The European Supervisory Authorities (EBA, EIOPA, and ESMA – the ESAs) have published their Spring 2025 Joint Committee report on risks and vulnerabilities in the EU financial system. The update points to geopolitical tensions and rising cyber risks as key challenges that could impact financial stability.
The ESAs note that geopolitical tensions, trade disputes, shifting policies, and ongoing international conflicts are reshaping global markets. They warn that these developments, along with the risk of economic fragmentation, require supervisors and financial entities to remain vigilant and adaptable.
Financial institutions face increasing uncertainty due to their exposure to international markets, potential liquidity risks, and the growing role of artificial intelligence (AI). The ESAs stress that ensuring resilience in response to these risks is essential.
Cyber risks and digital resilience
The report highlights cyber risks and digitalisation as areas requiring close attention. The ESAs recommend that supervisors and financial institutions maintain robust data governance, assess AI solutions for compliance with the AI Act, and ensure the timely implementation of the Digital Operational Resilience Act (DORA).
The ESAs advise that financial entities and regulators closely monitor global financial linkages, including currency risks, and prepare for continued market volatility. They emphasise the need for proactive risk management and adequate provisioning against potential liquidity risks.
