Overview
- In its November Financial Stability Report, the ECB says equities are vulnerable to abrupt sell‑offs due to persistently high valuations and a rally driven by a narrow set of stocks.
- Vice‑President Luis de Guindos warns uncertainty could flare again and highlights that the AI‑led surge in U.S. tech shares could reverse, though the ECB stops short of calling it a dot‑com‑style bubble.
- Supervisors flag dollar‑funding and counterparty risks and advise holding liquid dollar assets and potentially extra capital, noting exposures are concentrated at Deutsche Bank, BNP Paribas, Crédit Agricole, Groupe BPCE, Société Générale, ING and Banco Santander.
- Euro‑area banks remain broadly resilient with strong earnings and buffers, yet firms hit by tariffs may face repayment strains that could weaken loan quality.
- The ECB cautions that non‑bank portfolios show elevated valuations with risk of sudden price adjustments, while housing demand is firm but construction subdued and commercial real estate sentiment has improved with lingering risks.