News about ECB

The European Central Bank has developed two new quarterly indicators to monitor euro area banks' vulnerabilities between regular stress tests. The Stress Vulnerability Index (SVI) estimates how much bank capital could be depleted under adverse scenarios, while the Profitability Vulnerability Index (PVI) assesses pressure on current earnings and banks' ability to generate capital internally. Both indices rose during the global financial crisis and the European sovereign debt crisis, and both were strongly associated with the likelihood of banks receiving state aid. The paper supports a cautious approach to maintaining capital buffers, since the SVI stayed slightly elevated even as profitability improved.

In a keynote speech at the Green Swan 2026 Conference in Manila, ECB Executive Board Member Frank Elderson argued that climate change and nature degradation will continue to shape economies. He noted that summer 2026 was the warmest ever recorded in Western Europe, with severe droughts, wildfires and very low river levels affecting transport, industry and energy production. Europe is warming more than twice as fast as the global average, and tens of thousands of excess deaths were linked to extreme heat during the summer months. He argued that climate and nature-related shocks add up and can leave lasting economic scars, such as reduced labour productivity, damaged infrastructure and output that stays below trend for years. These events have also already pushed up wholesale electricity prices and continue to influence food prices.