 Financial stability risks have increased over the past six months. So what are the key vulnerabilities in the euro area financial system and the economy? Banks still struggle with low profitability. In some countries, the level of public debt remains high. Over the last few years, the number of firms with lower credit ratings has increased. In recent years, solid economic growth has made these vulnerabilities manageable. Yet lately, economic growth in the euro area has slowed down. If growth stays weak for longer than we expect, it could make it more difficult to address the challenges posed by these vulnerabilities. Looking ahead over the next two years, the key risks that could compromise the stability of the financial system are sharp falls in asset prices. These could affect not only the financial system, but the economy as a whole. A slowdown in economic growth or a sharp increase in the cost of borrowing money. Either of these may prove challenging for firms and governments with high levels of debt. Low bank profitability. This may make it more difficult for banks to provide loans to households and firms. High risks taken by investment funds. These may amplify sudden changes to prices in financial markets, which can negatively affect financial stability. Despite these risks, a number of factors continue to support financial stability. Euro area banks have built up their capital buffers, which helps to ensure that banks are more resilient in the face of a slowdown in economic growth. The euro area financial system itself is also more diverse now. This means that businesses are increasingly able to borrow directly in capital markets, rather than relying solely on banks. Read a financial stability review to find out more.