In particular, the General Board discussed the impacts of current geopolitical risks on the EU financial system. Geopolitical events may have financial stability implications via real and financial channels, creating challenges for both households and businesses. Such events can disrupt global trade and increase commodity prices. Moreover, they can also lead to higher market volatility, affecting capital flows, exchange rates and credit spreads. Members also discussed cyber risks, noting that reliance on a small number of third-party providers entails concentration risk and increases the potential for systemic shocks. Members called for increased focus and coordination within the regulatory community in relation to cyber risks.
The recent bouts of financial market volatility were also discussed in the General Board meeting. The sharp but brief market fluctuations in August showed how leveraged positions may amplify reactions to negative macroeconomic news, revealing structural vulnerabilities in the global financial system that could affect the financial stability of the EU. Persistent elevated risk-taking and the possibility of a swift unwinding of positions remain significant concerns. Redemption requests and margin calls have the potential to trigger forced asset sales, amplifying market stress.