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.

May 2019
Financial Stability Review
Financial stability risks
have increased
over the past six months

Looking ahead to the next two years, risks remain:

Disorderly increase in risk premia

Debt sustainability concerns

Hampered bank intermediation capacity

Increased risk-taking in the non-bank financial sector


May 2019
Financial stability review

Overview

Challenges to financial stability have increased amid downside risks to the economic outlook.

Macro-financial and credit environment

Stress has remained subdued in euro area sovereign debt markets, but there are uncertainties at the country level. Heightened political and policy uncertainty could also add to public debt sustainability concerns.

Financial markets

After spiking in December, tensions in global financial markets subsided in the first months of 2019. Conditions in the corporate bond and leveraged loans market worsened.

Euro area banking sector

Bank profitability remains subdued and prospects have worsened somewhat. Banks are progressing rather slowly in tackling structural challenges.

Non-bank financial sector

Euro area non-bank financial institutions have increased their share of credit provision to the real economy. Continued search for yield, liquidity risk and leverage in the sector could amplify the wider financial cycle.



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.


Macroprudential Bulletin
Spotlight on financial stability

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