The Dutch Authority for the Financial Markets has published its annual Financial Stability report, finding that geopolitical tensions are creating heightened uncertainty around growth and inflation, raising recession concerns and contributing to high volatility in capital markets. It highlights additional financial stability risks linked to cyber security and artificial intelligence, liquidity strains, and the housing market, and stresses the need for financial institutions and households to be well prepared for adverse scenarios. The report notes that developments in the United States can transmit strongly to the Netherlands due to interconnected markets and reliance on US financial institutions and infrastructure, while cross-border supervisory cooperation cannot be taken for granted, reinforcing the case for European coordination and deeper EU capital markets. Rising digitalisation increases the importance of digital and operational resilience, with the AFM supervising implementation of the Digital Operational Resilience Act since January 2025, and rapid AI adoption requiring stronger risk management. Market volatility has risen since the announcement of US trade tariffs; while major liquidity issues at financial institutions have not materialised, investors including pension funds incurred sizable losses and investment fund managers face elevated liquidity risks from outflows and margin calls, prompting a need to reassess stress-testing policies and scenarios. On housing, worsening affordability amid high demand and limited supply keeps risks elevated, including from high mortgage debt, and the AFM points to potential underpricing of climate-related risks such as foundation damage in property valuations alongside increased overbidding and fewer financing or inspection contingencies.

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