AFM warns of heightened financial‑stability risks from Middle East conflict and AI‑driven fraud

The Dutch financial regulator AFM says the war in the Middle East, soaring energy prices and trade‑flow disruptions are creating greater uncertainty for financial markets. Volatility has risen and short‑term sentiment now drives asset prices, raising valuation, liquidity and operational risks for banks and asset managers.

AFM chair Laura van Geest warned that “uncertainty is the new normal” and highlighted the growing threat of AI‑enabled fraud. Generative AI makes deepfakes, synthetic identities and automated phishing attacks easier, with estimated investment‑fraud losses of about €750 million a year in the Netherlands.

The regulator also flagged the sector’s increasing reliance on a handful of large cloud and technology providers outside Europe. A failure or cyber‑incident at such a provider could affect multiple financial firms simultaneously, undermining market confidence. Finally, AFM called for tighter oversight of the expanding private‑credit market, noting risks of illiquidity, valuation uncertainty and forced asset sales in stress scenarios. It urged firms to improve digital resilience, data‑quality controls and model validation while strengthening liquidity‑risk management.