PTEYou will hear a recording. Type the missing words in each blank.

When the time comes, its peers should follow suit. Of these, the European Central Bank faces the trickiest , because it has acted as, in effect, the backstop to euro-zone bond markets, a that otherwise the currency bloc still lacks. But the main safety valve lies elsewhere, with banks and investors. Bitter experience has shown that debt-funded assets can losses, causing financial crises. For this reason banks must be able to withstand any reversal of today's high asset prices and low defaults. That means raising bank capital in places where it is too low, the euro zone, and not backsliding on strenuous “stress tests” as America's Treasury proposes. In the end, however, there may be no escape for investors from the low future returns and even losses that high asset prices imply. They and should take a leaf out of “The Investor”, and make sure that they have a margin of safety.

PTE#210 - When the time comes, its peers...

Question 210 of

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