The SAFE Policy Center and the Centre for Economic and Policy Research (CEPR) organize and cordially invite you to attend a web seminar:
ECB Financial Stability Review May 2026:
to be held on 2 June, 11:00 a.m. - 12:00 p.m. CEST, online via Zoom
Moderator: Florian Heider, SAFE, Goethe University and CEPR
Stress in global private credit and its implications for euro area financial stability
Glenn Schepens, ECB
Recent stress in parts of the US private credit market − including concerns about exposures in the software sector and redemption pressure in semi-liquid vehicles − has led to renewed focus on possible financial stability risks stemming from private credit and the potential relevance of such risks for the euro area. This special feature looks at the exposure of the euro area financial system to private credit. Using available commercial, public and proprietary data, it finds that euro area financial institutions appear to have limited direct exposure to private credit. This makes it unlikely that private credit in isolation could be a source of systemic financial instability at present. However, insurance corporations and pension funds in particular could, in an adverse scenario, face more material second-round revaluation losses from broader spillovers to leveraged loans, high-yield bonds and equities. Private credit could promote long-term growth by channelling funds from long-term investors to innovative firms, thereby supporting the objectives of the EU’s savings and investments union. The market should nonetheless be monitored closely, especially in view of worsening credit quality, possible expansion into retail-oriented structures and a potential role of private credit in AI-related financing. Reducing private credit’s opacity, addressing data gaps and working towards a harmonised definition of private credit at a global level would avoid a potential underestimation of direct exposures and enable risk to be assessed more completely.
Drivers of investor behaviour in highly valued equity markets
Christoph Kaufmann, ECB
This analysis examines the drivers of euro area investment fund flows into equity markets, especially in currently highly valued US segments. Investment funds play a central role in channelling euro area capital into US equities, making them the key intermediary for assessing investor flows. Using a BVAR model, the analysis identifies US macroeconomic factors, most notably the AI-driven investment boom, as the dominant driver of recent inflows from the euro area into US equity markets. The analysis also shows that flows into US technology equity funds are significantly more sensitive to shocks than flows into broader equity funds. This makes such funds particularly vulnerable to sudden and disorderly redemptions in the event of adverse developments. The findings highlight the risks to financial stability should these supportive drivers suddenly reverse, particularly through spillovers to euro area markets and wealth effects on euro area investors.
Moderator: Florian Heider, SAFE, Goethe University and CEPR
