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, it 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. 

Indeed, the report suggested that the European sector for occupational pensions remained particularly resilient through the dynamic interest rate environment, pointing out that the financial position of  Institutions for Occupational Retirement Provision (IORPs) in the European Economic Area (EEA) improved slightly, driven by asset growth outpacing liability growth. 

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

This included liabilities’ indexation to inflation, interest-rate developments, variation in volumes, and regulatory changes in some Member States, which led to different effects on defined benefit (DB) and defined contribution (DC) schemes. 

However, the ESAs said that the recent market turmoil in April warrants "close monitoring" of IORP funding ratios and liquidity positions, the latter of which is currently being tested in the 2025 IORP stress test exercise.

More broadly, 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.

In addition to this, the ESAs suggested that the ongoing transition from DB to DC schemes represents a "major operational challenge" for the pension sector in particular, noting that this could reshape investment strategies and exposure to equity market volatility, and longevity risks, particularly affecting women. 

However, it argued that a robust three-pillar pension system can help mitigate these risks, reduce pension gaps, and support the Savings and Investment Union (SIU) by increasing investment through pension savings.

The ESAs also stressed the broader importance of financial institutions more generally playing an active role in the SIU initiative, while "duly considering the liquidity characteristics and risk profiles of alternative investments and their suitability for retail investors". 

"Further steps towards the finalisation of the Banking Union will be important as well," the paper continued. 

"Given the ambition to connect savings to most productive investments, a sound supervisory system will be important to build the necessary trust with consumers in the market."

In addition to this, 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 also 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. 

---