ECB flags rising financial-stability risks from war and debt

The European Central Bank has warned in a new assessment that risks to the stability of the euro-area financial system have risen. The bank listed the ongoing war in the Middle East, rising public debt and high valuations on equity markets as the main sources of risk.

According to the ECB, geopolitical tensions, volatility in energy prices and the possibility of a market correction could affect both households and financial institutions. The bank said heavily indebted governments could come under a growing interest burden, which may create fragility in public finances.

The assessment comes as global markets try to price in the effects of the Iran war. The ECB stressed the importance of financial institutions maintaining strong capital buffers. This article is for general information and is not investment advice.