ECB and EBA scrutinize European banks’ funding and Middle East exposures amid risk-transfer concerns

The ECB is probing how much banks are financing investments in significant risk transfers (SRTs), warning about a potential “circular effect” where risk is recycled rather than truly dispersed. Separately, the EBA reports that French banks have the EU’s highest direct exposure to Middle East counterparties (~€60.8bn at end-2025).

Geopolitical Implications

• 01

  Geopolitical risk can transmit through finance via concentrated Middle East exposures.

• 02

  Regulatory scrutiny of SRT structures may force more risk onto bank balance sheets.

• 03

  French banks’ relative concentration increases sensitivity to regional shocks.

Key Signals

• —Follow-up ECB data requests on SRT funding flows.
• —EBA updates on concentration/disclosure for Middle East counterparties.
• —Bank credit spreads and CDS reacting to exposure and regulatory headlines.