According to analysts, France’s political crisis is unlikely to inflict concerning levels of risk on the domestic banking sector. French Prime Minister Sébastien Lecornu stepped down from his role on October 6, just weeks after taking office, which sent the share prices of BNP Paribas, Crédit Agricole and Société Générale tumbling. It also propelled a sovereign-risk measure to its highest level this year. The turmoil has prompted investors to sell off French assets, raising domestic financing costs relative to those of its European peers. France’s borrowing premium over German debt, for instance, recently climbed to its highest level this year, while credit-ratings firms have also downgraded France’s credit rating.
Nonetheless, banks should be able to withstand any changes in France’s sovereign-debt profile, especially given that French lenders hold comparatively limited amounts of the country’s debt, with international investors owning more than half. French banks’ exposure to domestic government debt stands at around 6 percent of total assets, according to data from the European Central Bank (ECB), while that figure for Italian banks is 12 percent and for Spanish lenders 8 percent.
BNP Paribas, Société Générale and Crédit Agricole together hold about €37 billion of French sovereign debt, according to Pillar 3 disclosures compiled by Bloomberg Intelligence. This climbs to €84 billion when including Crédit Agricole’s insurance operations and businesses. The European Banking Authority (EBA), meanwhile, has estimated the three’s combined holdings at €166 billion. “There is limited near-term fundamental risk to the banks’ holdings of French sovereign paper,” Joseph Dickerson, an analyst at Jefferies, told Bloomberg. “The real risk would be any knock-on impact to the real economy.”
German banks have started to ramp up their marketing of private-equity funds to the country’s small-scale investors, with financial institutions of all sizes—from Deutsche Bank to online broker and bank Trade Republic—clamouring to capitalise on this rapidly expanding asset class.
“German retail investors represent one of the world’s largest untapped pools of wealth, and private equity firms are eager to gain access,” Claudio de Sanctis, head of retail banking at Deutsche Bank, recently told the Financial Times, after the bank launched a private-markets product with Switzerland’s Partners Group.
“This is a huge growth theme,” said Trade Republic’s co-founder, Christian Hecker. “We Germans may be sceptical of capital markets, but we are proud of our private companies—and this lets investors take part in that story.” Hecker also said that Trade Republic has been buoyed by strong early demand for its private-markets launch, with significant customer uptake and committed capital observed. “In the coming five years, private equity will become a cornerstone of retail investors’ portfolios,” he added.
German savers remain watchful, however, after the 2008 financial crisis saw them endure massive liquidations and steep discounts following the collapse of real-estate funds. “There’s mostly a boom from the supply side, but not from the demand side,” said Ali Masarwah, chief executive of wealth adviser Envestor. “Flows so far are tiny compared to exchange-traded funds.”
The Italian government approved its 2026 budget plan on October 17, which requires banks and insurance companies to contribute €4.5 billion through various mechanisms. According to Reuters, the government will oblige banks to spread over five years loan-loss provisions, which are deducted from income, while hiking the IRAP (Regional Tax on Productive Activities) corporate tax by two percentage points, weighing on domestic lenders and insurers.
Italian Minister of Economy and Finance Giancarlo Giorgetti stated that such financial firms should contribute to state finances and that the government’s fiscal-consolidation efforts had not only led to lower interest rates on Italy’s debt but also helped financial firms obtain better funding conditions on the market.
“The banking and insurance sector in these three years has strongly benefited from the positive effects of government action,” the minister said, adding that the package, worth an estimated €18 billion, “intervenes in a context of significant uncertainty”. He also noted that the budget would support “households’ purchasing power, businesses and social needs, while also ensuring the sustainability of public finances”.
Prime Minister Giorgia Meloni has been focused on slashing Italy’s budget deficit to avoid a European Union (EU) special monitoring regime. This has left the government with little room to manoeuvre, resulting in a slimmed-down budget and prompting calls for “contributions” from financial institutions. The Italian prime minister called the plan a “serious” budget with the same priorities as the past two years: “family and birth rates, tax reduction, support for businesses, and healthcare”.
The government has also proposed reviving a failed 40-percent tax on banks’ “windfall” profits, but at a reduced rate. As Politico magazine recently reported, Italian lenders “have already agreed to the temporary suspension of tax incentives, extending a measure implemented last year”.
The United Kingdom’s top banking supervisor has warned that it would be “highly risky” to scrap capital requirements on domestic lenders’ holdings of government bonds. Banking lobbyists in the United States and the UK have been pressing authorities to exempt sovereign debt from lenders’ leverage ratio calculations, which assess how much capital they require as a share of their total assets.
However, Sam Woods, chief executive officer of the Bank of England’s (BoE’s) Prudential Regulation Authority (PRA), has rebuffed those calls, arguing that giving UK banks and building societies capital relief on their £150 billion of gilt holdings, as well as their multibillion-pound portfolio of foreign government debt, would “risk forgetting one of the main lessons from the 2023 banking failures”.
“Such a change would be equivalent to ripping off our jacket, warm hat and gloves and throwing them all over the nearest cliff,” Woods recently warned, adding that it would be “profound—and highly risky”. Woods, the central bank’s deputy governor who will leave his position next year, also said the 2023 collapse of three mid-sized US banks showed “bonds issued by sound governments, if liquidated in size, can pose serious risks to banks’ balance sheets due to interest rate risk”.
