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December 13, 2018

ESRB published its quarterly risk dashboard, which provides a set of quantitative and qualitative indicators of systemic risk in the EU financial system. The dashboard covers data available to ECB by November 22, 2018. The risk dashboard is accompanied by an overview note that explains the recent development of the indicators and two annexes that explain the methodology and describe the indicators covered. On December 06, 2018, the General Board of ESRB held its meeting, during which it was noted that risks to the stability of the EU financial system remain elevated amid significant political uncertainties globally and in the EU.

The dashboard highlights that risks to EU financial stability remained a concern, as reflected by the market-based indicators of systemic stress in EU over the past quarter. The indicators for probability of simultaneous default by large and complex banking groups and EU sovereigns remained at slightly elevated levels, compared to the beginning of 2018, although still relatively low in historical terms. Banking sector resilience continued to strengthen in the second quarter of 2018. The median common equity tier 1 (CET1) to risk-weighted assets ratio increased to 15.8% in the second quarter of 2018, up from 14.9% in the second quarter of 2017. Moreover, the median ratio of non-performing loans to total gross loans and advances continued its downward trend, reaching 3.0% in the second quarter of 2018. Overall, ongoing supervisory and regulatory work, as well as the improved economic environment, continue to support the reduction of vulnerabilities in the European banking sector. 

Additionally, solvency and profitability indicators suggest that the EU insurance sector is performing well overall. Despite a slight drop compared to the previous quarter, the median solvency ratio remained well above 200% in the second quarter of 2018. For non-life insurance companies, the majority of European Economic Area insurers have had a combined ratio below 100% since the third quarter of 2017, indicating that the premiums written over these quarters were sufficient to cover both the insurance claims and other related costs to be paid. 

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Keywords: Europe, EU, Banking, Insurance, Securities, Systemic Risk, Risk Dashboard, PMI, ESRB

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