The European Central Bank (ECB) will extend supervision and develop policy tools as three major financial stability risks could rise, a top ECB official stressed on Monday at the Opening Conference of the 21st Euro Finance Week. 

"We are currently paying particular attention to three major developments that could trigger financial stability concerns globally and in the euro area," ECB Vice-President Luis de Guindos said in a speech.

These threats include a downturn in the US macro-financial cycle, increasing tensions in emerging market economies on the back of a stronger US dollar and increased trade frictions, and re-emerging debt sustainability concerns, he added.

Although contagion from Italy to other countries, for example, has been limited so far, it remains a possibility, de Guindos warned.

The asset management sector now plays a much larger role in financial markets than it did 10 years ago, according to de Guindos. In 2008, total assets held by investment funds were only 15 percent of banking sector assets. In 2017, euro area investment fund assets had grown to 42 percent of total banking sector assets, amounting to 12 trillion euros (about 13.49 trillion US dollars).

"As the risks arising from leverage and liquidity mismatches in investment funds are potentially systemic, we need to take a more ambitious policy approach to systemic risk. Extending the macro-prudential framework to the asset management sector and developing policy tools to address emerging risks will be an important step in preparing for possible future stress scenarios," the ECB vice-president said.