The European Securities and Markets Authority (ESMA) published its first risk monitoring report of 2026, concluding that risks of market and systemic stress in EU financial markets remain high despite resilient performance in the second half of 2025. It highlights a continuing likelihood of sudden and significant price swings driven by rising geopolitical tensions, stretched equity valuations and an uncertain EU economic outlook, with higher cross-asset correlations increasing contagion risk and cyber and hybrid threats raising the risk of operational disruption. ESMA notes that its second-half 2025 assessment was completed before the war in the Middle East began to shock the global economy in late February 2026, but that early market reactions underscored the transmission channels it identified, including sharp moves in energy and commodity prices and elevated volatility. The report reviews conditions across securities markets, crypto-assets, infrastructures and asset management, pointing to record-high global equity valuations, slightly weaker liquidity in European sovereign bonds despite narrower spreads versus Germany, mixed credit-quality signals with growing concerns around US private credit, and an October crypto flash crash followed by an extended sell-off while stablecoin growth slowed. It also flags settlement-fail spikes at central securities depositories for ETFs in April and for UCITS and equities in August and September, continued strong equity fund performance linked to increased US exposure, opacity and interconnectedness risks in private finance funds, persistent weakness in EU equity issuance with a downward trend in IPOs, and record catastrophe bond issuance in 2025 alongside low but rising tokenisation activity including tokenised money market funds.
European Securities and Markets Authority 2026-03-11
European Securities and Markets Authority warns of elevated systemic stress risks in its first 2026 risk monitoring report
The European Securities and Markets Authority (ESMA) released its first 2026 risk monitoring report, indicating high market and systemic stress risks in EU financial markets despite resilient late 2025 performance. The report highlights potential significant price swings due to geopolitical tensions, stretched equity valuations, and an uncertain EU economic outlook, with increased contagion risk from higher cross-asset correlations and cyber threats. It also notes record-high global equity valuations, mixed credit-quality signals, persistent weakness in EU equity issuance, a crypto flash crash, and settlement-fail spikes at central securities depositories.