ESRB report flags elevated EU financial stability risks

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ESRB flags EU stability risks

Highlights

ESRB's 15th annual report (April 2025–March 2026) highlights elevated EU financial stability risks due to geopolitics, trade frictions, and policy uncertainty despite system resilience.
In June 2025, the ESRB General Board adopted a broader risk assessment and system-wide macroprudential approach, including new top-down stress-testing for financial entities and activities.
The ESRB flags vulnerabilities in crypto-assets, third-country multi-issuer stablecoin schemes, and non-bank finance, urging EU authorities to address risks from elevated leverage and liquidity pressures in investment funds.

Review period findings and policy priorities

As reported by the European Systemic Risk Board, its 15th annual report covers the period from 1 April 2025 to 31 March 2026 and outlines how the body is carrying out its mandate to identify and mitigate systemic risks to financial stability across the European Union.

The report says the global backdrop is exceptionally uncertain, with geopolitical tensions, renewed trade frictions and heightened policy uncertainty shaping macro-financial conditions in the bloc. Even so, the European economy and financial system show resilience, although financial stability risks remain at elevated levels.

During the review period, the ESRB General Board agreed in June 2025 to move toward a more holistic assessment of risks and vulnerabilities and to promote a system-wide approach to macroprudential policy. That shift includes focusing on both financial entities and activities that are critical for stability, alongside developing a system-wide top-down stress-testing capability and integrating macroprudential stance analysis into regular assessments.

Crypto-assets and non-bank finance remain in focus

The ESRB also publishes a report on crypto-assets and decentralised finance, highlighting their implications for financial stability. It adopts a recommendation on third-country multi-issuer stablecoin schemes, saying such structures contain inherent vulnerabilities and create clear risks for the EU financial system.

The board says relevant authorities, including the European Commission, the European Supervisory Authorities and national supervisors, should act on the new recommendation. The report also points to cross-sector risks identified in other ESRB work published during the period.

Among those publications, the EU Non-bank Financial Intermediation Risk Monitor 2025 provides a system-wide assessment of vulnerabilities in the investment fund sector. It points to elevated leverage, persistent liquidity risk and growing interconnectedness, underlining the pressure points the ESRB continues to track across EU financial markets.

Our earlier article examined Singapore’s growing regulatory scrutiny of crypto perpetual futures (perps) as these highly leveraged products gain traction. It also highlighted how decentralized platforms such as Hyperliquid change trading mechanics by using smart contracts for collateral and liquidations—shifting risk management rather than removing risk, and intensifying concerns for regulators and market participants.

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