Regulatory Alerts2025-11-13
Scenario Thinking Crucial for Capital Market Stability - NL Summary
The Dutch Authority for the Financial Markets (AFM) issued a November 2025 summary highlighting that hidden vulnerabilities in European capital markets, driven by geopolitical tensions and behavioral convergence, threaten systemic stability. The document argues that scenario thinking is essential to identify archetypal risks such as institutional concentration and geographic dependence before they trigger cascading failures. By adopting this approach, market participants can detect risks earlier, limit crisis impacts, and ensure the resilience of the European economy.
TOEZICHT EXECUTIVE SUMMARY Deep Dive Analysis Capital Markets | Summary | November 2025
Scenario Thinking Crucial for Capital Market Stability
European capital markets appear robust, but vulnerabilities lie beneath the surface. Geopolitical tensions, technological dependencies, and financial innovations are increasing hidden risks. Crises often do not arise from a single error, but from interconnectedness and synchronized behavior: when many parties make the same choices simultaneously, even a strong system can collapse.
Why Scenario Thinking? The world is unpredictable. Examples such as the financial crisis, the COVID-19 market shock, and the LME nickel incident show that systemic stress often stems from chain effects. The AFM is investigating critical functions – issuance, investing, trading, clearing, and settlement – and identifies archetypal risks, such as:
• Institutional concentration • Geographic dependence • Hidden dependencies • Behavioral convergence
Example Scenario A loss of confidence in the US dollar, combined with cyberattacks and instability of stablecoins, could trigger a domino effect in a concentrated ecosystem. This threatens European market infrastructure and could lead to systemic stress.
What Does Scenario Thinking Yield? Through scenario thinking, we explore plausible futures that reveal vulnerabilities. By collaborating and focusing on system-wide dynamics, market participants can:
• Detect risks earlier • Limit the impact of crises • Enhance transparency and robustness
Why Act Now? It is not just about financial stability, but also about trust, protection of households, and securing the European economy. Scenario thinking is crucial to prepare for plausible futures and to ensure the resilience of capital markets.
Read the full deep dive analysis (English) here