The European Systemic Risk Board published the outcomes of its 59th General Board meeting, concluding that financial stability risks in the European Union remain elevated amid ongoing geopolitical uncertainty. It also signalled near-term publications on emerging sources of systemic risk, including a forthcoming report on stablecoins, crypto-investment products and multi-function groups and an Advisory Scientific Committee report on artificial intelligence and systemic risk, alongside the release of the 53rd issue of its risk dashboard. Members noted that the US–EU tariff package deal has reduced but not eliminated trade uncertainty and called for continued monitoring of its effects on EU firms, households and the financial sector. Over the past three months, higher global risk appetite has driven record-high asset valuations that appear increasingly misaligned with the macroeconomic outlook, creating the risk of a rapid shift to risk aversion if uncertainty rises; the recent EU-wide stress test nonetheless indicated European banks appear well positioned to withstand potential headwinds. The Board also pointed to sovereign risk sensitivities linked to subdued medium-term growth prospects and deteriorating primary fiscal balances in some countries, with increased defence spending potentially adding to fiscal pressures, and reiterated that dependencies on third countries could be tested by the current geopolitical environment. On stablecoins, the Board highlighted vulnerabilities in third-country multi-issuer schemes where fungible stablecoins are issued both inside and outside the EU and called for an urgent policy response, while noting that multi-function groups may operate under prudential regimes that are more lenient than those for financial conglomerates. Both the crypto-asset and AI reports are expected to be published in the coming weeks.
European Systemic Risk Board 2025-10-02
European Systemic Risk Board says EU financial stability risks remain elevated and prepares reports on stablecoins and artificial intelligence
The European Systemic Risk Board reported that financial stability risks in the European Union remain elevated amid geopolitical uncertainty, stretched asset valuations and sovereign risk sensitivities, although stress tests suggest banks are resilient. It highlighted vulnerabilities in third-country multi-issuer stablecoin schemes and in multi-function groups under more lenient prudential regimes, calling for an urgent policy response. The Board also announced forthcoming reports on stablecoins, crypto-investment products and artificial intelligence and systemic risk.