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.

Indicators of Financial Stability

What is financial stability?

The financial system is at the heart of the economy. It enables people to save, borrow, invest and hedge financial risks that they are unwilling to bear themselves. A stable financial system guarantees that payments can be made securely and quickly. These services are often taken for granted, even though they are essential to the functioning of the economy. This is why DNB is committed to maintaining a smoothly operating financial system that is sufficiently resilient to shocks and contributes towards creating sustainable economic growth in the Netherlands.

What is financial stability?

How does DNB promote financial stability?

DNB is committed to ensuring stable prices, solid financial institutions and a properly functioning payment system. These elements are all essential to maintaining a smoothly operating financial system. DNB also focusses on risks that may harm the financial system as a whole, warns against these risks and issues advice. For instance by arguing for a limit to the amount of mortgage loans that home owners are allowed to take out. We also improve the financial system's resilience by requiring financial institutions to strengthen their buffers. To this end,

How does DNB promote financial stability?