The European Systemic Risk Board published the outcomes of its 60th General Board meeting, concluding that financial stability risks in the European Union remain elevated amid growing vulnerabilities in financial markets. The General Board also approved the publication of two reports prepared jointly with the European Central Bank and released the 54th issue of the ESRB’s risk dashboard. The ESRB highlighted stretched valuations in several riskier asset classes, with high concentration in some segments such as the US technology sector, and noted that market risk appetite appears misaligned with a subdued growth outlook. It discussed vulnerabilities in parts of the non-bank financial sector, including opacity and leverage and liquidity mismatches in private markets and hedge funds, which could amplify shocks through forced sales, and pointed to the EU’s global interconnectedness as a channel for spillovers. While acknowledging resilience reflected in recent EU-wide stress tests and the 2025 Supervisory Review and Evaluation Process, the General Board noted signs of credit risk materialising in some jurisdictions and warned that the impact of tariffs may take time to feed through to bank balance sheets; it also flagged concerns that recent Solvency II changes have led to less prudent regulatory requirements and underlined the importance of implementing the Insurance Recovery and Resolution Directive in 2027. The first ECB joint report will assess linkages between banks and non-bank financial intermediaries in the EU, focusing on banks’ role in managing liquidity and providing leverage to NBFIs and the financial stability implications. The second will examine how geopolitical and geoeconomic risks interact with financial stability and will set out tools for regular monitoring; both reports are to be published in due course.
European Systemic Risk Board 2025-11-27
European Systemic Risk Board says EU systemic risks remain elevated and approves reports on bank-NBFI linkages and geopolitical risks
The European Systemic Risk Board's 60th General Board meeting highlighted elevated financial stability risks in the EU, with vulnerabilities in financial markets and the non-bank financial sector. The Board noted stretched valuations in riskier asset classes and misaligned market risk appetite, alongside concerns about credit risk and recent regulatory changes. Two forthcoming reports with the European Central Bank will assess financial intermediary linkages and the impact of geopolitical risks on stability.