European Central Bank

In the Survey on the Access to Financing of Enterprises (SAFE) for the second quarter of 2026, firms were asked about their exposure to the conflict in the Middle East, how the conflict has influenced their expectations, and what coping strategies they have adopted. It found that exposure to the conflict is higher for small and medium-sized enterprises, for exporters and in the trade sector. The conflict has primarily affected firms’ expectations for nominal variables and demand, while the impact on expectations for other real variables is small.

We construct a novel bank-level index that quantifies fragmentation in the capital buffer framework faced by euro area banks. Defined at quarterly frequency, it measures fragmentation by looking at the number of simultaneously active buffers, their geographical dispersion, and the frequency of buffer rate changes within the preceding year. The index is orthogonalised with respect to the level of capital requirements, bank size, and the financial cycle, thus controlling for these factors when measuring fragmentation as defined above.

We construct a novel bank-level index that quantifies fragmentation in the capital buffer framework faced by euro area banks. Defined at quarterly frequency, it measures fragmentation by looking at the number of simultaneously active buffers, their geographical dispersion, and the frequency of buffer rate changes within the preceding year. The index is orthogonalised with respect to the level of capital requirements, bank size, and the financial cycle, thus controlling for these factors when measuring fragmentation as defined above.

This paper examines how bank capital conditions the effect of competition on credit risk in lending markets, informing the debate on banking competition, deregulation, and risk-based supervision. Using ECB supervisory data for 146 euro area banks across 19 countries over 2020Q2–2025Q3, we analyze whether this relationship depends on banks’ regulatory capital positions. We find that greater market power is associated with higher subsequent credit risk, while stronger capitalization is associated with lower risk.