ECB's Lautenschlaeger believes bank share price drop might be overreaction

Recent sharp drops in euro area bank shares may have been an overreaction, a top European Central Bank official said.

In an interview with Spanish daily Expansion on 7 July, but published on 18 July, ECB executive board member Sabine Lautenschlaeger said: "It must be recognised that the resilience of banks and financial systems has improved significantly in recent years. We are far too quick to forget this," Market News International reported.

"The European banking sector holds significantly more capital than in 2008, and this capital is of higher quality. There are of course unresolved issues and we might be seeing a contagion effect on banks' share prices, which could be an overreaction."

Lautenschlager believed there were other factors at play, apart from Brexit even, such as the otlook for econmic growth and geopolitical risks.

"The good news is: there have been no funding, liquidity or operational problems in SSM banks since the referendum. Operationally, financial markets have been functioning well."