The European Securities and Markets Authority (ESMA) published its first risk monitoring report of 2025, setting out the key risk drivers currently facing EU financial markets. ESMA finds that overall risks in EU securities markets are high, and market participants should be wary of potential market corrections.
Verena Ross, ESMA’s chair, said in a statement: “Financial markets remain optimistic, but recent events show that confidence is fragile, including in Europe. The evolution of economic growth, global monetary policy and geopolitics remains uncertain, and this gives rise to key risk drivers.
“Market participants need to keep their eyes firmly on growing risks, from possible corrections in surging markets such as cryptos, to the threat of disruption from increasingly sophisticated and frequent cyber-attacks.
“The difficult funding environment, particularly for equity financing, in Europe identified in the report also shows just how important it is to strengthen European capital markets.”
As global financial markets continue to soar, downside risks are mounting. This is especially visible from an EU perspective where economic and political uncertainties are weighing on markets and where market-based corporate financing remains lackluster.
Contagion risk is also set to worsen given surging asset prices in a context of highly interconnected global markets. Crypto markets have recently hit record highs and continue to illustrate the growing risks from social-media-driven investing for investors with limited knowledge. More positively, credit risk should ease as lower interest rates feed through.
In market-based finance, the financing of European corporates lost momentum in 2024. The market environment remains challenging, and equity issuance stayed weak overall. Corporate bond issuance fell slightly in the second half of 2024 but remained close to historically high levels. Given the upcoming corporate bond maturity wall from 2025 to 2028, with 47% of debt maturing in this period, debt sustainability remains a risk.
For infrastructures and services, ESMA noted that cyber risks continue to grow amid geopolitical tensions. In H2 2024, equity-trading volumes remained high (+23% year-on-year). Settlement failure rates decreased, continuing a positive trend observed since the implementation of Central Securities Depositories Regulation (CSDR) in 2022. There was a small decrease in the number of outstanding credit ratings, associated with a decline in financial and particularly covered bond ratings.