ECB: Financial stability outlook remains fragile
The European Central Bank published its financial stability review for May on Wednesday, warning of elevated vulnerabilities to the Eurozone's financial stability due to the unexpected stress in the banking sector.
The ECB said in the overview of the detailed report that financial markets remain vulnerable to less favorable growth and inflation outcomes, with tighter credit conditions testing the resilience of euro-area businesses and households.
While banks across the bloc have had little exposure to the recent banking sector stress, the ECB noted that funding and asset quality headwinds may weigh on future profitability. Therefore, the ECB concluded it is essential to complete the banking union and strengthen policies for the non-bank financial sector to further enhance the resilience of the financial sector.