What Changed
- ESAs highlight financial sector vulnerabilities linked to heavy reliance on non-EEA ICT service providers, clearing, repo, and credit rating infrastructures.
- Rapid development of AI models and quantum computing creates elevated cyber risks and potential threats to financial cryptography.
- Expansion of private credit creates risks due to limited transparency, loan valuation uncertainties, and potential liquidity mismatches.
The European Supervisory Authorities (EBA, EIOPA, and ESMA – the ESAs) issued their Autumn 2026 Joint Committee risk update, identifying external dependencies, emerging technologies, and private credit as key vulnerabilities facing the European Union financial system. The key findings were presented to the Financial Stability Table of the EU's Economic and Financial Committee on 10 September 2026.
Despite ongoing geopolitical volatility, fluctuations in energy prices, and crypto-asset instability, the EU financial sector has demonstrated resilience. European banks retain high capital ratios and strong profitability, though asset quality deterioration is expected in specific areas, particularly Commercial Real Estate and Small and Medium-sized Enterprises (SMEs). Investment funds and the insurance and pension sectors also maintain solid fundamentals, despite risks from increasing natural catastrophes and widening protection gaps.
However, the ESAs highlight critical vulnerabilities stemming from external dependencies. The EU financial system relies heavily on non-EU counterparties, infrastructures, and service providers. Key exposures include:
- Substantial investment fund exposures to the United States, alongside bank funding gaps in non-EU currencies such as USD, GBP, and CHF.
- Persistent reliance on non-EEA Information and Communication Technology (ICT) providers and non-EU entities for clearing, repo, and credit rating markets.
Emerging technologies present both operational opportunities and heightened risks. The rapid development of advanced artificial intelligence (AI) models could amplify the speed, scale, and severity of cyberattacks. Quantum computing poses long-term threats to existing cryptographic systems securing transactions, communications, and blockchains.
Additionally, while private credit remains relatively small within the EU compared to the US, its rapid growth creates systemic risks due to limited transparency, infrequent loan valuations, data gaps, and potential liquidity mismatches that could spill over to traditional banks.
To address these vulnerabilities, the ESAs urge EU national supervisors and market participants to strengthen crisis preparedness, coordinate resolution planning, closely monitor dependencies on non-EEA entities, and proactively manage risks associated with AI, quantum computing, and private credit expansion.
Who May Be Affected
EU banks, insurers, investment funds, financial market infrastructures, non-EEA ICT service providers, and private credit vehicles.
Cross-Border Context
The EU financial system maintains substantial cross-border connections, including fund exposures to the US, FX bank funding gaps in USD, GBP, and CHF, and reliance on non-EEA ICT and financial infrastructure providers.
What to check next
- Monitor further Joint Committee updates or supervisory guidance from EBA, EIOPA, and ESMA regarding ICT risk management and non-EEA dependencies.
This article provides general information and does not constitute legal advice. Consult the official text and obtain advice appropriate to your circumstances where needed.