Financial institutions

The effects of geopolitical risk on sovereign debt holders in the euro area

10/30/2026 European Central Bank Central banks

We use confidential granular data on euro area sovereign bond holdings to examine the heterogeneous behavior of investor types in response to country-specific geopolitical risk shocks. By distinguishing investor categories and accounting for their bond holding dynamics over time, we provide an empirical assessment of how different bond holders react to geopolitics. The analysis employs country-level geopolitical risk indices of the country of sovereign bonds, and applies local projection methods to estimate the dynamic responses of various investor groups to geopolitical risk shocks.

Main findings from the ECB’s recent contacts with non-financial companies

10/30/2026 European Central Bank Central banks

This box summarises the main findings from recent contacts between ECB staff and representatives of 64 leading non-financial companies operating in the euro area. According to these exchanges, which mainly took place between 28 September and 7 October 2026, activity continued to grow moderately in the third quarter with similar momentum expected for the fourth quarter. Growth was particularly focused in high-value manufacturing and IT services, while growth in consumer spending was relatively weak. Employment dynamics remained subdued, with many firms in cost-cutting mode.

Headwind or tailwind? How banks interpret borrowers’ AI exposure

10/19/2026 European Central Bank Central banks

General-purpose technologies create large opportunities but make their distribution across firms difficult to assess in real time. We use banks as interpreters of the rise of generative AI by studying lender-specific probability-of-default (PD) estimates for private firms in four large euro-area economies. As public attention to AI rises after ChatGPT, banks lower assessed default risk for borrowers in highly AI-exposed industries by about 5%. The reassessment is weaker for labor-intensive firms and stronger among lenders with pre-existing industry expertise.

Regulatory incentives and the structure of euro area money markets

10/19/2026 European Central Bank Central banks

This paper quantifies the regulatory cost of short-term money market transactions and analyses how post-global financial crisis prudential reforms shape the structure of euro area money markets and the redistribution of central bank reserves. As the stock of reserves declines with the normalisation of the European Central Bank’s balance sheet, trading in money markets is becoming increasingly important to banks’ liquidity management. As the related money market volumes rise, regulatory constraints may become a more visible determinant of trading activity and short-term rate formation.

Headwind or tailwind? How banks interpret borrowers’ AI exposure

10/19/2026 European Central Bank Central banks

General-purpose technologies create large opportunities but make their distribution across firms difficult to assess in real time. We use banks as interpreters of the rise of generative AI by studying lender-specific probability-of-default (PD) estimates for private firms in four large euro-area economies. As public attention to AI rises after ChatGPT, banks lower assessed default risk for borrowers in highly AI-exposed industries by about 5%. The reassessment is weaker for labor-intensive firms and stronger among lenders with pre-existing industry expertise.

Pages

Subscribe to Financial institutions