Currently, European Central Bank (ECB) supervisors are focusing on critical issues, ranging from tariffs to cyberattacks and a possible dollar shortage, as they assess potential risks to the region's banking industry, five senior central bank officials said recently. The ECB is examining these risks amid a global trade war and conflicts, including the war in Ukraine and the Middle East.
Chief ECB supervisor Claudia Buch said last week that the central bank would test banks' resilience to geopolitical risk next year, instructing them to develop scenarios that could potentially wipe out large chunks of their capital.[1]
In addition to this, ECB supervisors have been incorporating these risks into their regular checks for months, the sources, who asked to remain anonymous as details of the ECB's supervisory work are confidential, said.
Banks have been instructed to monitor their exposure to other countries, both through operations abroad and credit extended to exporters, according to Reuters.
Cyber-attacks are also seen as a risk, particularly in Baltic countries, which Russian hackers have previously targeted, according to the sources.
Cybersecurity remains a particular area of concern for the ECB, especially given the increasing sophistication and frequency of attacks targeting the financial sector. Recent assessments have highlighted the heightened vulnerability of banks in the Baltic region, a hotspot for cyber threats believed to originate from state-backed actors. Supervisors are emphasizing the need for robust digital defenses, requiring institutions to refine their incident response protocols and enhance their monitoring capabilities. By prioritizing cyber risk, the ECB aims to bolster the resilience of the broader European banking system against disruptive digital threats.
The ECB has also instructed banks to prepare for a potential global dollar shortage, for example, in the event of the US Federal Reserve withdrawing its support, as reported earlier this year.
Supervisors are not instructing banks to reduce their exposures, nor are they making specific recommendations at this stage; instead, they are urging banks to tighten their controls and consider contingency plans.
The checks are taking place as part of the ECB's annual Supervisory Review and Evaluation Process, along with banks' own estimates of their liquidity needs, known in regulatory jargon as the Internal Liquidity Adequacy Assessment Process.
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[1] https://www.reuters.com/business/finance/ecb-supervisors-focus-risks-tariffs-cyber-attacks-central-bank-sources-say-2025-07-15/
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