ECB Warns High Valuations Boost Financial-Stability Risks

The European Central Bank sees “elevated” risks to the region’s financial stability, with stretched asset valuations prone to sharp adjustments and fiscal challenges in some countries that could test investor confidence.

“Market sentiment could shift abruptly on account of deteriorating growth prospects, for example, or disappointing news on artificial intelligence adoption,” the ECB said in its bi-annual Financial Stability Review, published Wednesday.