Financial Stability Report, No. 2 - 2026

13 November 2026

The ongoing geopolitical tensions, soaring long-term interest rates and high financial asset valuations are the main sources of global macrofinancial vulnerabilities. Despite the recent corrections in the technology sector, which is characterized by considerable uncertainty about the profitability outlook, financial market prices continue to be exposed to the risk of further declines. The current environment is marked by compressed risk premiums, especially in AI-related sectors, as well as by high long-term yields, particularly in some countries. A large-scale adjustment in US equity prices would have global repercussions.

In Italy, domestic macrofinancial vulnerabilities are moderate and broadly unchanged since last spring. Financial market conditions are still relatively relaxed, despite the high yields observed in the main advanced economies. The spread between the yield on Italian and German ten-year government bonds has widened, but remains below the average for the last 20 years. After experiencing very high volumes in the summer months, the trading volumes of Italian government bonds have returned in line with those recorded in the spring.

Lending is expanding moderately and the financial situation of the private sector remains balanced. Inflation has eroded the purchasing power of households. Firms continue to report low levels of debt and ample liquidity. Overall, risks for financial stability are low, but the ongoing tensions in the Middle East could affect the financial situation of households and firms as a result of further energy price hikes and a tightening of monetary and financing conditions.

Intermediaries continue to be in a sound position overall, which helps to mitigate the risks stemming from a possible worsening of the macrofinancial situation. The capitalization and profitability of the banking system remain strong, and credit quality is good. The insurance sector’s solvency is also high and its profitability is improving.

The supervisory authorities are monitoring the implications for financial stability of the rapid spread of frontier artificial intelligence models. Exposure to cyber and operational risks requires all intermediaries to step up their security measures. The European Systemic Risk Board has issued a formal warning on the risks, while the ECB, Banca d’Italia and IVASS have taken ad hoc measures to raise the awareness of supervised entities.

There are six boxes in this Report on the following topics: artificial intelligence as a potential amplifier of systemic risks; hedge fund activity in the Italian government bond repo market; supervisory expectations on provisioning for the non-performing exposures of less significant institutions; Banca d’Italia’s initiatives to enhance the digital operational resilience of the Italian financial system.; the impact of the Solvency II review on Italian insurance companies; the global growth of private credit.