ESAs urge financial institutions to 'stay alert' amid deepening uncertainties

Written by Sophie Smith

22/09/2025

The three European Supervisory Authorities (ESAs) have emphasised the need for financial institutions to stay alert to stability risks, warning that tensions in global trade and the global security architecture have deepened geopolitical uncertainties.

In the Autumn 2025 Joint Committee report on risks and vulnerabilities in the EU financial system, the ESAs called for increased vigilance and urged financial entities to maintain adequate provisions in the current "tense and unpredictable environment".

The ESAs, which include the European Banking Authority (EBA), the European Insurance and Occupational Pensions Authority (EIOPA), and the European Securities and Markets Authority (ESMA), noted that sudden structural changes in global trade and security led to a deterioration in the economic outlook in the first half of 2025.

However, the report acknowledged that the European financial system has demonstrated its resilience, as banks continued to generate solid profits, insurers hold strong solvency positions, and pension funds remain well-funded.

According to the ESAs, asset values increased due to equities and bonds revaluations, while liabilities grew because of several reasons.

The ESAs also warned that risks to financial stability and the risk of further corrections remain, suggesting that growing transatlantic tensions are reshaping the risk landscape, with tariffs and currency shifts impacting commodities and foreign exchange markets and creating new channels through which risks can spread to financial institutions.

The ESAs encouraged national supervisors, financial institutions, and market participants to continue embedding geopolitical risks in their day-to-day business operations and risk assessments.

The report stressed the need to prepare for short- and medium-term challenges amid high uncertainties, and to strengthen vigilance against cyber risks and their potential impact on operational and financial stability, also via third-party service providers.

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