Financial Stability Report, No. 2 - 2025

21 November 2025

Since last spring, the prices of riskier assets have risen sharply and volatility has returned to very low levels in the international financial markets, despite the ongoing uncertainty and geopolitical tensions. The risk of sudden corrections has increased, especially if valuations were to deviate from economic fundamentals.

In Italy, the risks to financial stability stemming from domestic factors remain limited, while those relating to international instability are not negligible.

The macrofinancial environment has not changed overall compared with last April. The yield spread between Italian and German ten‑year government bonds has narrowed further, reaching levels in line with those observed before the sovereign debt crisis of the previous decade.

The stability of the macrofinancial environment is being supported by the moderate recovery in credit, resilient labour income, low unemployment, a prudent fiscal policy stance, low private debt and the positive net international investment position. However, growth prospects remain muted.

House prices rose in the second quarter, while commercial property prices remained broadly unchanged. Overall, there are no signs of overvaluation.

The risks relating to the financial situation of households remained low, thanks to the growth in income and in financial wealth in the first half of the year and to the further reduction in debt relative to disposable income. The high uncertainty is reflected in a propensity to save that is still above pre-pandemic levels.

Business conditions remain good on average, buoyed by profitability and low indebtedness. The consequences of the trade tensions have been limited so far, but firms remain vulnerable to uncertainty over the economic outlook and to the possible repercussions of the higher tariffs and of geopolitical conflicts.

The banking system remains sound overall. Profitability and capitalization remained high in the first half of the year; liquidity conditions are still balanced and credit quality has not deteriorated. Looking ahead, the sustainability of the current levels of profitability could be affected by the decline in the net interest margin; in an uncertain environment marked by muted growth prospects, there are also risks to asset quality. Exposure to cyber and operational threats continues to require a great deal of attention.

In the insurance sector, the liquidity position is benefiting from the good performance of premium income. Profitability has increased and capitalization remains high.

In the second and third quarters, the assets of Italian investment funds grew and net subscriptions were positive. Vulnerabilities in the asset management sector remain limited.

There are five special-focus boxes in this Report. The first describes the evolution of the regulatory framework for stablecoins in Europe and the United States and illustrates the risks stemming from an uncontrolled development. The second demonstrates that the effect of exposure to hydrogeological risks on the creditworthiness of firms is limited, and could be reduced by increasing insurance coverage. The third shows how Banca d'Italia's recent stress test of less significant banks highlighted an overall resilience for these banks in an adverse scenario. The fourth describes the recent developments in the European framework for managing banking crises, with particular reference to those of small and mediumsized banks. The last box analyses the crowdfunding market in Italy; Banca d'Italia's actions are geared towards overseeing compliance with the criteria for sound and prudent management for service providers and the potential risks to financial stability.