ECB Warns of Increased Financial Stability Risks

The European Central Bank (ECB) Governing Council has issued a warning about the increasing risks to financial stability within the euro area. This comes in response to a sharp rise in global geopolitical tensions, notably trade friction, which has added to the uncertainty.

Banking Sector Resilience Remains Strong

Despite these challenges, the ECB notes that the banking sector's capital headroom and profitability levels are still high. There's no evidence suggesting that credit supply is being constrained by bank capital requirements at this time.

Call to Action for National Authorities

The Governing Council is urging national macroprudential authorities to maintain the banking system's current resilience. It supports plans by some national authorities to increase capital buffer requirements and emphasizes the need for agile macroprudential policies. Policymakers are also advised to stay vigilant, as adverse shocks may necessitate a shift in policy stance.