The Bank of Italy’s latest Financial Stability Report assesses Italy’s macrofinancial vulnerabilities as moderate and broadly unchanged since April, while highlighting risks from geopolitical tensions, global market corrections and cyber threats. High long-term yields and compressed risk premiums, particularly in sectors linked to artificial intelligence (AI), leave financial assets exposed to further price declines. A sharp adjustment in U.S. equity prices could have global repercussions.
Domestic lending continues to expand moderately, while low private sector debt and ample corporate liquidity limit financial risks. However, inflation has eroded households’ purchasing power, and further energy price increases and tighter financing conditions could weaken borrowers’ repayment capacity. Banks’ common equity tier 1 capital ratio stood at 15.5% in June, while their ratio of nonperforming loans to total loans, net of provisions, fell to 1.4%. Insurers’ average solvency ratio reached 276% in June, although higher yields subsequently pushed net unrealized investment losses to EUR 31 billion by the end of September, potentially weighing on profitability.
Widespread adoption of similar AI models and reliance on common technology infrastructure could synchronize financial decisions and accelerate the transmission of shocks. Cyber and operational exposures require intermediaries to strengthen security measures, including safeguards against risks arising from technology providers. A Bank of Italy communication issued in July requested supervised intermediaries to assess their safeguards and submit a report with an action plan by Dec. 31, 2026. The requested improvements cover governance, vulnerability management, monitoring and testing of technology and third-party risks.