ESRB published its seventh annual report, which details its achievements and activities between April 01, 2017 and March 31, 2018. During this period, ESRB continued its close monitoring of sources of systemic risk in the European financial system and economy. As part of this work, ESRB analyzed developments in the commercial real estate and the non-bank financial sectors.
The annual report highlights that ESRB identified key risks to financial stability in the EU, which were re-pricing of risk premia in global financial markets; weaknesses in balance sheets of banks, insurers, and pension funds; debt sustainability challenges in sovereign, corporate, and household sectors; and vulnerabilities in the shadow banking system and contagion to the wider financial system. These risks formed the basis for the adverse macro-financial scenario that ESRB provided to EBA for the 2018 EU-wide banking sector stress test. These risks were also reflected in the adverse scenarios that were provided to EIOPA for the 2018 insurance sector stress test. Details of these scenarios are provided in the annual report.
Other key achievements of ESRB during the year are as follows:
- ESRB published a recommendation designed to address systemic risks related to liquidity mismatches and the use of leverage in investment funds; a report discussing the financial stability implications of IFRS 9; and a report on resolving non-performing loans (NPLs) in Europe.
- Another contribution to the macro-prudential framework for banking came in the form of an opinion, which ESRB provided to EC on macro-prudential structural buffers.
- ESRB responded to an ESMA consultation on draft guidelines on anti-procyclicality margin measures for central counterparties.
- ESRB identified areas where the Solvency II framework could be enhanced and advocated the development of a harmonized recovery and resolution framework for the insurance sector across EU.
- ESRB also held the second Annual Conference in September 2017 to facilitate discussion and further develop conceptual thinking about macro-prudential policy. The panel discussions focused on legal perspectives on macro-prudential regulation and the conduct of macro-prudential policy beyond banking. There were sessions on the challenges and future of banking in EU, how to address NPLs in the EU banking sector, and monitoring of risk in the shadow banking system.
Related Link: ESRB Annual Report (PDF)
Keywords: Europe, EU, Banking, Insurance, Annual Report, Macro-prudential Policy, Systemic Risk, Stress Testing, ESRB
BCBS amended the guidelines on sound management of risks related to money laundering and financing of terrorism (ML/FT).
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.
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.
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.
IAIS published technical specifications, questionnaires, and templates for 2020 Insurance Capital Standard (ICS) and Aggregation Method data collections.