The banking sector in the EU continues to show resilience in capital, liquidity and profitability, but geopolitical events could pose significant challenges for the industry

The European Banking Authority (EBA) today released the Spring 2025 edition of its risk assessment report (RAR), which also analyses the funding plans of banks within the European Union/European Economic Area (EU/EEA). This report is supplemented by the Spring Risk Assessment Questionnaire (RAQ).

Key findings from the EBA risk assessment

•    As of the end of 2024, banks maintained a robust capital base, while profits were at historically high levels. Increased uncertainty and financial market volatility could pose challenges for the sustainability of these.
•    Liquidity levels remained substantial and significantly exceeded minimum standards, although potential risks may emerge due to heightened volatility.
•    EU/EEA banks’ credit risks could rise due to their exposure to sectors affected by tariffs or supply chain disruptions stemming from geopolitical events.
•    Operational risks are on the rise, particularly in relation to cyber threats and a surge in fraudulent activities.
•    The funding plans of EU/EEA banks indicate a focus on leveraging their deposit base and issuing secured debt to facilitate strong asset growth.
•    A significant portion of EU/EEA banks’ exposures could be affected by both transitional and physical climate-related risks, although there is considerable variation among different banks and countries.

Documents

Risk Assessment Report - Spring 2025 [digital]