Financial stability conditions in the eurozone have worsened as the ongoing war between Russia and Ukraine is pushing prices higher and increases risks to inflation and economic growth, the European Central Bank (ECB) said.
The ECB warned in a report on Wednesday that "vulnerabilities may increase" due to the uncertainties of the conflict and the shifting expectations of policy normalisation in advanced economies, reports Xinhua news agency.
The war in Ukraine has brought "immense human suffering", ECB Vice President Luis de Guindos said.
Financial stability risks have increased as the conflict has impacted all aspects of economic activity and financing conditions, he explained.
"Prices for commodities and energy have remained elevated and volatile, which has caused some stress in derivatives markets for these products," the ECB said in a press release.
"Some assets remain at risk of further corrections should the growth outlook weaken further and/or inflation turn out to be significantly higher than expected," it said.
Meanwhile, the eurozone's non-financial corporations were put under the risk of default as the pressure of rising input prices and weakened economic growth mounts.
The ECB suggested that a more effective capital buffer framework should help boost the resilience of the financial system and called for strengthened regulation to address risks in the non-bank financial sector.