This aggregate picture masks some heterogeneity within the banking sector. In particular, depending on their business models, individual banks might be affected in different ways by the low interest rate environment. A second issue is the potential risk of credit or asset bubbles. Currently, we do not see compelling evidence at the euro area level of stretched asset valuations.
Both corporate bond spreads and equity prices appear to be broadly in line with fundamentals. Similarly, real estate price growth remains moderate in the area as a whole, although significant cross-country heterogeneity is observable. This assessment is corroborated by the fact that credit growth is still modest, which suggests that asset price developments are not accompanied by increasing leverage.