Digital euro
The Eurosystem is preparing for the potential issuance of a digital euro to complement physical cash.
ACCOUNT
27 November 2025
Account of the October monetary policy meeting
The Governing Council agreed to keep interest rates unchanged. The inflation outlook was broadly unchanged since the previous meeting and most members viewed the risks surrounding the inflation outlook as two-sided.
Read the account
SPEECH
24 November 2025
The transformative power of AI
There are reasons to believe AI could spread faster and deliver tangible economic gains sooner than previous technology waves, says President Christine Lagarde. If that is the path we are on, we need to remove all the obstacles that stop us from leading this transformation.
Read President Lagarde’s speech
PODCAST
27 November 2025
The rise of AI, stablecoins and private markets
What do trade tensions, an unpredictable US economic policy, geopolitical issues, a potential AI bubble and the rise of stablecoins mean for financial stability in the euro area? Our host Paul Gordon speaks to financial stability expert John Fell to find out.
Listen to the latest episode of The ECB Podcast- 27 November 2025
- MONETARY POLICY ACCOUNTRelated
- 30 October 2025
- MONETARY POLICY DECISIONEnglishOTHER LANGUAGES (23) +
- 27 November 2025
- MONETARY DEVELOPMENTS IN THE EURO AREAAnnexes
- 27 November 2025
- MONETARY DEVELOPMENTS IN THE EURO AREA
- 27 November 2025
- CLIMATE CHANGE INDICATORS STATISTICAL RELEASE
- 26 November 2025
- PRESS RELEASERelated
- 26 November 2025
- FINANCIAL STABILITY REVIEW
- 25 November 2025
- WEEKLY FINANCIAL STATEMENTEnglishOTHER LANGUAGES (22) +Annexes
- 25 November 2025
- WEEKLY FINANCIAL STATEMENT - COMMENTARY
- 26 November 2025
- Presentation slides by Luis de Guindos, Vice-President of the ECB, at the Financial Stability Review press briefing
- 25 November 2025
- Slides by Piero Cipollone, Member of the Executive Board of the ECB, at Central Bank of Ireland's Financial System Conference 2025
- 24 November 2025
- Speech by Christine Lagarde, President of the ECB, BratislavAI Forum on artificial intelligence and education as part of an OECD high-level event to mark the 25th anniversary of "Better Policies for Better Lives", Bratislava
- 24 November 2025
- Slides by Piero Cipollone, Member of the Executive Board of the ECB, at Cassa Depositi e Prestiti in Rome
- 22 November 2025
- Keynote speech by Christine Lagarde, President of the ECB, in the session “Central Banks in a Changing World” at the European Meeting of the Trilateral Commission in Vienna, Austria
- 11 November 2025
- Interview with Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, conducted by Andrés Stumpf on 4 November 2025
- 10 November 2025
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by Luís Reis Ribeiro
- 9 October 2025
- Interview with Piero Cipollone, conducted by Žanete Hāka-Rikarde and Priit Pokk on 29 September 2025
- 25 September 2025
- Interview with Piero Cipollone, Member of the Executive Board of the European Central Bank, conducted by Francesco Ninfole on 24 September 2025Related
- 26 September 2025
- 26 September 2025
- 17 September 2025
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by Anja Ettel and Holger Zschäpitz
- 20 November 2025
- To bridge Europe’s investment gap, we need both public and private funding. Well-designed EU investment programmes can act as a major catalyst for private capital. As this blog post shows, every euro invested by the EU is matched by private finance, thereby doubling its impact.Details
- JEL Code
- E60 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→General
E20 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→General
- 19 November 2025
- Our 2025 macroprudential stress test report shows that banks are resilient. But when we look at risks not included in the EU-wide stress test, we see some pockets of vulnerability. These findings support a cautious approach to capital buffers.Details
- JEL Code
- G20 : Financial Economics→Financial Institutions and Services→General
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation
- 10 November 2025
- Banks consider the climate performance of firms and buildings in their lending policies. The euro area bank lending survey shows that lower climate risks tend to improve credit conditions. Meanwhile, green investments increase loan demand from firms and households.Details
- JEL Code
- E50 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→General
G20 : Financial Economics→Financial Institutions and Services→General
- 7 November 2025
- Climate risks affect credit ratings. And these, in turn, influence how banks can use securities as collateral to borrow money. This post takes a closer look at how the Eurosystem integrates climate change risks into its own collateral framework, through the credit risk channel.Details
- JEL Code
- E50 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→General
Q50 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→General
- 4 November 2025
- Many Bulgarians are still hesitant about giving up the Lev on 1 January. Mixed feelings are not uncommon in countries adopting the euro. However, survey data show that support significantly increases once people start using the euro in their daily lives.Details
- JEL Code
- O52 : Economic Development, Technological Change, and Growth→Economywide Country Studies→Europe
Z18 : Other Special Topics→Cultural Economics, Economic Sociology, Economic Anthropology→Public Policy
- 26 November 2025
- FINANCIAL STABILITY REVIEW - BOXFinancial Stability Review Issue 2, 2025Details
- Abstract
- This box assesses the liquidity risks of UCITS hedge funds during periods of market stress. The UCITS segment combines the elevated synthetic leverage typical of hedge funds with the frequent redemption terms that are typical of UCITS funds. This combination can cause UCITS hedge funds to act as amplifiers of market stress, as they may face simultaneous liquidity pressures from investor redemptions and margin calls on derivatives exposures.
