Featured Product

    ECB Publishes Ninth Issue of the Macro-Prudential Bulletin

    October 29, 2019

    ECB published ninth issue the Macroprudential Bulletin. The bulletin provides insight into the ongoing work of ECB in the field of macro-prudential policy. ECB also published the statement of the Vice-President Luis de Guindos on the bulletin. The bulletin includes articles on key macro-prudential topics: impact of cyclical systemic risk on future bank losses, interaction between different bank liquidity requirements, effect of supervisory scrutiny on bank risk-taking, and investigating initial margin procyclicality and corrective tools using the European Market Infrastructure Regulation (EMIR) data. The bulletin provides an overview of the macro-prudential policy measures being implemented in euro area countries as on October 03, 2019.

    Impact of cyclical systemic risk on future bank losses. This article studies the impact of cyclical systemic risk on future bank profitability for a large sample of EU banks, showing that high levels of cyclical systemic risk lead to large downside risks to bank profitability, with a lead time of three to five years. Hence, exuberant credit and asset price dynamics tend to increase considerably the likelihood of large future bank losses. Given the tight link between bank losses and reductions in bank capital, the results presented in this article can be used to quantify the level of “Bank capital-at-risk” (BCaR) for a banking system. BCaR is a useful tool for macro-prudential policy makers as it helps to quantify how much additional bank resilience could be needed if imbalances unwind and systemic risk materializes.

    Interaction between different bank liquidity requirements. This article contributes to the discussion on the interaction of different regulatory metrics by empirically examining the interaction between the liquidity coverage ratio and the net stable funding ratio for banks in the euro area. The findings suggest that the two liquidity requirements are complementary and constrain different types of banks in different ways, similar to the risk-based and leverage ratio requirements in the capital framework. This dispels claims that one of the requirements is redundant and underlines the need for a faithful and consistent implementation of both measures (and the entire Basel III package more broadly) across all major jurisdictions, to maintain a level playing field at the global level and to ensure that the post-crisis regulatory framework delivers on its objectives.

    Effect of supervisory scrutiny on bank risk-taking. This article contributes to the ongoing discussion about the long-term strategy for stress testing in the euro area. It highlights some of the strengths and weaknesses of the constrained bottom-up approach, which is being used in the EU-wide stress-testing exercise; the article shows that under this approach banks might have some scope to underestimate their vulnerabilities. The article finds that participation of banks in the stress test has an attenuating effect on their risk-taking in subsequent quarters and that this effect may partly be due to the tighter supervisory scrutiny prompted by the stress-testing quality assurance process.

    Investigating initial margin procyclicality and corrective tools using EMIR data. This article contributes to the ongoing debate on the procyclicality of initial margins in derivative markets and whether the current regulatory framework sufficiently addresses this issue. While initial margin reduces counterparty credit risk in derivatives markets, there is an ongoing debate about whether efforts to limit procyclical effects of initial-margin-setting practices are sufficient. The article provides insights into this issue using European Market Infrastructure Regulation data, simulating initial margin over a long time span and evaluating the effectiveness of policy tools in reducing procyclicality. The article shows that an initial margin floor based on a standardized initial margin model could be an effective tool for reducing initial margin procyclicality.

     

    Related Links

    Keywords: Europe, EU, Banking, Macroprudential Bulletin, Macroprudential Policy, Basel III, Stress Testing, Systemic Risk, Initial Margin, Liquidity Risk, OTC Derivatives, Procyclicality, ECB

    Featured Experts
    Related Articles
    News

    APRA Decides to Standardize Submission Date for Quarterly Reporting

    APRA announced the standardization of quarterly reporting due dates for authorized deposit-taking institutions.

    May 11, 2021 WebPage Regulatory News
    News

    EBA Publishes Phase 1 of Reporting Framework 3.1

    EBA published the phase 1 of its reporting framework 3.1, with the technical package covering the new reporting requirements for investment firms (under the implementing technical standards on investment firms reporting).

    May 10, 2021 WebPage Regulatory News
    News

    UK Government to Set Out Rules on Wind-down of Critical Benchmarks

    HM Treasury notified that, after considering all responses, the government intends to bring forward further legislation, when the Parliamentary time allows, to address issues identified in the consultation on supporting the wind-down of critical benchmarks.

    May 07, 2021 WebPage Regulatory News
    News

    EIOPA Launches Stress Test for Insurance Sector in EU

    EIOPA launched the 2021 stress test for the insurance sector in EU.

    May 07, 2021 WebPage Regulatory News
    News

    UK Authorities Publish Third Edition of Regulatory Initiatives Grid

    UK authorities jointly published the third edition of Regulatory Initiatives Grid setting out the planned regulatory initiatives for the next 24 months.

    May 07, 2021 WebPage Regulatory News
    News

    EC Consults on Regulation on Non-Financial Sustainability Disclosures

    EC is requesting feedback on the proposed Commission Delegated Regulation on the content, methodology, and presentation of information that large financial and non-financial undertakings should disclose about their environmentally sustainable economic activities under the Taxonomy Regulation.

    May 07, 2021 WebPage Regulatory News
    News

    OSFI Outlines Prudential Policy Priorities for Coming Months

    OSFI has set out the near-term priorities for federally regulated financial institutions and federally regulated private pension plans for the coming months until March 31, 2022.

    May 06, 2021 WebPage Regulatory News
    News

    BIS Announces TechSprint on Innovative Green Finance Solutions

    Under the Italian G20 Presidency, BIS Innovation Hub and the Italian central bank BDI launched the second edition of the G20 TechSprint on the lookout for innovative solutions to resolve operational problems in green and sustainable finance.

    May 06, 2021 WebPage Regulatory News
    News

    ACPR Publishes Version 1.0.0 of RUBA Taxonomy

    ACPR published Version 1.0.0 of the RUBA taxonomy, which will come into force from the decree of January 31, 2022.

    May 06, 2021 WebPage Regulatory News
    News

    EBA Proposed Regulatory Standards for Central Database on AML/CFT

    EBA proposed the regulatory technical standards on a central database on anti-money laundering and countering the financing of terrorism (AML/CFT) in EU.

    May 06, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6944