Interest rate increase due to rising risk premiums pose a risk
A sudden increase in interest rates due to rising risk premiums on financial markets is one of the most important risks for financial stability. The reason for this can be political unrest, but also an escalating trade war or rising geopolitical tensions. Sharply increasing interest rates may severely hit heavily indebted households, corporations and governments. A sudden increase in interest rates may also cause financial institutions to be faced with heavy losses on their investment portfolios. Furthermore, in countries where the government relies heavily on its own banking sector to fund its debt, as in Southern Europe, the banking sector will suffer severe losses if risk premiums on government paper suddenly jump.
This is stated in the Overview Financial Stability Spring 2018.