- JEL Code
- G10 : Financial Economics→General Financial Markets→General
G23 : Financial Economics→Financial Institutions and Services→Non-bank Financial Institutions, Financial Instruments, Institutional Investors
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation
- 26 November 2025
- FINANCIAL STABILITY REVIEW - BOXFinancial Stability Review Issue 2, 2025Details
- Abstract
- This box presents the business rationale for euro area banks’ US dollar activities and assesses the associated financial stability risks. It finds that euro area banks’ US dollar assets and liabilities are mainly linked to capital market activities and are concentrated in a few global systemically important banks. Banks’ activities represent a diverse set of financial services as they intermediate US dollars to other European parties, in the form of unsecured and secured lending and borrowing, FX swaps and currency hedges. Euro area banks’ US credit exposures are largely limited to holding high-quality debt securities and lending to the non-financial corporate sector. While asset-liability mismatches appear to be limited in extent, banks are exposed to liquidity risks due to mismatches between the specific counterparties providing and receiving funding. These liquidity risks may not materialise in banks’ own balance sheets, as they may deleverage in times of stress, but rather affect their counterparties. Therefore, maintaining adequate balance sheet capacity is necessary to enable banks to act as shock absorbers, given the lack of regulatory requirements for matching asset and liability positions within a given currency.
- JEL Code
- G11 : Financial Economics→General Financial Markets→Portfolio Choice, Investment Decisions
G15 : Financial Economics→General Financial Markets→International Financial Markets
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G23 : Financial Economics→Financial Institutions and Services→Non-bank Financial Institutions, Financial Instruments, Institutional Investors
E42 : Macroeconomics and Monetary Economics→Money and Interest Rates→Monetary Systems, Standards, Regimes, Government and the Monetary System, Payment Systems
F31 : International Economics→International Finance→Foreign Exchange
F34 : International Economics→International Finance→International Lending and Debt Problems
- 26 November 2025
- FINANCIAL STABILITY REVIEW - BOXFinancial Stability Review Issue 2, 2025Details
- Abstract
- This box examines the stabilising role of household investors for investment funds during market stress, with a focus on the April 2025 market turmoil. Households’ long-term investment strategies make them less sensitive to market volatility, which can enhance fund resilience. An analysis of the April 2025 market turmoil and other past market downturns reveals that funds held by households experienced smaller outflows than those dominated by institutional or foreign investors. Following the April 2025 market sell-off, households also reinvested more quickly, further stabilising fund liquidity.
- JEL Code
- D14, G11, G23, G40, G50 : Microeconomics→Household Behavior and Family Economics→Household Saving; Personal Finance
- 26 November 2025
- FINANCIAL STABILITY REVIEW - BOXFinancial Stability Review Issue 2, 2025Details
- Abstract
- Rolling corporate recessions, defined as sequential downturns across specific sectors rather than broad-based economic contractions, offer a potential explanation for the apparent disconnect between heightened corporate vulnerabilities and still-benign bank credit metrics in the euro area. In fact, descriptive evidence suggests that vulnerabilities are increasingly emerging in staggered waves across sectors, rather than uniformly across the economy. When these sectoral vulnerability waves align, rolling recessions can become systemic. As downturns synchronise, sectoral growth correlations spike and NPL dynamics become more clustered, especially in cases where banks have concentrated exposures to specific sectors. This amplifies the risk of correlated credit losses and abrupt tightening in credit supply. Therefore, macroprudential surveillance and policy tools need to move beyond aggregate indicators towards more granular sector, region and borrower-type analysis. This should be underpinned by better data in order to identify pockets of fragility at an early stage and mitigate the non-linear systemic risks arising from rolling recessions.
