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

    APRA Issues Interim Update to Policy Priorities for 2021 and Beyond

    In a letter addressed to the industry, the Australian Prudential Regulation Authority (APRA) set out an updated schedule of policy priorities for the banking, insurance, and superannuation industries.

    September 24, 2021 WebPage Regulatory News
    News

    EC Adopts Solvency II and Resolution Rules Package for Insurers

    The European Commission (EC) adopted a comprehensive review package of Solvency II rules in the European Union.

    September 22, 2021 WebPage Regulatory News
    News

    OCC Issues Booklets on Regulatory Reporting and Earnings

    The Office of the Comptroller of the Currency (OCC) issued Versions 1.0 of the "Earnings" and "Regulatory Reporting" booklets of the Comptroller's Handbook.

    September 22, 2021 WebPage Regulatory News
    News

    ECB Sets Out Results of Economy-Wide Climate Stress Tests

    The European Central Bank (ECB) published results of its economy-wide climate stress test, which aimed to assess the resilience of non-financial corporates and euro area banks to climate risks.

    September 22, 2021 WebPage Regulatory News
    News

    EBA Examines Implications of Increasing Use of Digital Platforms in EU

    The European Banking Authority (EBA) published a report on the use of digital platforms in the banking and payments sector in European Union.

    September 21, 2021 WebPage Regulatory News
    News

    HKMA Issues Updates on Policy Measures Intended to Ease COVID Impact

    The Hong Kong Monetary Authority (HKMA) published updates on the policy measures that were announced in context of the ongoing pandemic.

    September 21, 2021 WebPage Regulatory News
    News

    ISDA Responds to BCBS Proposal on Treatment of Cryptoasset Exposures

    The International Swaps and Derivatives Association (ISDA), along with several other associations, submitted a joint response to the Basel Committee on Banking Supervision (BCBS) consultation on preliminary proposals for the prudential treatment of cryptoasset exposures.

    September 21, 2021 WebPage Regulatory News
    News

    BIS Quarterly Review Discusses Developments in Fintech and ESG Space

    BIS published the September issue of the Quarterly Review, which contains special features that analyze the rapid rise in equity funding for financial technology firms, the effectiveness of policy measures in response to pandemic, and the evolution of international banking.

    September 20, 2021 WebPage Regulatory News
    News

    BCBS to Consult on Supervisory Practices for Climate Risks by Year-End

    The Basel Committee for Banking Supervision (BCBS) met in September 2021 and reviewed climate-related financial risks, discussed impact of digitalization, and welcomed efforts by the International Financial Reporting Standards (IFRS) Foundation to develop a common set of sustainability reporting standards

    September 20, 2021 WebPage Regulatory News
    News

    OCC Identifies Operational Risk Deficiencies in MUFG Union Bank

    The Office of the Comptroller of the Currency (OCC) issued a Cease and Desist Order against MUFG Union Bank for deficiencies in technology and operational risk governance.

    September 20, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7494