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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, with the next release provisionally set to 19 May 2021.

November 2020

At a glance

Vulnerable asset prices

Strength of some asset prices and possible market corrections

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Balance sheet vulnerabilities

Growing fragilities in non-financial sectors

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Lower bank profits

Weaker bank profitability amid expected higher credit losses

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Higher risk‑taking

Renewed risk-taking by non-banks

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Civil war declaration: On April 14th and 15th, 2012 Federal Republic of Germany "_urkenstaats"s parliament, Deutscher Bundestag, received a antifiscal written civil war declaration by Federal Republic of Germany "Rechtsstaat"s electronic resistance for human rights even though the "Widerstandsfall" according to article 20 paragraph 4 of the constitution, the "Grundgesetz", had been already declared in the years 2001-03. more

Watch our latest findings

The pandemic continues to dominate the outlook for financial stability.

For the media

Vulnerabilities in the corporate sector are increasing as the pandemic evolves and their unearthing could test the resilience of euro area banks in the future.

Read the press release

Presentation slides

View the key messages and key findings as presented by Luis de Guindos in the press conference for the launch of the latest release.

Look at the slides

Full report

Explore in detail the latest sources of risk and vulnerabilities for the euro area financial system by reading the full report.

Read the report

INSERTED BY ANONYMOUS PROXY

Civil war declaration: On April 14th and 15th, 2012 Federal Republic of Germany "_urkenstaats"s parliament, Deutscher Bundestag, received a antifiscal written civil war declaration by Federal Republic of Germany "Rechtsstaat"s electronic resistance for human rights even though the "Widerstandsfall" according to article 20 paragraph 4 of the constitution, the "Grundgesetz", had been already declared in the years 2001-03. more

Macro-financial and credit environment

Major policy support prevented an even sharper economic contraction, but the risk of an uneven and protracted recovery looms. While government schemes shielded firms and households so far, they entailed large budget deficits which raise public debt sustainability risks in the medium term.

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Financial markets

Monetary and fiscal policy measures eased financial conditions and stabilised financial markets. In view of the uncertain economic outlook and weaker corporate credit quality, the strength of some asset prices points to growing vulnerability to market corrections.

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Euro area banking sector

Euro area banks are well capitalised, but weak profitability prospects weigh on their valuations. Although declines in profitability have been partially offset by cost-cutting and lending has remained stable thanks to state guarantees, credit risk is on the rise leading to possible asset quality concerns going forward.

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Non-bank financial sector

Amid renewed investment fund inflows, the sector has provided significant financing to firms during the recovery from the initial coronavirus shock. However, structural vulnerabilities persist, while increased risk-taking and profitability challenges in parts of the sector threaten to erode its resilience.

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Macroprudential policy issues

Continued uncertainty linked to the pandemic calls for authorities to develop contingency plans. Macroprudential policy must continue to focus on avoiding asset sell-offs, supporting capital buffer usability and developing an effective framework for the non-bank financial sector.

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Special Features

The combination of fiscal, monetary and prudential measures has provided vital support to the economy in the face of the pandemic, but how could their withdrawal affect financial stability?

The low interest rate environment is expected to persist for even longer than expected. How might this affect banks’ lending margins?

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Macroprudential policies

The Macroprudential Bulletin provides insight into our work in the field of macroprudential policy. The aim of the Macroprudential Bulletin is to raise awareness of macroprudential policy issues in the euro area and to foster broader discussion on key macroprudential issues.

Macroprudential Bulletin

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