- JEL Code
- E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation
- 26 November 2025
- FINANCIAL STABILITY REVIEW - ARTICLEFinancial Stability Review Issue 2, 2025Details
- Abstract
- Trade turmoil in April 2025 saw a marked change in cross-asset behaviour compared with typical patterns. Notably, the US dollar depreciated strongly while US Treasury yields rose – the opposite of what usually happens in a risk-off environment. This prompted discussions as to whether the safe-haven properties of US dollar-denominated assets might be changing. This is particularly important for euro area financial stability since euro area investors hold US dollar-denominated securities in an amount equivalent to €6 trillion, which represents a significant share of their portfolios. As policy uncertainty remains high and alternative safe assets are scarce, investors’ risk management practices may be evolving. Immediate and decisive implementation of policies associated with the savings and investments union and the capital markets union would help foster an alternative market of safe assets for euro area and global investors.
- JEL Code
- G11 : Financial Economics→General Financial Markets→Portfolio Choice, Investment Decisions
G15 : Financial Economics→General Financial Markets→International Financial Markets
G23 : Financial Economics→Financial Institutions and Services→Non-bank Financial Institutions, Financial Instruments, Institutional Investors
F31 : International Economics→International Finance→Foreign Exchange
- 26 November 2025
- FINANCIAL STABILITY REVIEWAnnexes
- 26 November 2025
- FINANCIAL STABILITY REVIEW
Related- 26 November 2025
- PRESS RELEASE
- 25 November 2025
- WORKING PAPER SERIES - No. 3156Details
- Abstract
- I examine how households adjust the quality of their purchases in response to adverse economic shocks. Using household scanner data from Germany, I document heterogeneous responses across income levels. Higher-income households tend to reduce the quality of the goods they purchase, whereas lower-income households, who typically consume lower-quality goods, show a limited propensity to trade down, likely due to a limited ability to do so. To assess the equilibrium effects of an aggregate shift in demand toward lower-quality varieties, I implement a shift-share research design. This approach leverages two key components: (i) pre-determined spending shares on middle-quality varieties across the product space for a wide range of sociodemographic groups prior to the great financial crisis, and (ii) variation in population growth across these groups during the crisis. I find that a 1% aggregate demand shift toward lower-quality varieties following a recession raises the relative price of low-quality varieties by about 0.45% on average.
- JEL Code
- E21 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Consumption, Saving, Wealth
E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
E60 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→General
- 25 November 2025
- FINANCIAL STABILITY REVIEW - ARTICLEFinancial Stability Review Issue 2, 2025Details
- Abstract
- Linkages between euro area banks and entities in the non-bank financial intermediation (NBFI) sector may lead to the emergence of systemic risk in at least two fields. First, the banking sector receives short-term deposit, repo and debt securities liabilities from NBFI entities. Such liabilities may be prone to flight risk and difficult to substitute. Second, euro area banks provide credit to NBFI entities which follow leveraged investment strategies. Hedge funds, mainly based outside of the euro area, together with non-bank lenders and real estate funds are the main groups of such leveraged NBFI entities. These interconnections are particularly important for euro area global systemically important banks (G-SIBs), which play a central role in financial intermediation and transform short-term NBFI liabilities into credit granted to other NBFI entities. While the scale of these linkages is generally contained, they could make euro area banks vulnerable to asset price shocks which, by triggering NBFI funding outflows and counterparty credit losses on exposures to NBFI entities, could lead to deleveraging by banks, reduced provision of leverage by banks to NBFI entities and asset fire sales. G-SIBs’ loss-absorbing capacity is thus essential to ensure the smooth provision of financial services in times of stress.
