The European Central Bank (ECB) released its May 2026 Financial Stability Review, noting that financial stability in the euro area remains elevated due to the war in the Middle East and associated energy supply disruptions. The review warns that the current energy shock poses upside risks to inflation and downside risks to growth, potentially increasing market volatility and stressing debt servicing as financing costs rise. While euro‑area banks have shown resilience, their reliance on non‑bank funding and the risk of deteriorating asset quality could create liquidity and funding pressures if market conditions worsen. The review calls for macroprudential authorities to maintain capital buffers and borrower‑based measures, and urges a comprehensive response to liquidity vulnerabilities in the non‑bank sector. It also stresses accelerating progress on the EU’s savings and investments union to support growth and safeguard stability.
© European Central Bank, 2025.
Summary derived from the ECB website (https://www.ecb.europa.eu ).
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