Lorenzo Bini Smaghi, an executive board member at the European Central Bank, on Monday said low short-term interest rates can lead to over-leveraging in the shadow banking sector.

At the Annual Economic Conference in Vienna, Austria, Bini Smaghi said: "Problems arise when, due to low interest rates that make short-term funding cheap, the total debt raised by financial institutions goes beyond what may be considered as socially optimal. This is frequently the case for the unregulated or so-called