Reinforcing Europe’s financial resilience – and growth potential

Keynote speech by Governor Olli Rehn, First Vice-Chair of the European Systemic Risk Board, at the 10th Annual Conference of the ESRB, Frankfurt, 2 October 2026

Frankfurt am Main, 2 October 2026

Ladies and Gentlemen, Dear Colleagues and Friends,

It is a great pleasure to address this special annual conference, marking 15 years of the European Systemic Risk Board. Its birth was not easy: the ESRB was created in the middle of the euro sovereign debt crisis.

Before that, the global financial crisis had exposed serious gaps in EU financial supervision. In response, the European Commission appointed a High-Level Group chaired by Jacques de Larosière. In just three months, it delivered a landmark report, the central insight of which was simple but crystal-clear: supervisors had paid too little attention to macroeconomic imbalances and risks spreading across the financial system.

SLIDE 2: 15 years of the ESRB

The report laid the foundations for the ESRB and the wider European System of Financial Supervision.

As a Commissioner at the time, I had the privilege of preparing, together with my team, the legislative proposals establishing the ESRB. My colleague Michel Barnier led the work on the European Supervisory Authorities. The legislative process moved remarkably quickly, and the ESRB held its inaugural meeting in January 2011.

Looking back, the ESRB and the ESAs have made an important contribution to Europe's financial resilience. It embodies a lesson I have learned over 35 years of crisis management. In a world of polycrisis, it can be hard to know where the next shock will come from. But the best defence is still prevention — building resilience before the next crisis hits us.

SLIDE 3: Resilience in an age of uncertainty

Europe has shown considerable resilience during a period marked by extraordinary uncertainty. Yet it would be a mistake to underestimate the pressures we face.

Europe's financial system has faced several major tests since 2011.

The pandemic, Russia's unjustified, brutal war in Ukraine and the subsequent energy crisis all threatened to cause severe financial turmoil. Yet our financial system held up and demonstrated resilience, supported by swift policy responses and stronger regulation and supervision.

The sharp rise in interest rates in 2022 and 2023 to fight too high inflation was another important test. It caused large valuation losses on fixed-rate assets. Several US banks failed, while the fiscal policy-related turmoil in the UK gilt market forced the Bank of England to intervene.

European banks weathered these shocks relatively well. This was no accident. Stronger capital positions, better supervision and more effective risk management all played their part.

But resilience is never a permanent achievement.

The ESRB must continue to identify risks that may appear remote but could cause serious damage if they materialise.

In July, the ESRB warned that advances in frontier AI models could increase the speed, scale and sophistication of cyberattacks. These technologies may also strengthen cyber defence. For now, however, they create new risks that demand close attention.

Climate change is another growing source of risk. This summer's extreme heat, drought and wildfires reminded us of its human and economic costs.

Geopolitical tensions add to these pressures. The conflict in the Middle East has driven up energy prices and inflation, while uncertainty continues to weigh on the global outlook.

Even so, the European economy has proved resilient so far. The ECB's September projections foresee euro area growth of 0.9% this year and 1.4% in 2027. Inflation is expected to decline from 3.0% this year to 2.1% in 2028.

While growth has been resilient, energy prices have in the past weeks soared and long-term interest rates have risen. Higher energy prices bring us closer to the ECB’s adverse scenario in terms of inflation. But, on the other hand, the rise in long-term interest rates will slow growth and reduce the pass-through of the energy shock to other prices and wages.

This underlines the fact that the projections for growth and inflation continue to be subject to very high, pervasive uncertainty.

One possible source of uncertainty is, moreover, the possibility of a sudden reversal in market sentiment towards artificial intelligence.

The AI investment boom may bring substantial productivity gains, in the long run. Yet it also involves large and concentrated financial exposures. Investment in computing capacity, chips and energy infrastructure increasingly relies on debt, including complex financing arrangements.

A sharp correction in AI-related valuations could spread through equity and credit markets. We need to understand better where these risks lie and how they could affect financial stability.

High and rising public debt across developed countries is another concern. Higher borrowing costs, growing spending needs and limited fiscal room could increase sovereign risks and expose vulnerabilities elsewhere in the financial system. These risks underline the need for continued vigilance and for sustained fiscal consolidation.

But these risks should also force us to look at the grand scheme of things, and bring us to a wider question: how can Europe strengthen its economic and financial resilience – and growth potential?

SLIDE 4: Europe's triple test

Europe faces three strategic challenges. I call them Europe's triple test: defence, energy and productivity.

First, Europe must take greater responsibility for its own defence, as the European pillar of NATO. This requires more investment, but also better coordination and joint procurement.

Second, Europe must reduce its dependence on imported fossil fuels. Investment in clean energy, including renewables and nuclear power, is essential for energy security and for meeting our climate goals.

Third, productivity. Europe must reverse its relative economic decline. The Draghi report sets out the roadmap: sustained investment in human and physical capital, and in research and development.

As the Draghi report highlights, fixing structural fundamentals—streamlining regulation, completing the single market, and lowering energy costs—is the essential prerequisite for driving productive investment in Europe. In addition, all three challenges require substantial investment. But from where?