Lifting capital requirements from government debt would “allow a very large increase in bank leverage given the size of banks’ sovereign holdings” and would “largely remove sovereign risk from the bank capital framework”, unless lenders decided to sell the bonds, he added.
Poland’s parliament approved a government proposal to increase the corporate income tax on banks, with the rate rising from 19 percent to 30 percent next year, before being lowered to 26 percent in 2027 and 23 percent in 2028, where it will remain. According to the Ministry of Finance, the hike is a form of “social justice” after banks earned bumper profits during a recent period of high interest rates. The banking sector has sharply criticised the move, however, labelling it as discriminatory.
The Ministry of Finance plans to raise an additional 11.3 billion zlotys ($3.1 billion) over the next two years from the tax hike, in a bid to bolster the budget amid record defence spending due to the outbreak of war in neighbouring Ukraine. Indeed, the approval follows Prime Minister Donald Tusk’s insistence in late September that banks had to accept “the brutal truth” of paying higher corporate taxes to help finance a sharp increase in defence spending and that lenders were in a stronger position than households to shoulder the fiscal burden.
“That’s the brutal truth. It’s better to tax banks than Polish families, especially since banks are in very good financial shape,” the Polish prime minister stated. “It will be a greater burden [for banks], but who should be burdened if not those who have the most money? This isn’t populism, just a rather obvious conclusion.”
Financial startups with annual revenues below €2 million will also see their tax rate jump from the current 9 percent to 20 percent next year, then drop to 16 percent in 2027 and finally to 13 percent in 2028. At the same time, the banking tax, which is levied on banks’ assets, will be lowered from its current rate of 0.0366 percent to 0.0329 percent in 2027 and 0.0293 percent in 2028.
On October 23, the National Bank of Ukraine (NBU) published its quarterly “Bank Funding Survey” report for the fourth quarter (Q4) of 2025. “The Q3 2025 bank funding survey showed a rise in the volume and cost of client deposits. The financial institutions reported higher liabilities. Interest rates on both retail and corporate deposits were growing, the respondents said. The cost of wholesale funding held steady,” the survey found. “In Q4, the banks expect an inflow of deposits and no change in their cost. In July–September, the share of FX liabilities declined, and the banks expect [it] will shrink further in the year’s last three months. Funding maturity rose and will extend its increase into the next 12 months.”
The survey also noted that the total volume of capital grew between October 2024 and September 2025 in an uptrend expected to persist going forward. The banks stated that the cost of capital rose, but they anticipated it to retreat over the year. “In July–September, almost all of the banks reported growth in their total capital to a greater or lesser extent over the past 12 months. The financial institutions expect this uptrend to continue until September 2026,” the central bank added.
Commercial banks predicted that the cost of funding would hold steady overall in Q4, according to the survey. “However, certain large financial institutions believe the cost of deposits raised from households will go up,” it further observed.
Ahead of Bulgaria’s entry into the eurozone, deposits in its banking system climbed to 151.7 billion leva ($90.2 billion) in September, up from 139.9 billion at the start of the year, according to Bulgarian National Bank (BNB) data. Households held the largest share of deposits, at 96.2 billion leva, while deposits from financial enterprises, such as banks, insurers and investment funds, accounted for 4.3 billion leva. Non-financial companies, meanwhile, had 51.1 billion leva deposited.
On an annual basis, total deposits surged by 13.18 percent, putting the sector on a stronger growth pace than the 9.51 percent recorded for 2024. The situation thus reflects the greater appetite of Bulgarians and local businesses to accumulate savings, possibly to weather any fallout from the country’s upcoming entry into the eurozone.
Bulgaria’s total loan volume, meanwhile, reached 114 billion leva in September 2025, which was up 10 billion from January. Household loans came in at 53.5 billion leva, while loans to financial enterprises reached 9.2 billion. Lending to companies outside the financial sector, moreover, totalled 51.3 billion leva.
The United States issued a warning to Serbian banks over potential violations of sanctions targeting Serbia’s state-owned oil company, Naftna Industrija Srbije (NIS), President Aleksandar Vučić confirmed on October 17. Vučić said the National Bank of Serbia (NBS) had received a formal notice from US authorities expressing their concerns over the use of the domestic DinaCard—Serbia’s national payment card launched in 2003 as the result of collaboration between the NBS and local commercial-bank payment systems—at NIS fuel stations, which could be interpreted as a breach of US sanctions on NIS, which came into effect on October 9.
The measures prohibit transactions with NIS involving US-linked financial instruments, including payments made with Visa, Mastercard and other foreign-issued cards. As such, fuel purchases at NIS stations must be made in cash or via the DinaCard. But the warning from Washington suggests that US authorities may scrutinise the use of the DinaCard system as a possible workaround of sanctions targeting Russian-linked entities.
Vučić also assured citizens that there would be no disruptions to the fuel supply, so there was no reason to panic. “The market will be well supplied. Diesel prices have even decreased today,” he said. “We are doing everything we can in terms of oil, gas, and electricity. There’s no reason for concern about heating or energy supplies.” Vučić also promised that Serbia would engage in talks with the United States to resolve the issue. “We will not go back to the past. We are going to the future,” he added.
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