# PTE Listening FIB #20: European Central Bank and...

Listening: Fill in the Blanks #20 - Level 3 - Feeds Listening

> You will hear a recording. Type the missing word in each blank.

The European Central Bank faces the ____ challenge because it has acted as, in effect, the ____ to eurozone bond markets, a mechanism that otherwise the currency bloc still lacks. But the main safety valve lies elsewhere, with banks and ____ . Bitter experience has shown that debt-funded assets can ____ losses, causing financial crises. For this reason, banks must be able to withstand any ____ of today's high asset prices and low defaults. That means raising bank capital in places where it is too low, especially in the eurozone, and not backsliding on ____ "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 regulators should take a leaf out of The Intelligent Investor and make sure that they have a ____ of safety.

## Answer

1. trickiest
2. backstop
3. investors
4. magnify
5. reversal
6. strenuous
7. margin

## Explanation

"Trickiest" ends in -iest because "the" signals the most tricky. "Backstop" is one word meaning a safety support for bond markets. "Strenuous" is hard to spell; it means demanding, which fits "stress tests." "Margin of safety" is a fixed phrase, so expect "margin" before "of safety."

## Hints

- Focus on the speaker's discussion about the European Central Bank's role and the risks involved in financial markets.
- Listen carefully to the specific terminology used regarding bank capital, asset prices, and investor safety.

## Transcript

The European Central Bank faces the trickiest challenge, because it has acted as, in effect, the backstop to Eurozone bond markets, a mechanism 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 magnify 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, especially the Eurozone, 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 regulators should take a leaf out of The Intelligent Investor, and make sure that they have a margin of safety.

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