In her hearing before the European Parliament’s Committee on Economic and Monetary Affairs on 3 December 2025, Christine Lagarde addressed the importance of keeping financial stability at the forefront of policy discussions. She praised the Committee’s initiative report on safeguarding financial stability, noting its alignment with the ESRB’s priorities.
Lagarde highlighted several key areas:
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System-wide macroprudential approach: Risks in the financial system cross borders and sectors, so monitoring must cover the entire system rather than individual entities. The ESRB prioritizes developing top-down system-wide stress tests.
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Closing regulatory gaps: Non-bank financial intermediaries, such as money market funds, and emerging sectors like crypto-assets, including stablecoins, require stronger oversight to prevent systemic vulnerabilities.
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Balanced simplification of post-2008 reforms: Reporting frameworks could be streamlined, but without compromising data quality, as high-quality, comprehensive information is essential to monitor risks effectively.
Lagarde provided an update from the ESRB’s recent risk assessment, noting that while the EU economy has shown resilience, vulnerabilities remain. Key concerns include:
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Volatile global trade and geopolitical tensions, especially Russia’s war against Ukraine.
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Elevated risk appetite and high valuations in certain asset classes, such as US technology.
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Potential vulnerabilities in non-bank financial sectors, including liquidity mismatches in investment funds, leveraged hedge funds, and opacity in private markets.
She also noted continued strengths, citing EU-wide stress tests, ECB Supervisory Review results showing robust capital and liquidity buffers, and overall resilience of insurers. However, changes to Solvency II and delayed effects of tariffs on credit risk remain areas of caution.
Lagarde concluded that maintaining financial stability in policy debates requires a system-wide perspective, closing regulatory gaps, and ensuring access to reliable data, enabling authorities to respond effectively to emerging risks.
Source: ESRB, Speech by Christine Lagarde, Brussels, 3 December 2025.
