Frankfurt (Reuters) – The European Central Bank (ECB) warned Wednesday that the stock market and booming debt seemed to be “desynchronized” compared to the context of geopolitical and commercial uncertainties.

This warning is part of the half -yearly report on financial stability published Wednesday by the ECB, which includes a litany of ancient and new risks ranging from the exhaustion of cash reserves of funds to the overvaluation of real estate markets and high public debt.

In the latest edition of the report, the ECB warns that investors could underestimate the risk that the economy is doing less well than expected, that trade tensions intensify or that the expected relaxation of monetary policy does not materialize.

“Despite the decreases, the valuations of the actions remain high, while the credit differences still do not seem in line with the risk of underlying credit,” said Luis de Guindos, vice-president of the ECB, in his foreword.

The ECB has described the American customs duties as “major risk”, believing that an increase in a standard deviation of a index measuring the uncertainty of the commercial policy would lower the median growth forecast of 0.15 percentage points after four quarters.

Such a push of uncertainty has also reduced the equity of banks by 10.4% in six months and increased their loan cost on the bond market with seven base points, underlines the ECB.

Among other risks, the institution also cites cyber attacks, the concentration of investments in private markets and growing links – although your tenuous – between cryptocurrencies and traditional finance.

No doubt about the Fed

During the press conference on presentation of the report, Luis de Guindos, Vice-President of the ECB, also said that Frankfurt examined the exhibition of Euro area banks to the dollar, but that there was no doubt that the Federal Reserve (Fed) would continue to provide liquidity during tensions.

“I have no doubts that the agreement we have concluded with the Federal Reserve will remain an important pillar for financial stability worldwide,” he said, while adding that the SWAP lines had been very positive for financial stability on both sides of the Atlantic.

The recent attacks by American president Donald Trump against the federal reserve have raised questions about the independence of the American central bank and on his commitment to ensure that foreign banks do not lack dollars when the financing markets dry up.

Reuters reported last week that ECB supervisors urged certain commercial banks in the region to assess their US dollars needs in the event of a crisis while the institution develops scenarios in which it could not count on the Fed with Donald Trump.

However, banking financing markets have been calm so far, despite the turbulence associated with trade tensions in other asset classes.

“The operation of the market has been ordered,” said the ECB in its report. “Nor have there been signs of deterioration of access to currency funding through pension and swaps markets, despite the volatility observed on other market segments,” it added.

According to a study by the ECB published in November 2024, 23% of the financing of the banks of the euro zone are denominated in foreign currencies and the US dollar makes the largest contribution with 17%.

(Written by Francesco Canepa and Balazs Koranyi; Diana Mandia, edited by Blandine Hénault)

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