The European Central Bank (ECB) has issued warnings regarding the vulnerabilities of the fragmented European banking sector, particularly in light of recent market turbulence. The ECB highlighted financial risks stemming from shadow banks and hedge funds, noting potential liquidity shortages as a significant concern. In response to these challenges, ECB Executive Board member Isabel Schnabel emphasized the need for banks to simplify their risk models to enhance transparency and efficiency within the banking sector. Additionally, the ECB has ruled out a repeat of dividend bans, indicating that banks have managed to weather the recent turmoil. However, the ECB has expressed opposition to the capital treatment related to BNP Paribas's planned acquisition of AXA Investment Managers, which could have mitigated the impact on BNP Paribas’s capital. The regulatory body is also facing warnings from the Swiss bank lobby regarding the risks associated with UBS's potential relocation.