Outcomes of the 62^nd General Board meeting of the European Systemic Risk Board – 25 June 2026

2 July 2026

• Despite severe disruptions triggered by war in Middle East, the financial system proved resilient
• The recent announcement about ending hostilities has the potential to reduce tail risks – but uncertainty about implementation remains
• Overall, the ESRB General Board assessed macro-financial risks as having abated, but cyber risk has become severe
• Looking ahead, simultaneous materialisation of several shocks could pose significant risk to financial stability

At its meeting on 25 June, the General Board of the European Systemic Risk Board (ESRB) noted that a Memorandum of Understanding to end the war in the Middle East has been announced. The sustained reopening of the Strait of Hormuz would reduce tail risks to the global economy and the financial system in the EU.

Overall, the General Board assessed that risks to financial stability in the EU remain elevated. A large shock, or combination of shocks, could affect market expectations and threaten financial stability.

The General Board continued to recognise that several underlying vulnerabilities persist. Real economy vulnerabilities include subdued growth prospects and high levels of public sector indebtedness in some jurisdictions. Financial sector vulnerabilities include high valuations of several riskier asset classes as well as excessive liquidity mismatches and leverage, in particular in certain types of investment funds. Against this backdrop, the General Board noted that market sentiment could shift quickly in response to a possible flare-up of tensions in the Middle East. Market concerns about higher inflation could trigger an increase in government bond yields and large asset price falls. Forced asset sales by highly leveraged investors such as hedge funds could amplify such asset price falls and create spillover effects across financial markets. Rising bond yields and low growth would increase fiscal pressures and constrain fiscal space to cushion the broader economy in case stress arises. The General Board highlighted recent developments in frontier artificial intelligence (AI) models, whose capabilities represent a structural increase in systemic cyber risk to the EU financial system.

Finally, the General Board discussed post-trade fragmentation in equities in the European Union as one of the barriers to the savings and investments union. An Advisory Scientific Committee (ASC) Insight, authored by Thorsten Beck and Hans Degryse presenting the authors’ view, will be published in the summer.

The ESRB today released the 56th issue of its risk dashboard. This provides a set of quantitative and qualitative indicators that measure systemic risk in the EU financial system.