Dutch Watchdog Warns Market Resilience Is Showing Cracks as Risks Rise

Key Takeaways

• Market Stability Is Deceptive: The AFM warns that today’s steady markets rest on a fragile balance shaped by geopolitical tensions, digital dependencies, and growing links with lightly regulated sectors such as crypto.
• Cross-Border Risks Are Growing: Rapid interconnectedness and reliance on non-European service providers mean systemic risks can move quickly across jurisdictions, strengthening the case for deeper European cooperation.
• Hyper-Personalization Brings Opportunities and Uncertainty: AI-driven personalization is emerging in financial services, but firms face practical and legal barriers that slow adoption.
• Scenario Thinking Should Become Standard: The AFM argues that firms and regulators must embrace scenario thinking to uncover hidden vulnerabilities and prepare for disruptive combinations of events.

Deep Dive

The Netherlands Authority for the Financial Markets is sounding the alarm on what it calls a “treacherous” sense of calm across global markets. In its Trend Monitor 2026 report and a separate deep dive on scenario thinking, the regulator warns that the stability seen in recent years is resting on an uneasy balance that could tip with little warning.

According to the AFM, geopolitical tensions, digital dependencies, and the growing links between traditional finance and lightly regulated markets such as crypto are creating a financial ecosystem that is both tightly interconnected and increasingly fragile. Markets may appear steady, but the underlying risks are widening.

AFM Executive Board Chair Laura van Geest didn’t mince words, noting that the upbeat mood is resting on ground that is anything but solid. She urged firms to stay alert, think in scenarios, and prepare for futures that may be more disruptive than the present. The point, she emphasized, is not to predict the next crisis but to avoid being blindsided by it.

A Market Held Together by Fragile Threads

The AFM highlights several sources of vulnerability. Europe’s financial system relies heavily on a small group of dominant and often non-European providers for technology and critical services. Traditional markets are also becoming increasingly intertwined with crypto assets and private markets, expanding the channels through which stress can spread.

Add in geopolitical tensions, volatile trade policies, and ongoing competition between global powers, and the picture becomes even more complex. The regulator acknowledges that markets have handled recent shocks surprisingly well, but it cautions that past performance is no guarantee of future resilience.

Risks now travel across borders at the speed of digital finance. A disruption in one jurisdiction can ripple instantly through platforms, infrastructure, and capital flows worldwide. For the AFM, this reality makes deeper European cooperation not just helpful but essential.

To strengthen resilience, the regulator argues that Europe must accelerate efforts to broaden its capital markets and finally turn the long-discussed Savings and Investment Union into something tangible.

A Push to Understand Hyper-Personalization in Financial Services

Not all trends are negative. The AFM sees significant opportunity in hyper-personalization, an emerging frontier powered by AI and a growing universe of customer data. While sectors such as entertainment and retail already rely heavily on tailored digital experiences, most financial institutions are still in early stages.

The regulator notes that many firms want to move faster but remain held back by practical challenges and legal uncertainty. The AFM plans to work with the industry to explore how personalization can serve consumers while staying grounded in responsible conduct and clear guardrails.

In its second report, the AFM turns its focus to scenario thinking, calling it an essential tool for navigating a financial system that is becoming more complex and more tightly woven.

The COVID-19 shock and the London Metal Exchange nickel disruption are two examples the regulator points to, illustrating how quickly systems that look stable can unravel. The AFM argues that traditional risk frameworks, based on static assumptions and linear models, simply cannot keep up with a world defined by unpredictable interactions and compounding shocks.

Scenario thinking fills that gap by helping firms imagine how multiple pressures might collide. In one example, the AFM describes a situation where falling confidence in the dollar, cyberattacks, and stress in stablecoin markets converge to threaten European market infrastructure. The point isn’t that this exact scenario will unfold, but that the system is full of potential combinations that could.

A More Imaginative Approach to Risk

The AFM is urging market participants, policymakers, and regulators to embed scenario thinking into strategic planning, supervision, and everyday risk management. It says it will continue engaging with the sector on which scenarios warrant the most preparation and push for European oversight that takes a system-wide view.

Across both reports, the message is that today’s calm can be misleading. The financial system’s growing complexity demands a more imaginative approach to understanding risk, a more cohesive European response, and a mindset that prepares for disruption rather than assuming stability will hold.

The GRC Report is your premier destination for the latest in governance, risk, and compliance news. As your reliable source for comprehensive coverage, we ensure you stay informed and ready to navigate the dynamic landscape of GRC. Beyond being a news source, the GRC Report represents a thriving community of professionals who, like you, are dedicated to GRC excellence. Explore our insightful articles and breaking news, and actively participate in the conversation to enhance your GRC journey.