EZ ECB Financial Stability Review

Economic growth remains fragile, while concerns about global trade outlook add to geopolitical and policy uncertainty High valuations and risk concentration make markets more susceptible to sudden corrections Policy uncertainty, weak fiscal fundamentals in some countries and sluggish potential growth raise concerns about sovereign debt sustainability Credit risk vulnerabilities in some euro area households and firms could lead to weaker asset quality for banks and non-bank financial intermediaries if downside risks to growth ...

Financial markets remain exposed to adverse macro-financial and geopolitical developments, potentially amplified by vulnerabilities in some non-bank financial institutions Full impact of tighter financial conditions on real economy yet to be felt Higher borrowing and debt service costs will increasingly test resilience of euro area households, firms and governments Euro area banks see profitability benefit from rising interest rates but face headwinds from higher funding costs, worsening asset quality and lower lending volumes ...

post at 4:00am: ECB SAYS EURO AREA HOME PRICES COULD SEE 'DISORDERLY FALL': FSR ECB SAYS FINANCIAL STABILITY OUTLOOK REMAINS FRAGILE: FSR post at 4:00am: ECB: VULNERABILITIES OF FINANCIAL SYSTEM REVEALED BY RATE HIKES.Financial Stability Review, May 2023 This spring saw considerable financial turbulence, with the spotlight increasingly turning on systemic risk concerns following a series of bank failures outside the euro area. While the fallout experienced by euro area banks was limited, these events have served as a powerful reminder of the importance of ensuring that banking system fundamentals are sound, in an environment where financial conditions are being tightened to tackle elevated inflation around the world. Price stability remains as crucial as ever for durably preserving financial stability. Tighter financing conditions to forcefully address high inflation havFinancial stability outlook remains fragile, ECB review finds According to the May 2023 Financial Stability Review published today by the European Central Bank (ECB), the outlook for euro area financial stability remains fragile, in the context of recent banking stress outside the currency union. While economic conditions have improved slightly, uncertain growth prospects paired with persistent inflation and tightening financing conditions continue to weigh on the balance sheets of firms, households and governments. Furthermore, an unexpected deterioration in economic conditions or financial tightening could lead to disorderly price adjustments in either or both financial and real estate markets. “Price stability is crucial for durable financial stability,” said ECB Vic

Since February 2020, the coronavirus (COVID-19) pandemic has disrupted social and economic life across the euro area and the globe, to an extent unseen in most of our lifetimes and unexpected six months ago. It has caused one of the largest and sharpest economic contractions in recent history. As news unfolded of the spread of the virus, global financial markets responded with sell-offs, volatility and a sharp increase in borrowing costs, which rivalled ‒ and at times exceeded ‒ those seen during the 2008 global financial crisis.Pandemic increases risks to financial stability Despite the immense social and economic disruption in the wake of the coronavirus (COVID-19) pandemic, decisive policy responses have helped to prevent a seizing-up of the financial system. However, even as infection rates fall in many countries, the impact on the economy and markets has unearthed and increased existing vulnerabilities for euro area financial stability, according to the May 2020 Financial Stability Review (FSR) of the European Central Bank (ECB). Financial stability risks could arise as these vulnerabilities, identified in earlier issues, interact with the pandemic. These include richly valued asset prices, fragile investment funds, the sustainability of sovereign and corporate debt, and weak bank profitability. post at 9:03am: #ECB SEES DEBT-SUSTAINABILITY RISKS AFTER PUBLIC VIRUS SPENDING - BBG *ECB CITES WEAK BANK PROFITS, CORPORATE DOWNGRADES AS RISKS *INSURERS UNDER PRESSURE FROM LOW RATES, ASSET PRICES *ECB SAYS PROPERTY PRICE CORRECTION MORE LIKELY DUE TO VIRUS *Link: https://t.co/uIP5ZCgmpr