ESRB published the annual EU Shadow Banking Monitor, which covers data up to the end of 2017. The report considers a range of risks and vulnerabilities, including those related to interconnectedness, liquidity, and leverage. The report reveals that, while little changed in 2017, the shadow banking system now accounts for nearly 40% of the EU financial system.
These risks and vulnerabilities are assessed using an entity-based monitoring framework, which considers both, investment funds and other financial institutions, such as financial vehicle corporations, security and derivative dealers, and financial corporations engaged in lending. The analysis is complemented by an activity-based assessment considering risks and vulnerabilities in securities financing transactions and derivatives markets, which are used across entities and where risks can arise from the use and reuse of financial collateral. The report identifies several key risks and vulnerabilities in the EU shadow banking system:
- Liquidity risk and risks associated with leverage among some types of investment funds
- Interconnectedness and the risk of contagion across sectors and within the shadow banking system, including domestic and cross-border linkages
- Procyclicality, leverage, and liquidity risk created through the use of derivatives and securities financing transactions
- Vulnerabilities in some parts of the other financial institution sector, where significant data gaps prevent a comprehensive risk assessment
Keywords: Europe, EU, Banking, Securities, Systemic Risk, Shadow Banking, Liquidity Risk, Leverage, Procyclicality, ESRB
Previous ArticleFritz Zurbrügg of SNB on Mitigation of Systemic Risk in Switzerland
EBA published phase 2 of the technical package on the reporting framework 2.10, providing the technical tools and specifications for implementation of EBA reporting requirements.
FASB issued a proposed Accounting Standards Update that would grant insurance companies, adversely affected by the COVID-19 pandemic, an additional year to implement the Accounting Standards Update No. 2018-12 on targeted improvements to accounting for long-duration insurance contracts, or LDTI (Topic 944).
APRA updated the regulatory approach for loans subject to repayment deferrals amid the COVID-19 crisis.
BCBS and FSB published a report on supervisory issues associated with benchmark transition.
IAIS published a report on supervisory issues associated with benchmark transition from an insurance perspective.
ESMA updated the reporting manual on the European Single Electronic Format (ESEF).
EBA published a statement on resolution planning in light of the COVID-19 pandemic.
BCBS Finalizes Revisions to Credit Valuation Adjustment Risk Framework
ECB published a guideline (2020/97), in the Official Journal of European Union, on the definition of materiality threshold for credit obligations past due for less significant institutions.
FED temporarily revised the capital assessments and stress testing reports (FR Y-14A/Q/M) to implement the changes in response to the COVID-19 pandemic.