Financial Stability Report, No. 1 - 2026
The conflict in the Middle East has increased the vulnerabilities of the global economy and financial system in an environment already characterized by strong geopolitical and trade tensions and by heightened uncertainty. Global growth forecasts have been revised downwards, inflation expectations have risen and financial conditions have tightened. At the same time, the existing risks stemming from excessive financial market valuations, especially in the technology sector, still linger. Any further increases in investors' risk aversion could affect the riskiest segments of the international financial system.
In Italy, the main risks to financial stability stem from international factors. Until last February, Italy's macrofinancial conditions and the risks associated with cyclical developments were stable. Following the outbreak of the conflict, Italian government bond yields rose and, to a smaller extent, so did their spread vis-à-vis the German Bund; share prices dropped sharply and, although they have since recovered, they remain exposed to significant fluctuations. The markets have continued to function in an orderly fashion.
The financial condition of households and firms is balanced, but a deterioration in the macroeconomic scenario could affect their confidence. The risks to households remain limited given their sound financial position and low debt. The picture for firms also appears to be stable on the whole, supported by a low level of debt and moderate credit growth. At a time of widespread uncertainty, higher energy and transport costs, more persistent inflationary pressures and less accommodative financial conditions could have an impact on households' purchasing power and on firms' costs, as well as on their confidence.
Despite starting from a sound position, financial intermediaries are exposed to risks that could materialize should the conflict drag on. The deterioration in the geopolitical environment and increased uncertainty may expose banks to a number of risks: funding and liquidity conditions could worsen if market yields were to rise sharply; asset quality could be affected by a deterioration in the ability of firms to repay their loans. However, Italy's banking system continues to exhibit high levels of capitalization and profitability. The Italian insurance sector also remains sound, thanks to high capitalization levels, rising premium income, and improving profitability and liquidity conditions; higher yields on fixed-income securities could, however, lead to unrealized losses.
Banca d'Italia is continuing to monitor the risks to the macrofinancial environment stemming from the war in the Middle East. It has confirmed the macroprudential measures in place in 2025 and has updated the capital requirements for the other systemically important institutions involved in mergers.
There are four special-focus boxes in this Report. The first one analyses Italian investors' holdings in securities issued by the US technology sector and concludes that the exposure is limited overall. The second presents a new composite indicator of systemic risk for the financial cycle for Italy. The third box shows that the higher default rate for loans granted by less significant institutions can largely be explained by the characteristics of borrowers. The fourth box analyses the characteristics and risks of less significant institutions' use of online deposit platforms to collect deposits from abroad.
Full text
-
29 April 2026
-
29 April 2026
-
29 April 2026
-
29 April 2026
YouTube
X - Banca d'Italia
Linkedin
RSS
E-mail Alert
