The European Banking Authority (EBA) Spring 2026 Risk Assessment Report confirms that EU/EEA banks continue to operate from a strong overall position, supported by solid capitalisation, strong liquidity buffers, high asset quality and sustained profitability. Funding conditions remain broadly favourable, despite an increasingly uncertain macro-financial environment.

However, the risk landscape is becoming more complex and rapidly evolving. The EBA highlights heightened geopolitical tensions, particularly in the Middle East, as a key source of uncertainty. While direct exposures of EU banks to the region remain limited, indirect effects, such as higher energy prices, renewed inflationary pressures, weaker economic activity and increased market volatility, could significantly impact borrowers, funding conditions and asset quality.

Key risk themes identified:

• Geopolitical and macroeconomic risks: Elevated tensions and fragile market sentiment continue to drive volatility in risk premiums and rate expectations. Potential second-round effects may affect credit demand and asset quality, especially in energy-intensive sectors.

• Operational and cyber risk: Digitalisation, AI adoption and evolving cyber threats are significantly increasing operational risk. The growing sophistication of AI-enabled attacks, including exploitation of zero-day vulnerabilities, reinforces the need for stronger cybersecurity and operational resilience frameworks.

• Private credit and NBFI interconnectedness: Exposures to non-bank financial institutions (NBFIs) continue to grow, with banks increasingly linked to private credit markets. While current direct exposures remain limited, risk transmission channels through funding linkages, shared borrowers and correlated exposures are increasing.

• Credit risk and asset quality: Non-performing loans (NPLs) remain near historical lows (~1.8%), but risks persist in CRE, SME and unsecured retail portfolios. Some divergence across countries is expected, with potential deterioration in certain jurisdictions.

• Funding and liquidity: Banks maintain strong liquidity positions, although LCR levels are slightly declining. Funding plans indicate continued balance sheet expansion, supported by deposits and market issuance, but geopolitical volatility could challenge execution.

• Profitability and capital: Profitability remains robust, driven by net interest income and fee income, with expectations of further gains supported by cost efficiencies. Capital ratios remain at record levels (CET1 ~16.3%), though some decline in buffers is noted amid rising risk-weighted assets. Dividend distributions reached record levels in 2025 and are expected to increase further in 2026.

Despite strong fundamentals, the EBA stresses that the EU banking sector operates in an environment shaped by converging structural risks, geopolitical tensions, AI-driven cyber threats, and the expansion of private credit markets. Continued vigilance, strong risk management and sustained investment in operational resilience are considered essential to maintain stability going forward.