- JEL Code
- G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G22 : Financial Economics→Financial Institutions and Services→Insurance, Insurance Companies, Actuarial Studies
G23 : Financial Economics→Financial Institutions and Services→Non-bank Financial Institutions, Financial Instruments, Institutional Investors
G24 : Financial Economics→Financial Institutions and Services→Investment Banking, Venture Capital, Brokerage, Ratings and Ratings Agencies
- 24 November 2025
- FINANCIAL STABILITY REVIEW - BOXFinancial Stability Review Issue 2, 2025Details
- Abstract
- The rapid expansion of stablecoins has drawn widespread attention and raised potential financial stability concerns. The risks stem from inherent structural weaknesses, specifically the potential for de-pegging, compounded by growing interconnections with traditional finance. Major stablecoin issuers now manage asset holdings comparable to the world’s largest money market funds and rank among the top acquirers of US Treasury bills in recent months. Consequently, a run on stablecoins could trigger fire sales, potentially disrupting safe-asset markets. Furthermore, continued growth may drive retail deposit outflows, increasing banking disintermediation risks. While resulting wholesale inflows might partially offset these retail outflows, this type of funding is typically less stable, leaving banks more vulnerable to shocks. Nevertheless, financial stability risks from stablecoins remain limited for the euro area. The primary source of risk stems from discrepancies in stablecoin regulation globally, allowing for cross-border regulatory arbitrage. Therefore, it is vital that regulatory frameworks are further aligned at a global level.
- JEL Code
- G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation
G15 : Financial Economics→General Financial Markets→International Financial Markets
E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
- 20 November 2025
- WORKING PAPER SERIES - No. 3155Details
- Abstract
- Exploiting three decades of detailed regional data for Germany, we find that when the Green Party is successful at the polls, local hazardous emissions decline. The level of political representation matters, too. Green politicians’ gaining influence at county level is followed largely by a decline in air pollutants that have an immediate adverse health effect. In contrast, when the Green party joins the state government, only greenhouse gas emissions that affect the welfare of future generations via climate change decline. The primary mechanism to achieve lower emissions appears to be a reduction in output, rather than more efficient energy use.
- JEL Code
- D72 : Microeconomics→Analysis of Collective Decision-Making→Political Processes: Rent-Seeking, Lobbying, Elections, Legislatures, and Voting Behavior
Q53 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Air Pollution, Water Pollution, Noise, Hazardous Waste, Solid Waste, Recycling
- 20 November 2025
- RESEARCH BULLETIN - No. 137Details
- Abstract
- Euro area insurers manage several trillion euro in assets and take a long‑term investment perspective. To counteract the long period of low interest rates, they have shifted towards holding more alternative and less liquid assets. As a result, their balance sheets have become less liquid and more sensitive to market conditions overall. Meanwhile, their holdings of sovereign bonds show a significant home bias, which may have even increased with quantitative easing. Sovereign bonds also serve as a key source of liquidity for insurers, who sell them to raise liquidity to settle large claims after natural disasters. Thus, liquidity shocks can spill over from insurance to the sovereign debt markets, increasing market volatility. Capital markets union would likely help insurers diversify their bond portfolios and promote cross-country risk sharing.
- JEL Code
- G22 : Financial Economics→Financial Institutions and Services→Insurance, Insurance Companies, Actuarial Studies
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
- 19 November 2025
- LEGAL ACT
- 19 November 2025
- MACROPRUDENTIAL BULLETIN - FOCUS - No. 32Details
- Abstract
- Early activation of the countercyclical capital buffer (CCyB), including adoption of a targeted “positive neutral” rate, has become an increasingly common practice within the euro area and beyond. This Focus Piece introduces a relatively novel approach for deriving a target positive neutral rate which links bank capital losses to macroeconomic variables using stress test data. The stress-test-elasticities approach complements existing methodologies developed by the ECB to inform the calibration of the target positive neutral CCyB rate for the euro area. As an example of how the approach works, a target positive neutral CCyB rate for the euro area is simulated based on scenarios designed to capture losses occurring when cyclical systemic risks are neither subdued nor elevated. The simulated results are consistent with actual positive neutral CCyB rates and align well with estimates derived from other ECB approaches.
