Featured Product

    ESAs Issue Report on Risks and Vulnerabilities in EU Financial System

    April 02, 2019

    ESAs published a Joint Committee report on risks and vulnerabilities in the EU financial system. The report highlights uncertainties about the terms of the Brexit and describes the policy actions being called for by ESAs.

    In light of the ongoing uncertainties, especially those around Brexit, supervisory vigilance and cooperation across all sectors remain key. Therefore, ESAs call for the following policy actions by European and national competent authorities as well as financial institutions:

    • Contingency Plans—It is crucial that EU financial institutions, market participants, and their counterparties enact timely contingency plans to prepare for Brexit, including possible market volatility a no-deal Brexit may trigger. ESAs are closely monitoring Brexit developments and the possible associated risks of a no-deal scenario. In this regard, ESAs issued opinions and recommendations to provide important guidance for financial institutions, market participants, and national competent authorities.
    • Stress Tests—Against the backdrop of the potential for sudden risk premia reversals with a risk of rising funding costs, the development and regular use of stress tests across all sectors remain crucial. Therefore, scenarios for the 2018 bank and insurance stress tests, which are conducted by EBA and EIOPA, reflected these risks. Furthermore, ESMA will present guidelines on fund liquidity and Money Market Fund stress testing during 2019. ESMA is also preparing its next central counterparties (CCPs) stress test. EBA has started to prepare the methodology for its 2020 stress test exercise and EIOPA launched its 2019 Occupational Pensions Stress Test.
    • Lending by Banks—Banks should develop strategies to carefully manage and address large refinancing needs, including building loss-absorbing capacity. In addition, banks should continue with efforts to address the stocks of non-performing loans (NPLs) and should review their business model to improve profitability. Banks must also carefully manage their credit risk and interest rate risk. New bank lending has started to increase and warrants close monitoring of credit quality trends of new lending portfolios. Banks need to ensure that lending standards and covenant requirements do not weaken. The financial sector and banks, in particular, need to carefully manage their sovereign exposure, which might imply a significant impact on their profitability and capital.
    • Insurance SectorSupervisors and insurance companies must ensure that risks of a potentially sudden reassessment of risk premia and continued low interest rates are properly monitored and analyzed while taking appropriate mitigating actions. In this context, the vulnerabilities identified in the 2018 insurance stress test by EIOPA need to be addressed.

     

    Related Links

    Keywords: Europe, EU, Banking, Securities, Insurance, Brexit, Stress Testing, NPLs, ESAs

    Featured Experts
    Related Articles
    News

    HKMA Announces Repayment Deferment Under Payment Holiday Scheme

    HKMA, together with the Banking Sector Small and Medium-Size Enterprise (SME) Lending Coordination Mechanism, announced a ninety-day repayment deferment for trade facilities under the Pre-approved Principal Payment Holiday Scheme.

    August 05, 2020 WebPage Regulatory News
    News

    ESRB Paper Presents Alternative Approach to EBA Stress Test Proposal

    The Advisory Scientific Committee of ESRB published a response, in the form of an Insights Paper, to the EBA proposals for reforms to the stress testing framework in EU.

    August 05, 2020 WebPage Regulatory News
    News

    MAS Announces Key Initiatives to Support Adoption of SORA

    MAS announced several initiatives to support adoption of the Singapore Overnight Rate Average (SORA), which is administered by MAS.

    August 05, 2020 WebPage Regulatory News
    News

    BoE Updates Template and Definitions for Form ER

    BoE updated the reporting template for Form ER as well as the Form ER definitions, which contain guidance on the methodology to be used in calculating annualized interest rates.

    August 05, 2020 WebPage Regulatory News
    News

    PRA to Extend Temporary High Balance Coverage Amid COVID Crisis

    PRA published the policy statement PS19/20 on the final policy for extending coverage under the Financial Services Compensation Scheme (FSCS) for Temporary High Balance.

    August 04, 2020 WebPage Regulatory News
    News

    EBA Publishes Standards on Disclosure and Reporting of MREL and TLAC

    EBA published the final draft implementing technical standards for disclosures and reporting on the minimum requirements for own funds and eligible liabilities (MREL) and the total loss-absorbing capacity (TLAC) requirements in EU.

    August 03, 2020 WebPage Regulatory News
    News

    EBA Releases Erratum for Phase 2 Package on Reporting Framework 2.10

    EBA published an erratum for the phase 2 of technical package on the reporting framework 2.10.

    August 03, 2020 WebPage Regulatory News
    News

    EC Sets Out Updated Technical Information for Solvency II Calculations

    EC published the Implementing Regulation 2020/1145, which lays down technical information for calculation of technical provisions and basic own funds.

    August 03, 2020 WebPage Regulatory News
    News

    US Agencies Issue Statement on Additional COVID-19 Loan Accommodations

    FFIEC, on behalf of its members that include US Agencies such as CFPB, FDIC, FED, NCUA, and OCC, issued a joint statement that sets out prudent risk management and consumer protection principles for financial institutions to consider while working with borrowers.

    August 03, 2020 WebPage Regulatory News
    News

    PRA Consults on Implementation of Certain Provisions of CRD5

    PRA, via the consultation paper CP12/20, proposed changes to its rules, supervisory statements, and statements of policy to implement certain elements of the Capital Requirements Directive (CRD5).

    July 31, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 5622