Featured Product

    ECB Publishes Results of the Financial Stability Review

    November 28, 2018

    ECB published results of the financial stability review in November 2018. The financial stability review assesses developments relevant for financial stability, including identifying and prioritizing the main sources of systemic risk and vulnerabilities for the euro area financial system. This review plays an important role in relation to the micro-prudential and macro-prudential competences of ECB. By providing a financial system-wide assessment of risks and vulnerabilities, the review provides key input to the macro-prudential policy analysis of ECB.

    In addition to the usual overview of the current developments relevant for euro area financial stability, the review includes eight boxes and three special features aimed at deepening the financial stability analysis of ECB and broadening the basis for macro-prudential policy making. The first special feature examines how banks can reach sustainable levels of profitability. The second feature examines the financial stability implications stemming from a resurgence of trade tariffs while the third one discusses the rapid growth in exchange-traded funds and their potential for transmitting and amplifying risks in the financial system.

    The review highlights that the profitability of euro area significant banks remained broadly stable in the first half of 2018. Structural vulnerabilities, including overcapacity in certain domestic banking markets and high operating costs, continue to dampen bank profitability. Reductions in non-performing loans (NPLs) continued, with the NPL ratios of banks having nearly halved since 2014. Moreover, banks’ solvency positions remain solid. The recent EBA stress test confirmed that the capitalization of euro area banks is sufficient to weather a severe adverse scenario. Additional sensitivity analyses to account for the recent developments, not specifically catered for in the test, lead to an additional capital depletion of about 30 to 70 basis points, on top of the overall common equity tier 1 ratio depletion of 380 basis points in the adverse scenario of the EBA stress test.

    The assessment shows that, looking ahead, four key risks to euro area financial stability could materialize over the next two years. First, the most prominent risk stems from the possibility of a disorderly increase in global risk premia. Second, the risk of renewed debt sustainability concerns has increased over the last six months. Third, legacy issues from the financial crisis continue to dampen bank profitability and could hamper banks’ intermediation capacity. Fourth, possible liquidity strains in the investment fund sector constitute a growing risk. 

     

    Related Links

    Keywords: Europe, EU, Financial Stability Review, Stress Testing, NPLs, Systemic Risk, Macro-prudential Policy, ECB

    Featured Experts
    Related Articles
    News

    APRA to Transition to Annual Stress Testing of Large Banks in 2020

    APRA published key findings of the stress testing assessment conducted on authorized deposit-taking institutions.

    February 21, 2020 WebPage Regulatory News
    News

    EC Consults on Review of Non-Financial Reporting Directive

    EC is launched a consultation on the review of the Non-Financial Reporting Directive or NFRD (Directive 2014/95/EU, as part of its strategy to strengthen sustainable investment in Europe.

    February 20, 2020 WebPage Regulatory News
    News

    EIOPA Consults on Standards for Supervisory Reporting Under PEPP Rule

    EIOPA is consulting on the implementing technical standards for supervisory reporting and cooperation, as mandated by the Pan-European Personal Pension Product (PEPP) Regulation (Regulation 2019/1238).

    February 20, 2020 WebPage Regulatory News
    News

    ECB Report on Transfer of Liquidity from EONIA Products to €STR

    ECB published a report on the transfer of liquidity from the cash and derivatives products of the Euro Overnight Index Average (EONIA) to the Euro Short-Term Rate (€STR).

    February 19, 2020 WebPage Regulatory News
    News

    ESRB Publishes Report on Systemic Cyberattacks

    ESRB published a report that explores systemic implications of cyber incidents, such as cyberattacks.

    February 19, 2020 WebPage Regulatory News
    News

    FSB Chair Sets Out Key Deliverables for G20 Presidency of Saudi Arabia

    FSB published a letter from the Chair Randal K. Quarles to the G20 finance ministers and Central Bank governors ahead of the meetings in Riyadh on February 22-23.

    February 19, 2020 WebPage Regulatory News
    News

    CFTC Proposes Rules on Derivative Position Limits and Swap Execution

    CFTC approved a proposed rule on position limits for derivatives and a proposed rule amending requirements for certain Swap Execution Facilities and real-time reporting.

    February 19, 2020 WebPage Regulatory News
    News

    BIS Appoints Heads of Innovation Hubs in Singapore and Switzerland

    BIS announced key personnel appointments to the Innovation Hubs in Singapore and Switzerland.

    February 19, 2020 WebPage Regulatory News
    News

    BOJ Deputy Governor Speaks on Interest Rate Benchmark Reform in Japan

    The Deputy Governor of BOJ Masayoshi Amamiya spoke in Tokyo about how Japan should proceed with interest rate benchmark reform over the next two years until the end of 2021, when the discontinuation of LIBOR is expected.

    February 19, 2020 WebPage Regulatory News
    News

    OSFI Proposes New Benchmark Rate for Qualifying Uninsured Mortgages

    OSFI announced that it is considering a new benchmark rate for determining the minimum qualifying rate for uninsured mortgages.

    February 18, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 4708