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Peter Bednarek
- 27 May 2026
- FINANCIAL STABILITY REVIEW - ARTICLEFinancial Stability Review Issue 1, 2026Details
- Abstract
- Corporate bankruptcies in the euro area have been on the rise, but the aggregate asset quality of banks’ corporate lending has remained broadly stable. This special feature analyses this divergence and its implications for financial stability. It shows that rising bankruptcies may partly be explained by the normalisation of firm turnover since the COVID-19 pandemic, albeit with marked cross-country unevenness. At the same time, firm-level evidence suggests that balance sheet and profitability challenges are concentrated in a vulnerable tail of firms, but have remained stable for the average euro area company. Structural changes in corporate financing, including a declining reliance on bank loans and a larger role for equity, debt securities and non-bank lending, imply that a greater share of corporate risk might be outside the banking system. The analysis also shows that broadly stable aggregate asset quality reflects diverging trends in loan performance across countries and firm sizes, as well as banks’ proactive management of non-performing loans. Overall, it does not find any systematic evidence for banks delaying the recognition of non-performing loans in their loan books. Instead, the analysis indicates that weaker firm fundamentals result in a higher probability of bank exposures being reclassified from performing to non-performing.
- 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
G01 : Financial Economics→General→Financial Crises
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G32 : Financial Economics→Corporate Finance and Governance→Financing Policy, Financial Risk and Risk Management, Capital and Ownership Structure, Value of Firms, Goodwill
G33 : Financial Economics→Corporate Finance and Governance→Bankruptcy, Liquidation
- 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