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. While the US-EU tariff package deal has somewhat reduced trade uncertainty, authorities were urged to keep monitoring how it affects the behaviour of EU firms, households and the financial sector. Recent market developments were characterised by stronger global risk appetite and record-high asset valuations that appear increasingly misaligned with the macroeconomic outlook, creating scope for a rapid shift back to risk aversion if uncertainty rises. The General Board also highlighted sovereign risk pressures from subdued medium-term growth prospects and deteriorating primary fiscal balances in some countries, with security threats potentially adding to fiscal strain through higher defence spending, and noted that the current geopolitical environment could test EU financial system resilience given dependencies on third countries. On structural risks, the ESRB will publish a report in the coming weeks covering stablecoins, crypto-investment products and multi-function groups, with particular focus on vulnerabilities in third-country multi-issuer schemes where fungible stablecoins are issued both inside and outside the EU, which it characterised as requiring an urgent policy response. A separate report by the ESRB Advisory Scientific Committee on artificial intelligence and systemic risk was authorised for publication in the coming weeks, including potential systemic implications from concentration in a small number of AI providers and model similarity creating common exposures; the ESRB also released the 53rd issue of its risk dashboard.

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