While the ECB’s roles in the macroprudential and microprudential domains have a predominant banking sector focus, the FSR examines the risks and vulnerabilities of the financial system at large, including – in addition to banks – activities involving non-bank financial intermediaries. Such a euro area system-wide dimension is an important complement to microprudential banking supervision, which is more focused on the soundness of individual institutions. By providing a financial system-wide assessment of risks and vulnerabilities, the Review provides key input to the ECB’s macroprudential policy analysis. The FSR also plays an important role in relation to the ECB’s microprudential and macroprudential competences. This mitigates the likelihood of disruptions in the financial intermediation process that are systemic, that is, severe enough to trigger a material contraction of real economic activity. It does so to promote awareness of these systemic risks among policymakers, the financial industry and the public at large, with the ultimate goal of promoting financial stability.įinancial stability can be defined as a condition in which the financial system – which comprises financial intermediaries, markets and market infrastructures – is capable of withstanding shocks and the unravelling of financial imbalances. The Financial Stability Review (FSR) assesses developments relevant for financial stability, including identifying and prioritising the main sources of systemic risk and vulnerabilities for the euro area financial system. Assessing the systemic footprint of euro area banks.Euro area bank profitability: where can consolidation help?.5.4 Responding to climate change-related financial stability risks.5.3 Developing macroprudential measures to enhance the resilience of euro area capital market financing.5.2 Tackling structurally weak bank profitability.Box 8 Macroprudential policy and powers within the Eurosystem.5.1 Activating macroprudential instruments to counter vulnerabilities in the euro area financial system.4.3 Stable outlook for euro area insurers, despite the challenge from low yields.Box 7 Portfolio rebalancing by euro area investment funds following outflows.4.2 Euro area bond funds continue to expand and increase liquidity risk.Box 6 Investment funds and the transmission of the global financial cycle to the euro area.4.1 Non-banks increased risk-taking while facing profitability challenges in the low interest rate environment.Box 5 The ECB’s new euro area banking sector macro-micro model.3.2 Evaluating the resilience of the euro area banking sector.Box 4 Climate risk-related disclosures of banks and insurers and their market impact.Box 3 Implications of bank misconduct costs for bank equity returns and valuations.3.1 Increased challenges to the profitability of the sector.Box 2 Valuations in corporate bond and equity markets. ![]() 2.2 Riskier asset prices reliant on low rates.Box 1 Explaining cross-border transactions in euro area commercial real estate markets.1.5 Diverging residential and commercial real estate cycles.1.4 Emerging pockets of corporate sector vulnerabilities.1.3 Euro area households’ resilience supported by low interest rates.1.2 Near-term sovereign debt sustainability concerns mitigated by favourable financing conditions.1.1 Weaker economic outlook amid elevated uncertainty.1 Macro-financial and credit environment.
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