- JEL Code
- G20, G28 : Financial Economics→Financial Institutions and Services→General
- 19 November 2025
- MACROPRUDENTIAL BULLETIN - ARTICLE - No. 32Details
- Abstract
- The severity and the plausibility of stress test scenarios are crucial elements for interpreting the results and ensuring the credibility of stress-testing exercises. This article introduces a comprehensive framework for assessing scenario severity and plausibility in the context of the adverse scenarios used in the EU-wide stress tests. Two families of indicators are developed, characterised by a backward-looking and a forward-looking perspective. Backward-looking indicators compare the scenario with historical regularities, using as key metrics deviations from baseline projections and comparisons with the extreme values of key variables. Forward-looking indicators are drawn from macroeconomic modelling and compare the scenario with projected distributions about future economic developments incorporating the co-movement of variables within a unified analytical framework. These forward-looking metrics enable the severity assessment to account for the prevailing financial conditions and the level of systemic risk in the economy. The analysis presented suggests that the adverse scenarios used in the EU-wide stress tests have become more severe over time, peaking in the 2023 exercise and stabilising in 2025. Taking into account systemic risk, the 2025 scenario appears to be slightly more severe than the 2023 scenario. Overall, the article supports the idea of fostering a more effective definition, monitoring and communication of scenario severity, thereby strengthening the policy relevance and transparency of stress-testing exercises.
- JEL Code
- C53, C54, E37, G18 : Mathematical and Quantitative Methods→Econometric Modeling→Forecasting and Prediction Methods, Simulation Methods
- 19 November 2025
- MACROPRUDENTIAL BULLETIN - ARTICLE - No. 32Details
- Abstract
- As authorities across the euro area work towards including climate risks into regular stress-testing frameworks, this article offers a starting point for assessing bank resilience to climate risks that materialise under a short-term horizon. This is relevant since acute physical risks and abrupt policy changes can also materialise at short notice and affect the balance sheet of financial institutions. The analysis uses an adverse macroeconomic backdrop that combines the EBA’s adverse scenario with the Network for Greening the Financial System’s Nationally Determined Contributions (NGFS NDCs) scenarios. It extends the EU-wide 2025 stress test results by incorporating both transition and acute physical climate risks into the credit risk assessment for non-financial corporations by means of top-down models. Transition risks driven by green investments to reduce emissions amplify credit losses and reduce banks’ CET1 capital, particularly in high energy-intensive sectors. Similarly, acute physical risks such as extreme flood events reduce CET1 capital through direct damage, local disruptions and macroeconomic spillovers. While the magnitude of impacts varies across banks, the analysis shows that both types of climate risk can have a moderate but consequential effect on capital ratios. Notably, the banks most exposed to climate-related losses may differ from those identified as the most vulnerable in the broader EU-wide assessment. These findings underscore the importance of incorporating both types of climate risk into regular financial stability assessments.
- JEL Code
- G20 : Financial Economics→Financial Institutions and Services→General
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation
- 19 November 2025
- MACROPRUDENTIAL BULLETIN - ARTICLE - No. 32Details
- Abstract
- This article expands the 2025 EU-wide stress test by incorporating a system-wide perspective to capture contagion risks across investment funds and insurance corporations alongside the banking sector. It examines potential short-term contagion effects under the EBA’s adverse scenario as financial institutions adjust their balance sheets in response to stress. These adjustments would result in additional average CET1 ratio depletion of 29 basis points, increasing first-round effects by 12%. Among institutional sectors, investment funds, in particular equity funds, face the greatest losses under the EBA’s adverse scenario, while banks with less sophisticated hedging capabilities are also significantly affected. The findings emphasise the importance of a holistic, system-wide perspective to capture spillover effects both within and across financial sectors. Furthermore, the results show how solvency-driven liquidity shocks can trigger market reactions, which in turn propagate through the financial system and amplify the losses stemming from initial exogenous shocks. The article also includes two boxes which expand the way in which the EBA methodology accounts for counterparty credit risk. It does so by looking at exposures to additional institutional sectors such as central clearing counterparties (Box 1), and the losses that materialise when the failures of counterparties become more interdependent (Box 2).
- JEL Code
- D85 : Microeconomics→Information, Knowledge, and Uncertainty→Network Formation and Analysis: Theory
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G22 : Financial Economics→Financial Institutions and Services→Insurance, Insurance Companies, Actuarial Studies
G23 : Financial Economics→Financial Institutions and Services→Non-bank Financial Institutions, Financial Instruments, Institutional Investors
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation
- 19 November 2025
- MACROPRUDENTIAL BULLETIN - ARTICLE - No. 32Details
- Abstract
- Stress test simulations can enhance our understanding of the interplay between bank actions, the real economy and macroprudential buffers. Leveraging BEAST, the ECB’s workhorse top-down stress test model, this article explores impacts stemming from bank behavioural reactions by simulating them under the adverse scenario of the 2025 EU-wide stress test. The article shows that allowing banks to adjust their balance sheets only improves their capital ratios to a minor extent compared with simulations where they are assumed to keep their balance sheets constant. However, these reactions trigger negative credit supply shocks, exacerbating the downturn. Conversely, releasing available releasable buffers reduces banks’ incentives to deleverage and mitigates GDP contraction. These findings highlight how stress test simulations can inform macroprudential policy. More generally, they underscore the value of building sufficient releasable buffers during stable periods, to be used in times of stress to sustain credit supply to the real economy while preserving banks’ resilience.
