ESRB released its quarterly risk dashboard at the ESRB Board meeting, which was held on June 27, 2019. The risk dashboard provides a set of quantitative and qualitative indicators of systemic risk in the financial system in EU. The overview note accompanying the risk dashboard summarizes the recent development of indicators and contains two annexes describing the methodology and the covered risk indicators.
The dashboard highlights that risks to EU financial stability remain a concern, as reflected by the market-based indicators of systemic stress in EU over the past quarter. The indicators of systemic stress increased during the second quarter of 2019. Meanwhile, the probability of simultaneous default by large and complex banking groups and EU sovereigns decreased in the second quarter of 2019. The banking sector resilience remained broadly stable while the pace of the reduction of non-performing loans (NPLs) slightly lost momentum. The median common equity tier 1 to risk-weighted assets ratio remained stable at 15.5% in the first quarter of 2019, with the highest capitalized banks reducing their capitalization. Moreover, the median ratio of NPLs to total gross loans and advances slightly increased, reaching 3.2% at the beginning of 2019, up from 2.9% at the end of 2018. Overall, ongoing supervisory and regulatory work needs to support the reduction of vulnerabilities in the European banking sector. The dashboard also shows that, despite a lower profitability due to reduced investment returns, the median solvency ratio of the EU insurance sector is stable above 200%.
Additionally, at the ESRB meeting, the General Board considered the medium-term risks related to vulnerabilities in the residential real estate sector in European Economic Area. The General Board exchanged views on a range of systemic risks and vulnerabilities related to non-bank financial intermediation, including those related to interconnectedness, liquidity, and leverage. ESRB also plans to publish the EU Non-Bank Financial Intermediation Risk Monitor (previously Shadow Banking Monitor) in the coming months. Furthermore, the General Board discussed the key results from the ESRB workshop on the second-round effects from the banking sector stress test. For a better understanding of second-round effects, the General Board decided to supplement the 2018 EBA EU-wide banking sector stress test with a questionnaire. The questionnaire was sent to the 30 largest banking groups in Europe and aggregate results were discussed with representatives from participating banks.
- Press Release
- Risk Dashboard (PDF)
- Overview Note (PDF)
- Annex I on Methodology (PDF)
- Annex II on Description of Indicators (PDF)
Keywords: Europe, EU, Banking, Insurance, Securities, Systemic Risk, Risk Dashboard, ESRB
Previous ArticleEMMI Authorized as EURIBOR Administrator Under Benchmark Regulation
BCBS amended the guidelines on sound management of risks related to money laundering and financing of terrorism (ML/FT).
US Agencies (Farm Credit Administration, FDIC, FED, FHFA, and OCC) finalized changes to the swap margin rule to facilitate implementation of prudent risk management strategies at banks and other entities with significant swap activities.
PRA published a letter that builds on the expectations set out in the supervisory statement (SS3/19) on enhancing banks' and insurers' approaches to managing the financial risks from climate change.
EBA finalized the guidelines on treatment of structural foreign-exchange (FX) positions under Article 352(2) of the Capital Requirements Regulation (CRR).
FSB published a statement on the impact of COVID-19 pandemic on global benchmark transition.
IAIS published the list of Internationally Active Insurance Groups (IAIGs) publicly disclosed by group-wide supervisors.
FED has temporarily revised the reporting form on consolidated financial statements for holding companies (FR Y-9C; OMB No. 7100-0128).
EC launched a consultation on the review of the key elements of Solvency II Directive, with the comment period ending on October 21, 2020.
ECB launched a consultation on the guide that sets out supervisory approach to consolidation projects in the banking sector.
IAIS published technical specifications, questionnaires, and templates for 2020 Insurance Capital Standard (ICS) and Aggregation Method data collections.