The three European supervisory authorities (ESAs) – European Banking Authority (EBA), European Insurance and Occupational Pensions Authority (EIOPA), and European Securities and Markets Authority (ESMA) – have released the Autumn 2025 joint committee report on risks and vulnerabilities in the EU financial system. The paper highlights how global trade and security developments have affected the economy and sets out recommended policy actions for market participants to protect themselves.
“Global trade and security developments have led to sudden structural changes and contributed to a deteriorating economic outlook,” the report states. It lists the US’ tariffs, the Russian war against Ukraine, and conflicts in Israel as major geopolitical events that are market destabilisers.
As a result, “growth forecasts were revised downwards, with signs of divergence between EU and US monetary policy”. The paper shared some numbers, including those released by the European Commission in May this year, that estimated growth forecasts for the EU going down 0.4ppt to 1.1 per cent for 2025, and down 0.3ppt to 1.5 per cent for 2026.
Steps to follow
To address these challenges, the paper recommends five policy actions to market participants. Financial institutions should incorporate considerations for risks stemming from geopolitical developments into day-to-day business processes and risk assessments. Risk management capacities should be put in place to address unexpected short- and medium-term challenges, no matter how those challenges arise. Vigilance against cyber risks should be strengthened. Contagion risks from crypto assets must be monitored, especially since interlinkages between crypto markets and the traditional financial sector are deepening. Finally, market participants are encouraged to support the Savings and Investments Union (SIU).
