Financial Stability Review
The Financial Stability Review provides an overview of potential risks to financial stability in the euro area. It aims to promote awareness in the financial industry and among the public of euro area financial stability issues.
It is published twice a year.
remains challenging
Key vulnerabilities in the financial system:
Potential for future asset price corrections
Lingering debt sustainability concerns
Growing bank profitability challenges
Increased risk-taking by non-banks
Macro-financial and credit environment
Private and public sector debt sustainability concerns remain, but are mitigated by low interest rates. Pockets of vulnerability in the non-financial corporate sector and property markets may need to be monitored closely going forward.
Financial markets
As investors search for yield, prices of both safer and riskier financial assets have risen. As a result, asset valuations are increasingly dependent on low benchmark yields and more sensitive to changes in them.
Euro area banking sector
Challenges to bank profitability have increased as support from cyclical factors is waning, while cost inefficiencies and overcapacities in some parts of the banking sector persist.
Non-bank financial sector
While the non-bank financial sector continues to expand, there are challenges to profitability and solvency in the low interest rate environment. Investment funds, insurers and pension funds have continued to take on more liquidity and credit risk.
Macroprudential policy issues
All countries in the euro area have implemented macroprudential measures to mitigate risks and build resilience in recent years. However, the countercyclical capital buffer could be used more actively in some countries.
- 20 November 2019
- Financial Stability Review, November 2019
- 29 May 2019
- Financial Stability Review, May 2019
- 29 November 2018
- Financial Stability Review, November 2018
What is financial stability?
Financial stability can be defined as a condition in which the financial system – which comprises financial intermediaries, markets and market infrastructures – is capable of withstanding shocks and the unravelling of financial imbalances.
This mitigates the likelihood of disruptions in the financial intermediation process that are systemic; that is, severe enough to trigger a material contraction of real economic activity.
Financial stability can be defined as a condition in which the financial system – which comprises financial intermediaries, markets and market infrastructures – is capable of withstanding shocks and the unravelling of financial imbalances.
This mitigates the likelihood of disruptions in the financial intermediation process that are systemic; that is, severe enough to trigger a material contraction of real economic activity.