The European Systemic Risk Board’s General Board concluded that EU financial stability risks remained elevated over the previous three months, citing ongoing trade uncertainty, heightened geopolitical tensions and continued market volatility. It also agreed to accelerate work to assess systemic risks related to stablecoins, driven by concerns that the fungibility of stablecoins issued both in the EU and in a third country such as the United States could pose risks to EU financial stability. Worsening trade restrictions were highlighted as a potential drag on growth that could raise corporate insolvencies and weaken household balance sheets, while developments in the Middle East were noted as a possible amplifier of volatility, particularly in foreign exchange and commodity markets. The discussion also covered sovereign risks linked to the need to increase defence spending, which could reduce fiscal space and create challenges for higher-debt countries; macroprudential policy priorities included maintaining current resilience levels, expanding quantitative analysis of trade uncertainty impacts (especially for more open economies) and stepping up system-wide cyber security exercises with macroprudential authority involvement. Two analytical reports reviewed by the General Board, the tenth edition of the ESRB Non-Bank Financial Intermediation Risk Monitor and a report on credit default swap markets, are scheduled for publication in the coming months. The ESRB also released the 52nd issue of its risk dashboard and agreed follow-up to the High Level Group report on the ESRB Review, focusing on advancing a comprehensive framework for holistic systemic risk assessment and strengthening the system-wide approach to macroprudential policy.

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