ECB published an article that uses large exposure data to gauge the systemic importance of single supervisory mechanism (SSM) significant institutions. It presents stylized facts from the euro area network of large exposures and derives model-based interconnectedness measures of SSM significant institutions.
The article explores SSM significant institutions’ supervisory reporting of large exposures to gauge the interconnections in the interbank network and beyond, along with the related contagion risk. The article first describes the construction of the interbank network, based on large exposure reporting, and sets out key features of the network. It then examines the macro-prudential policy tools available for addressing systemic risks related to interconnectedness. Next, the measures of interconnectedness, based on the large exposure network, are put into the perspective of existing macro-prudential measures, before providing the final conclusion. The article contains the following key findings:
- The interbank network is relatively sparse and suggests a core-periphery network structure.
- The more complex network measures on average correlate highly with the more simple size-based interconnectedness indicators, constructed following the EBA guidelines on the calibration of other systemically important institutions (O-SII) buffers.
- Policymakers can derive value by considering network-based measures in addition to the size-based interconnectedness indicators, as for some banks these measures can deviate considerably.
Related Link: ECB Article
Keywords: Europe, EU, Banking, Large Exposures, Systemic Risk, SSM, Supervisory Reporting, Macro-prudential Policy, ECB
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.
BCBS published a technical amendment to the capital treatment of securitizations of non-performing loans by banks.
BoE announced that the Data and Statistics Division is planning to move collection of statistical data to the BoE Electronic Data Submission (BEEDS) portal.
APRA published the updated reporting standards and guidance for the collection of Economic and Financial Statistics (EFS), following a consultation process. Also published was a response letter to the feedback received on the proposal for amending the EFS reporting standards and guidance.
EC is consulting on a draft delegated regulation to supplement the Taxonomy Regulation (2020/852) by establishing the technical screening criteria for determining the conditions under which an economic activity qualifies as environmentally sustainable.
The IFRS Foundation published material highlighting the ways in which existing requirements in IFRS standards require companies to consider climate-related matters when their effect is material to the financial statements.
EBA published a report analyzing the impact of the unwind mechanism of the liquidity coverage ratio (LCR) for a sample of European banks over a three-year period, from the end of 2016 to the first quarter of 2020.
In response to questions from a member of the European Parliament, the ECB President Christine Lagarde issued a letter clarifying the possibility of amending the AnaCredit Regulation and making targeted longer-term refinancing operations (TLTROs) dependent on the climate-related impact of bank loans.
IASB started the post-implementation review of the classification and measurement requirements in IFRS 9 on financial instruments and added the review as a project to its work plan.
FSB published a report that examines progress in implementing policy measures to enhance the resolvability of systemically important financial institutions.
EBA published a report on the benchmarking of national loan enforcement frameworks across 27 EU member states, in response to the call for advice from EC.