Robust and dynamic financial markets

The global financial crisis and subsequent European sovereign debt crisis prompted a wide set of financial sector reforms to increase the financial sector’s resilience and authorities’ capacity to react. These reforms laid the groundwork for a resilient euro area financial sector that has – aided both by the ECB’s interventions and swift and decisive policy measures taken at national and EU level - weathered a number of adverse shocks in recent years. Nonetheless, the risk-sharing and shock absorption capacity of the euro area still has important limitations, reflecting both shortcomings in the institutional and legislative framework and persistent structural weaknesses. Impediments to euro area cross-border investment flows also limit the currency area’s growth potential and efficient resource allocation. Addressing these shortcomings is key to further solidifying the stability of the euro area’s financial system and to exploiting the euro area’s full growth potential. At the same time, a continuously changing financial landscape and broader challenges such as the twin green and digital transitions and geopolitical developments require policy makers both to plan for the future and to remain reactive to emerging trends.