The European Securities and Markets Authority has published its second 2025 risk monitoring report, concluding that risks across markets within its remit are high or very high. It highlights geopolitical uncertainty and escalating trade conflicts as key drivers of pronounced market volatility in the first half of 2025, alongside rising cyber and hybrid threats that could disrupt market operations. The report also flags elevated investor risks in crypto-asset markets and warns that sharp market corrections could trigger liquidity strains, with retail investors particularly exposed to information overload and misinformation. EU equities saw volatility at levels not seen since COVID-19 market stress, including sharp falls and a fast recovery in April linked to US tariff announcements, while performance as of end-June was +11% year to date. Corporate bond spreads widened significantly in early April, especially in high-yield, and market metrics of credit quality deteriorated; the report also notes Moody’s downgrade of the US to Aa1 in May. Crypto markets fell 10% in valuation in 1H25 but remained near historical peak volumes at around EUR 3tn, with additional concerns cited around governance, credibility and money laundering risks. In asset management, EU funds were broadly resilient amid high volatility but pockets of leverage and liquidity risk persist, including continued outflows from real-estate funds in some jurisdictions; an ESMA-IMF stress test found resilience to shocks but potential spillovers to underlying bond markets. Operational vulnerabilities were highlighted by incidents such as the Iberian Peninsula blackout and a T2S outage in 1Q25, while equity-trading volumes rose 23% year-on-year in 1H25.
European Securities and Markets Authority 2025-09-09
European Securities and Markets Authority warns of high or very high risks across EU markets in its second 2025 risk monitoring report
The European Securities and Markets Authority's second 2025 risk monitoring report identifies high risks across markets due to geopolitical uncertainty, trade conflicts, and rising cyber threats. It highlights elevated investor risks in crypto-asset markets and warns of potential liquidity strains from sharp market corrections. EU equities experienced significant volatility, corporate bond spreads widened, and crypto markets fell 10% in valuation, while operational vulnerabilities were underscored by incidents like the Iberian Peninsula blackout.