Financial stability concerns arise when asset prices adjust too quickly, reflecting unforeseeable realisations of transition or physical risks. However, it is unclear how much today’s asset prices reflect the extent of the policy actions required to limit global warming to 2˚C or their impact on the economy and the financial system.
Attention should also be paid to the share of EU Internal Market legislation not yet implemented in national laws. Finally much progress has been achieved in capital market reforms, not least due to the introduction of the euro. Whilst in most countries financial markets function well, there is still some market segregation.