www.ecb.europa.eu
22 November 2023
- 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
According to the November 2023 Financial Stability Review, which was published today by the European Central Bank (ECB), the outlook for euro area financial stability remains fragile, as tighter financial conditions are increasingly propagating to the real economy in an environment of weak growth, high inflation and heightened geopolitical tensions.
“The weak economic outlook along with the consequences of high inflation are straining the…