Post by European Central Bank

War, soaring energy prices and upside risks to inflation are clouding the financial stability outlook for the euro area. In the latest episode of Euro Matters, host Paul Gordon speaks with John Fell about how well the financial system is holding up as it faces two potentially colliding shocks: AI disruption and an energy shock stemming from the war in the Middle East. So what are the main takeaways? 🔹 The system remains resilient, but the combination of these shocks is creating new uncertainty. 🔹 AI optimism has helped support high valuations, even as questions remain about whether these expectations will be met. 🔹 At the same time, higher energy prices are weighing on the outlook and could amplify vulnerabilities across markets and balance sheets. 🔹 Banks remain a source of strength. Profitability is solid, capital buffers are strong and non-performing loans remain low. 🔹 Private credit warrants closer attention. Opacity and data gaps make it harder to assess how stress could spread. Listen to the full episode wherever you get your podcasts! 👉 https://lnkd.in/d2yzBkkc