So far, financial market stress has been lower than during the onset of the COVID-19 pandemic. However, the situation in financial markets has certainly worsened: financial conditions are tightening, risk aversion has increased, and uncertainty is high. Risks, particularly in commodity markets and related to cyber security, require close monitoring.
Geopolitical events, climate change, and digitalisation are intensifying the ongoing structural change in the real economy. An abrupt process of structural change may lead to losses in the real economy and write-downs of loans. Structural change also places a burden on the financial sector, which has to accompany the real economy through the transition. What buffers against unexpected losses are available in the system?