Featured Product

    ECB Publishes Seventh Issue of Macroprudential Bulletin in March 2019

    March 27, 2019

    ECB published Issue 7 of the Macroprudential Bulletin, which provides insight into the ongoing work of ECB in the field of macro-prudential policy. The Bulletin presents an overview of the macro-prudential policy measures that are being implemented in euro area countries as of January 01, 2019. Additionally, this issue includes four articles on key macro-prudential topics, including an assessment of bank regulatory reforms ten years after the crisis, results from the new macro-prudential stress test framework, macro-prudential analysis of residential real estate markets, and analyses of the recent decisions on the countercyclical capital buffer (CCyB).

    Post-crisis bank resilience. The first article investigates whether the euro area banking system is more resilient ten years after the global financial crisis. It compares the ability of euro area banks to absorb potential shocks before the 2008 global financial crisis and ten years later, taking into account the impact of post-crisis reforms on bank capital and loss-absorbing capacity, including the new, post-crisis resolution framework. The analysis shows a significant increase in the ability of the euro area banking system to withstand potential shocks without costs for taxpayers after the global financial crisis and the post-crisis wave of reforms. This has been achieved through higher regulatory capital and the new resolution framework, which includes the bail-in tool and the potential intervention of the Single Resolution Fund, as well as a significant reduction in the average probability of default of banks. Notwithstanding the significant increase in the average level of resilience in the euro area banking system, the post-crisis regulatory work is not yet complete. Recent and outstanding regulatory reforms, particularly the finalization of the Basel III package and the minimum requirement for own funds and eligible liabilities (MREL) requirements, should be properly implemented to further strengthen the resilience of banks, especially outlier institutions.

    Results from macro-prudential stress test. The second article summarizes the results of the macro-prudential stress test of the euro area banking sector in 2018-2020 and assesses the resilience of the European banking sector’s resilience, if faced with a global economic recession. The results indicate substantial resilience of the euro area banking system at the current juncture. The macro-prudential stress test predicts a lower negative impact on capital ratios, though higher capital depletion, in billions of euro, than a static balance-sheet stress test. They also show that bank deleveraging tied to deteriorating capitalization and asset quality leads to further deterioration in economic conditions in an adverse scenario.

    Macro-prudential analysis of residential real estate markets. The third article presents ECB framework for assessing financial stability risks stemming from residential real estate markets and for designing macro-prudential policy responses. It also reviews recent developments in residential real estate markets and policy initiatives to address risks. The current analysis indicates that residential real estate vulnerabilities relevant to macro-prudential policy are present in a number of euro area countries. In general, over the past years, the activation of macro-prudential instruments related to residential real estate risks recognizes the need for a proactive policy stance to avoid possible negative consequences for the financial sector and the broader economy. However, the continuation of observed trends in residential real estate markets in some countries suggests that further policy actions remain warranted in the near future.

    Analysis of CCyB decisions. The fourth article reviews the country-specific strategic choices and decisions regarding timing and calibration of CCyB in countries participating in the Single Supervisory Mechanism (SSM). It sheds light on the causes of the different policy choices and exposes limitations encountered in the prominent role of the credit-to-GDP gap in the current Basel framework. Ultimately, assessing risks across euro area countries consistently, while taking into account country-specific factors, supports the effective use of CCyB as a macro-prudential instrument and ensures that similar risk exposures are subject to the same set of macro-prudential requirements. The consistent use of additional risk indicators over time and across countries can help make macro-prudential policy more predictable. 

     

    Related Links

    Keywords: Europe, EU, Banking, Post-Crisis Reforms, Macroprudential Bulletin, CCyB, Residential Real Estate, Stress Testing, Macroprudential Policy, ECB

    Featured Experts
    Related Articles
    News

    EIOPA Forms Consultative Expert Group on Digital Ethics in Insurance

    EIOPA established the Consultative Expert Group on Digital Ethics in Insurance to assist EIOPA in the development of digital responsibility principles in insurance.

    September 17, 2019 WebPage Regulatory News
    News

    FASB Proposes Taxonomy Changes Related to Topics 848 and 470

    FASB proposed taxonomy improvements for the proposed Accounting Standards Update on topic 848 on facilitation of effects of reference rate reform on financial reporting.

    September 16, 2019 WebPage Regulatory News
    News

    BoE Statement on Recalculating Transitional Measures Under Solvency II

    BoE notified that it will be willing to accept applications from firms to recalculate transitional measure on technical provisions (TMTP) as at September 30, 2019.

    September 16, 2019 WebPage Regulatory News
    News

    BIS Hosts Conference to Discuss Issues from Emergence of Stablecoins

    BIS hosted a conference in Basel to discuss policy and regulatory issues posed by the emergence of stablecoin initiatives backed by financial institutions and large technology companies.

    September 16, 2019 WebPage Regulatory News
    News

    BIS Paper on Embedded Supervision of Blockchain-Based Financial Market

    BIS published a working paper that investigates ways to regulate and supervise blockchain-based financial markets.

    September 16, 2019 WebPage Regulatory News
    News

    BoE Paper on Market-Implied Systemic Risk and Shadow Capital Adequacy

    BoE published a working paper that presents a forward-looking approach to measure systemic solvency risk.

    September 13, 2019 WebPage Regulatory News
    News

    HKMA Consults on Policy Module on Pillar 2 Supervisory Review Process

    HKMA is consulting on the revised Supervisory Policy Manual module CA-G-5 that sets out the HKMA approach to conducting the supervisory review process under Pillar 2.

    September 13, 2019 WebPage Regulatory News
    News

    PRA Publishes Waiver by Consent of Continuity of Access Rules

    PRA published a new waiver by consent to waive the Continuity of Access requirements contained in the Depositor Protection Part of the PRA Rulebook (DPP).

    September 13, 2019 WebPage Regulatory News
    News

    EBA Single Rulebook Q&A: Second Update for September 2019

    EBA updated the Single Rulebook question and answer (Q&A) tool with answers to three questions.

    September 13, 2019 WebPage Regulatory News
    News

    BoE Publishes Update on Meeting of Working Group on Risk-Free Rates

    BoE published the minutes of the July meeting of working group on sterling risk-free reference rates.

    September 13, 2019 WebPage Regulatory News
    RESULTS 1 - 10 OF 3827