European Central Bank supervisors have told euro-area lenders to tighten monitoring of both direct and indirect cross-border exposures as geopolitical tensions intensify. According to senior central-bank officials, the watchdog is scrutinising risks stemming from sharply higher tariffs, the threat of cyber attacks—especially in the Baltic region—and the possibility of a global shortage of US dollars should Federal Reserve liquidity lines be withdrawn. Supervisory Board Chair Claudia Buch said the ECB will run a thematic stress test in 2026 that will require about 110 banks to model severe geopolitical shock scenarios capable of eroding significant portions of their capital. While regulators have stopped short of ordering firms to cut positions, they are urging management to strengthen controls and draft contingency plans that could include higher loan-loss provisions. The new focus follows the ECB’s annual Supervisory Review and Evaluation Process, during which officials found early signs of asset-quality deterioration linked to trade frictions and commercial real-estate exposures. Buch warned lawmakers that prolonged tariff disputes and escalating cyber threats could undermine credit quality, underscoring the need for resilient capital and liquidity buffers across the banking system.