The European Central Bank’s November 2025 Financial Stability Review identifies high asset valuations, fiscal challenges, and interconnected risks in the financial system amid geopolitical and market uncertainties.
The European Central Bank has published its Financial Stability Review for November 2025. The review highlights that high asset valuations pose risks of sharp adjustments, potentially amplified by non-bank financial institutions (NBFIs).
It notes that a challenging fiscal outlook in some advanced economies could test investor confidence and lead to stress in sovereign bond markets. Growing linkages between banks and non-banks, along with credit exposures to tariff-sensitive firms, could challenge banks during periods of economic or market stress.
The review emphasizes that vulnerabilities remain elevated due to geopolitical uncertainties, tariff impacts, and interconnected financial risks. Market concerns about stretched public finances and elevated valuations, especially in US technology and AI sectors, increase the risk of sudden repricing and spillovers.
It also discusses the potential impact of high public debt, increased defense spending, and external shocks on fiscal stability. The report recommends maintaining macroprudential buffers, improving data collection, and enhancing policy coordination to support financial resilience.
Further details are available in the full report at the ECB’s official publication.
