Bank of Spain Governor Escrivá warns markets may be underpricing risks and urges simpler European regulation and deeper capital markets

In a speech at the Brokerslink Global Conference, Bank of Spain Governor José Luis Escrivá described 2025 as a turbulent year for the global economy, but argued that growth and inflation have remained relatively resilient. He attributed this resilience in part to productivity gains linked to generative AI and to the continued soundness of the global banking sector, which he characterised as well capitalised and profitable following post-crisis regulatory reforms. The speech cautioned that financial markets appear upbeat despite underlying vulnerabilities, citing equity indices near record highs led by large US technology firms, elevated price-to-earnings ratios, tight corporate bond spreads and subdued volatility. Escrivá also highlighted fiscal risks in systemic economies, pointing to high public debt and deficits and, in the case of the United States, a lack of credible medium-term fiscal consolidation plans, with vulnerabilities building over the medium term and reflected in higher long-term interest rates. On Europe’s positioning, he pointed to institutional quality, sizeable domestic savings, strong human capital and macroeconomic stability as key strengths, while flagging challenges and priorities including simplifying the complex regulatory framework and reducing red tape, developing a more liquid and deep European capital market, rewarding talent and risk-taking, and enhancing the international role of the euro.