Growing geopolitical risks impact financial sector

"For some years now, the Netherlands and Europe have not been able to take favourable international relations for granted," says DNB Executive Board Member Steven Maijoor. He calls on financial institutions such as banks, insurers and pension funds to proactively identify geopolitical risks and strengthen their operational resilience. In addition, it is important for financial institutions to maintain adequate buffers and be prepared should geopolitical developments cause financial risks to materialise.

Focus on cyber resilience

Because of the increasingly complex threat landscape, Maijoor says it is necessary to focus more on cyber resilience. He therefore welcomes the introduction of the Digital Operational Resilience Act (DORA). This European regulation aims to boost the digital resilience of the financial sector, for example through tighter requirements for managing risks when outsourcing to ICT service providers.

From free trade to protectionism

DNB found that international cooperation and free trade have given way to protectionism, fragmentation and the formation of new blocs between countries and regions in recent years. This development has been accompanied by trade barriers, the disruption of global supply chains and increased use of financial sanctions. Geopolitical tensions also increase the likelihood of unexpected economic shocks.

As a typical trading nation, the Netherlands is particularly sensitive to growing geopolitical tensions. Financial institutions can be affected in various ways, for example through a cyber attack, as a result of sanctions, through their investment portfolio or through loans to companies that are sensitive to such tensions. In the next few years, geopolitical risks and their impact on financial institutions will therefore be a key focus area in DNB's supervision.

A strong Europe is important

A strong Europe with a well-functioning single market is an important buffer against geopolitical risks. In financial and economic terms, according to DNB, this at least requires finalising the European banking and capital market union. This will contribute to a stronger and more diverse financial system. Cooperation on a European scale is also necessary for effective supervision, Maijoor argues. 

Media representatives can contact Corina Ruhe by email at c.a.m.ruhe@dnb.nl or by telephone at +31 6 55 41 83 51.