In fact, Europe has the savings to finance them. What it lacks is a sufficiently integrated financial market that can channel these savings efficiently into productive investment.

There is also a more positive way to look at Europe's triple test.

The AI revolution, the energy transition and the need to strengthen our defence are driving a new wave of investment. Together, they could mark the beginning of a long investment cycle, comparable in some respects to the spread of electricity or the internet.

Could this even mean the end of the infamous secular stagnation? It is too early to say. But a sustained rise in investment and productivity could change the balance between savings and investment and thus eventually raise the equilibrium real interest rate.

The crucial question is whether today's investment boom will translate into lasting productivity gains. History teaches us that technological revolutions can transform economies, but also that financial markets may overestimate their immediate returns.

Our task at the ESRB is twofold: to ensure that Europe's financial system is stable and conducive to productive investment, while remaining alert to the risks of excessive leverage and inflated asset valuations.

SLIDE 5: Mobilising Europe’s savings for productive investment

That is precisely why we need deeper and more integrated European capital markets, supported by effective oversight of systemic risks. This is why completing the Savings and Investments Union is so important.

As noted, Europe has no shortage of savings to fund its triple test. European households save nearly 15% of their income, and hold some €10 trillion — or 70% of their savings — in bank deposits.

The structural fundamentals must be strengthened, and the Savings and Investments Union should channel more of the available capital into productive investment here in Europe. That raises a question worth exploring today: could a European safe and liquid asset help deliver it?

SLIDE 6: A European safe asset: potential benefits and essential conditions

A well-designed, common safe and liquid asset strengthens the foundations of any deep capital market. As the Draghi report set out, it would deepen liquidity and give markets a benchmark for pricing bonds and derivatives. It would also provide safe collateral usable across all Member States, draw in global investors and lower the cost of capital. It could thus strengthen the euro's international role and Europe's financial sovereignty. Global demand for such an asset already exists, but Europe does not yet meet it.

And the financial stability case goes further: a carefully designed common safe asset would matter most in periods of stress, offering a safe haven and stable collateral pool precisely when private risk appetite retreats, weakening the harmful feedback loop between banks and sovereigns.

Yet building the foundations for a genuine safe asset is, at heart, a political question. It touches fiscal responsibility, risk-sharing, and the balance between national and EU fiscal power. Many proposals are on the table; none has yet won universal support. That is not a reason to abandon the search — it is a reason to keep looking for a workable design.

The EU is not a fiscal union, and Member States remain responsible for most public spending. Article 125 TFEU, the "no-bailout clause," reflects this fact. The Court of Justice has clarified that it does not bar financial assistance to Member States, but it does bar assistance that would weaken incentives for sound fiscal policy.

Any safe-asset design must work within this framework and meet three tests: (1) preserving incentives for fiscal discipline; (2) distributing costs and benefits fairly enough to satisfy every Member State; and (3) avoiding new risks to national bond markets.

SLIDE 7: Political requirements for a European safe asset

Passing these tests would also ensure that building a safe-asset is compatible with the ECB’s role as the guarantor of price stability.

Proposals range from common EU issuance to pooled national debt, and to structures that separate safer and riskier claims. None yet satisfies all three tests at once — which suggests the way forward is to combine the best elements of several, not to pick one.

SLIDE 8: Elements of market acceptance

Credibility with markets matters as much as credibility with politicians. Bonds from the Commission, the EIB and the ESM all earn top credit ratings, yet still trade at a yield above German Bunds — likely reflecting differences in backing, thinner liquidity and their exclusion from sovereign bond indices.

Where does the path forward lie?

In my view, the case for a European safe asset deserves further examination. But we should not assume that every design would improve financial stability, or that a common safe asset is necessarily the right answer to every problem in European capital markets.

Furthermore, it is not the task of the ESRB to settle the political choices concerning fiscal integration or risk sharing. Instead, we can help assess financial stability considerations.

We should stand ready to support policymakers with such analysis in a timely manner. Policy makers need to have a clear view of the options and their trade-offs from a financial stability angle.

This would give policymakers a clearer view of the options and their trade-offs, without prejudging the political decisions.

Let’s recall the prime rule of crisis management I referred to earlier on: It is far better to examine these questions carefully now than to search for solutions in the middle of the next crisis.

SLIDE 9: Conclusion

Let me now conclude.

It is clear that Europe needs a stronger and more integrated financial system to meet its strategic challenges in defence, energy and productivity. Completing the Savings and Investments Union is central to that effort.

A well-designed European safe asset has potential to support this agenda, but only if its design protects financial stability, channels idle savings into productive investment and safeguards sustainable public finances.

On its part, the ESRB can help advance this debate by providing sound, independent analysis of the financial stability implications.

In the grand scheme of things, Europe has learned a great deal from the crises of the past 15 years. We have strengthened our institutions and reinforced the resilience of our financial system.

But the world around us is changing rapidly.

Our task is to ensure that Europe's financial system indeed remains resilient going forward, as well — and capable of supporting the investment and innovation on which our sustained growth and future prosperity depends.

Thank you.