The Bank of Italy has published its Financial Stability Report for 2026, saying the conflict in the Middle East has increased the main risks to Italy’s financial stability through weaker global growth prospects, higher inflation expectations, tighter financial conditions and renewed market volatility. In Italy, government bond yields and, to a lesser extent, the spread over the German Bund rose after the conflict began, while share prices fell sharply before recovering part of their losses. Markets have nonetheless continued to function in an orderly way. Households and firms remain broadly balanced, and banks and insurers start from sound positions, but a prolonged conflict could weaken confidence, worsen banks’ funding and asset quality, and increase unrealized losses on insurers’ fixed income portfolios. On policy settings, the central bank confirmed the macroprudential measures already in place in 2025. It kept the systemic risk buffer at 1 per cent and the countercyclical capital buffer at 0 per cent for the first two quarters of 2026, and updated capital requirements for other systemically important institutions involved in mergers. From 1 April, BPER Banca and Monte dei Paschi di Siena are required to hold a 0.50 per cent buffer. The report also points to lingering risks from elevated global market valuations, especially in the technology sector, although a special analysis found Italian investors’ exposure to US technology securities to be limited overall. The central bank said it will continue monitoring the macrofinancial effects of the war in the Middle East and adjust its macroprudential stance if necessary.
Bank of Italy 2026-04-29
Bank of Italy says Middle East conflict has raised financial stability risks and confirms macroprudential measures
The Bank of Italy’s 2026 Financial Stability Report says the Middle East conflict has raised risks to Italy’s financial stability via weaker global growth, higher inflation expectations, tighter financial conditions and renewed volatility, though domestic markets remain orderly and banks and insurers are starting from sound positions. The central bank confirmed macroprudential measures for 2026, keeping the systemic risk buffer at 1 per cent and the countercyclical capital buffer at 0 per cent, and set a 0.50 per cent buffer for BPER Banca and Monte dei Paschi di Siena from 1 April. It also updated capital requirements for other systemically important institutions involved in mergers, flagged risks from elevated global market valuations, particularly in technology, noted Italian investors’ limited exposure to US technology securities, and said it will adjust its macroprudential stance if needed.