ESRB published a report that examines developments in the macro-prudential policy framework in EU during 2019. The report discusses the macro-prudential measures—for both banks and non-banks—that were adopted or were in place in 2019. Non-banking sectors covered include insurance, pension schemes, asset management and investment funds, and financial market infrastructure. The report also provides an update on the release of the countercyclical capital buffers (CCyBs) and the re-calibration or removal of other capital buffers for banks in the light of the COVID-19 pandemic. In 2019, most macro-prudential measures were taken to address arising or prevailing cyclical risks in the banking sector.
The report describes the changes in policy frameworks at both the EU and the national levels. It outlines the national macro-prudential measures to target risks in banking that were adopted in 2019. It first reviews certain trends seen across different instruments and then turns to specific instruments. Further, the report covers risks beyond banks and the related policies. Some member states passed legislation to broaden the toolkit available in their jurisdictions and developed analytical frameworks. This included bringing a macro-prudential perspective to micro-prudential regulation; designing recovery and resolution frameworks; and developing macro-prudential tools to target systemic risk.
The report also consists of four special features. The first feature (Special Feature A) describes the new role that ESRB has been given by the Capital Requirements Directive (CRD) 5 and Capital Requirements Regulation (CRR) II with respect to coordinating macro-prudential policies and acting as a notification hub. The second feature (Special Feature B) sets out the framework for monitoring material third countries for the purpose of potentially setting a CCyB for exposures of EU banks to such countries. The third feature (Special Feature C) describes the analytical framework for assessing cross-border effects of macro-prudential policy as developed by ECB. The fourth and final feature (Special Feature D) considers the intricate relationship between real estate taxation and macro-prudential policy.
With more structural and cyclical measures in place, 17 out of 31 European Economic Area member states adopted fewer new domestic macro-prudential measures in 2019, compared to 2018. In 2019, several member states tightened their CCyBs, in line with the broader trend of macro-prudential tightening to address cyclical risks. Seventeen European Economic Area member states had a systemic risk buffer in place in 2019. The revised CRD abolishes the use of the systemic risk buffer for systemically important institution risks and some member states will, therefore, have to revise their capital buffer policies by the end of 2020 when the revised CRD enters into force. By March 31, 2020, Finland and the Netherlands had reduced the level of the other systemically important institution (O-SII) buffer for one bank in their respective jurisdictions, in response to the COVID-19 pandemic.
Keywords: Europe, EU, Banking, Systemic Risk, CCyB, Macro-prudential Policy, Systemic Risk Buffer, COVID-19, Residential Real Estate, CRD5, CRR2, ESRB
Leading economist; commercial real estate; performance forecasting, econometric infrastructure; data modeling; credit risk modeling; portfolio assessment; custom commercial real estate analysis; thought leader.
Sam leads the quantitative research team within the CreditEdge™ research group. In this role, he develops novel risk and forecasting solutions for financial institutions while providing thought leadership on related trends in global financial markets.
Previous ArticleESMA Issues Opinion on ESG Disclosures for Benchmark Administrators
HKMA announced that enhancements will be made to the Special 100% Loan Guarantee of the SME Financing Guarantee Scheme (SFGS) and the application period will be extended to December 31, 2021.
BoE has set out a three-phased plan to transform data collection from the UK financial sector over the next decade.
BIS recently made a couple of announcements with respect to the planned and ongoing work in the area of financial technology.
ESRB updated the list of national macro-prudential measures applied by each member state in the European Economic Area.
BoE has set out results of a survey on the impact of COVID-19 events on the use of machine learning and data science.
In response to a request from the European Council and Parliament, ECB published an opinion on the proposed regulation on markets in crypto-assets.
APRA announced the updated aggregate amounts for the 2021 Committed Liquidity Facility (CLF) established between the Reserve Bank of Australia (RBA) and certain locally incorporated authorized deposit-taking institutions that are subject to the Liquidity Coverage Ratio (LCR).
ECB published supervisory Memorandums of Understanding (MoUs) with UK as well as other European and non-European authorities.
EIOPA identified business model sustainability and adequate product design as the two EU-wide strategic supervisory priorities.
After considering comments received on the November 2020 proposal, US Agencies (FDIC, FED and OCC) are proceeding with the proposed revisions to the reporting forms and instructions for Call Reports FFIEC 031, FFIEC 041, and FFIEC 051.