Spain | Geopolitical risk as the leading threat to financial stability

Summary

A few days ago, Bank of Spain released its Financial Stability Report, one of its top publications. Coincidentally, this report came out on the same day Americans elected their new president.

Key points

• Key points:
• The report noted that the outcome of the U.S. elections would be one of the most impactful geopolitical events in the coming months. It cautioned that a Trump victory, along with his unpredictable policies, could trigger a rise in geopolitical tensions worldwide.
• These potential risks, which may spur economic and financial instability, also include elections in other strategic regions for Europe and Spain, ongoing conflicts in Ukraine and the Middle East, trade disputes with China, and cyber threats.
• Another significant risk highlighted in the report is the potential for an abrupt correction in financial markets, particularly within some high-risk assets that are currently valued at record levels.
• Meanwhile, concerns related to slower economic growth and high inflation have subsided: the Spanish economy has grown above its European peers in recent quarters.
• Regarding vulnerabilities, there is good news: Spain's private sector shows resilience; household disposable income has risen, companies have reported strong financial results, with increased profits; and Spain's financial sector remains buoyant and robust, supporting efficient financial intermediation.

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