- JEL Code
- G20 : Financial Economics→Financial Institutions and Services→General
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation
- 19 November 2025
- MACROPRUDENTIAL BULLETIN - ARTICLE - No. 32Details
- Abstract
- This overview article provides an introduction to the 2025 Macroprudential Stress Test Extension Report (MaSTER), released as the 32nd edition of the Macroprudential Bulletin, which investigates how the EU-wide stress test and its extensions provide a broader assessment of the systemic vulnerabilities of euro area banks. The 2025 EU-wide stress test results are expanded via a top-down model-based toolkit to assess additional risks, perform policy simulation exercises, and present novel approaches to gauging the severity of the adverse scenario. In this article, lessons are drawn from these extended stress tests through a comparative analysis of capital depletion. Overall, available results support authorities’ cautious approach to capital buffers. They suggest that, while most banks are resilient to the tested shocks, considering risks not monitored under the current EBA methodology (such as climate risk, liquidity risk and contagion risk) may uncover new vulnerabilities. These exercises, conditioned on the EBA’s 2025 adverse scenario, depend on the selected transmission channels and explore a relevant albeit partial set of risks.
- JEL Code
- G10, G18, G20, G28 : Financial Economics→General Financial Markets→General
- 18 November 2025
- WORKING PAPER SERIES - No. 3154Details
- Abstract
- Using a large survey of euro area consumers, we conduct an experiment in which respondents report how they would adjust their labor market participation, hours worked, and job search effort (if not employed) in response to randomly assigned windfall gain scenarios. Windfall gains reduce labor supply, but only when the gains are substantial. At the extensive margin, gains of €25,000 or less have no effects, while gains between €50,000 and €100,000 reduce the probability of working by 1.5 to 3.5 percentage points. At the intensive margin, small gains produce no impact, while gains above €50,000 lead to a reduction of approximately one hour of work per week. The effects among women and workers near retirement are stronger. The share of non-employed respondents who stop or reduce job search intensity declines by 1 percentage point for each €10,000 in windfall gain, with the strongest effects observed among older individuals receiving €100,000.
- JEL Code
- E24 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Employment, Unemployment, Wages, Intergenerational Income Distribution, Aggregate Human Capital
D10 : Microeconomics→Household Behavior and Family Economics→General
J22 : Labor and Demographic Economics→Demand and Supply of Labor→Time Allocation and Labor Supply
J68 : Labor and Demographic Economics→Mobility, Unemployment, Vacancies, and Immigrant Workers→Public Policy
- 17 November 2025
- WORKING PAPER SERIES - No. 3153Details
- Abstract
- We estimate the contribution of discretionary fiscal policy measures to euro area inflation in the post-pandemic era using an extension of Bernanke and Blanchard (2024b)’s semi-structural model. Since the pandemic, aggregate discretionary fiscal measures had a modest yet progressively increasing positive contribution to inflation that partly worked through an indirect effect on wage growth and inflation expectations. However, net indirect taxes helped to contain inflationary pressures, both during the pandemic and energy crises. Fiscal policy, therefore, can be a powerful tool to smooth the inflationary effects of adverse supply shocks, yet may also increase inflation persistence if fiscal stimulus is not timely withdrawn.
- JEL Code
- C5 : Mathematical and Quantitative Methods→Econometric Modeling
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
E47 : Macroeconomics and Monetary Economics→Money and Interest Rates→Forecasting and Simulation: Models and Applications
E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
Interest rates
| Deposit facility | 2,00 % |
| Main refinancing operations (fixed rate) | 2,15 % |
| Marginal lending facility | 2,40 % |
Financial stability
Our tasks Institutional framework Financial Stability Review Macroprudential policy measuresMarket operations
Open market operations Asset purchase programmes Lendings of holdings under PSPPNOT AN EXPERT? CHECK OUT OUR EXPLAINERS
LEARN MORE
What is the European Central Bank?