Strong capital and profitability in EU/EEA banks in a context of increased geopolitical uncertainty and operational threats

The European Banking Authority (EBA) today released its Autumn 2025 risk assessment Report (RAR), confirming that EU/EEA banks remain strong in capital, liquidity, profitability and asset quality. However, the EBA calls for continued vigilance as geopolitical uncertainty, market volatility and increasing operational risks persist. The Report is published alongside the 2025 EU-wide transparency exercise, providing detailed and comparable data for 119 banks across 25 countries of the European Union (EU) and the European Economic Area (EEA), and is supplemented by the Autumn 2025 Risk Assessment Questionnaire (RAQ).

Key findings from the EBA risk assessment:

• Geopolitical instability, global trade tensions, and rising sovereign debt are increasing risks for European banks, leading to higher risk premiums on government bonds and more volatile funding markets. EU/EEA banks remain highly vulnerable to external shocks due to ongoing uncertainty.
• Geopolitical and geoeconomic risks now affect not only market volatility but also banks’ asset quality, lending strategies, and risk management. Banks are strengthening governance, enhancing due diligence, and embedding scenario planning.
• Operational risks remain high, driven by cyber threats, fraud, and legal risks. DDoS attacks and ransomware are prominent, and the Digital Operational Resilience Act (DORA) is improving incident response. Outsourcing and third-party dependencies are growing concerns.
• EU/EEA banks maintain a robust capital base, with capital ratios reaching record levels thanks to strong organic capital growth.
• Banks’ strong capital positions are driven by solid profitability. Despite declining net interest income, banks maintained high profits through resilient fee and commission income and cost control. With cost efficiency now a strategic priority, automation and digitalisation are playing an increasingly important role.
• Liquidity ratios remain well above regulatory requirements, but buffers have shifted toward sovereign assets, increasing sensitivity to market volatility. Some banks could face foreign currency funding and liquidity risks, especially in USD. Growing interest in stablecoins may affect banks’ funding and liquidity risk management in the long run.
• While corporate lending was weak, asset growth was driven by broad-based mortgage lending - supported by improving real estate dynamics – and increased  lending to non-EEA non-bank financial institutions (NBFIs). Exposures to sovereigns increased considerably, but domestic bias is retreating.
• Recovery in real estate and robust labour markets also support stable asset quality. However, while non-performing loan ratios remain low, the share of stage 2 loans is elevated, especially in commercial real estate and SMEs segments, which require close monitoring.

Documents

Risk Assessment Report - Autumn 2025 [digital]