Eurozone financial stability remains strained: ECB

FRANKFURT - The European Central Bank (ECB) said on Wednesday in a report that financial stability vulnerabilities remain elevated in the euro area.

According to the November edition of its Financial Stability Review, the ECB considers the euro area's financial stability to be vulnerable in a "volatile environment".

"The outlook for financial stability is clouded by heightened macro-financial and geopolitical uncertainty together with rising trade policy uncertainty," ECB Vice-President Luis de Guindos said.

The ECB said that it has seen elevated vulnerabilities in a wide range of areas, although the financial sector in the euro area has withstood volatilities and proven to be resilient so far.

The equity and corporate credit markets, and equity markets may be exposed to volatility due to underlying vulnerabilities and non-bank financial institutions could amplify market stress, the central bank warned.

It also pointed out the possibility of recurring market concerns about sovereign debt sustainability in some eurozone countries where fiscal fundamentals remain weak.

Small and medium-sized companies and lower-income households could face strains if economic growth slows at a faster pace than expected, according to the report.

To ensure European banks' ability to absorb further asset quality deterioration, the ECB called on authorities in the euro area to keep their guard up by maintaining existing capital buffer requirements and ensuring sound lending standards.