ESAs Urge Financial Sector to Brace for Geopolitical & Cybersecurity Risks

The European Supervisory Authorities (EBA, EIOPA and ESMA) have jointly issued a stark warning to the financial sector, highlighting the mounting threat of geopolitical instability and cybersecurity risks to the EU’s financial system. Their Spring 2025 Joint Committee update outlines a call to action for financial institutions and supervisors across Europe to increase vigilance, strengthen resilience and bolster preparedness in response to a rapidly evolving risk landscape.

Geopolitical tensions are rising sharply, fuelled by global conflicts, protectionist policies and economic fragmentation. These developments are not only redrawing the contours of international trade and financial markets but also introducing heightened uncertainty and volatility. According to the ESAs, these pressures are testing the resilience of financial institutions, especially those with international exposures and dependence on cross-border financial flows.

Cybersecurity threats continue to escalate in both frequency and sophistication. The ESAs stress the critical importance of proactive risk management, urging institutions to fortify cyber resilience through robust data governance, careful oversight of AI tools in line with the EU AI Act, and full compliance with the Digital Operational Resilience Act (DORA). The use of AI and increased digitalisation present opportunities but also amplify vulnerabilities, especially when implemented without proper safeguards.

Liquidity risks are another area of growing concern, particularly amid global market instability. The ESAs are encouraging financial entities to closely monitor their liquidity positions and to provision adequately against potential shocks.

International regulatory cooperation, forward-looking supervision and comprehensive stress testing will be central to maintaining market confidence and systemic stability. The ESAs’ message is clear: financial institutions must not only brace for continued volatility but actively plan for it.

This update was formally presented to the Financial Stability Table of the EU Economic and Financial Committee on 27–28 March 2025 and represents a coordinated European response to shared systemic threats. As global challenges mount, the ESAs are reinforcing their message that only through preparedness, adaptability and cross-border cooperation can the EU financial system remain robust and secure.

Read the report and press release here.