Featured Product

    ESAs Issue Report on Risks and Vulnerabilities in EU Financial System

    April 02, 2019

    ESAs published a Joint Committee report on risks and vulnerabilities in the EU financial system. The report highlights uncertainties about the terms of the Brexit and describes the policy actions being called for by ESAs.

    In light of the ongoing uncertainties, especially those around Brexit, supervisory vigilance and cooperation across all sectors remain key. Therefore, ESAs call for the following policy actions by European and national competent authorities as well as financial institutions:

    • Contingency Plans—It is crucial that EU financial institutions, market participants, and their counterparties enact timely contingency plans to prepare for Brexit, including possible market volatility a no-deal Brexit may trigger. ESAs are closely monitoring Brexit developments and the possible associated risks of a no-deal scenario. In this regard, ESAs issued opinions and recommendations to provide important guidance for financial institutions, market participants, and national competent authorities.
    • Stress Tests—Against the backdrop of the potential for sudden risk premia reversals with a risk of rising funding costs, the development and regular use of stress tests across all sectors remain crucial. Therefore, scenarios for the 2018 bank and insurance stress tests, which are conducted by EBA and EIOPA, reflected these risks. Furthermore, ESMA will present guidelines on fund liquidity and Money Market Fund stress testing during 2019. ESMA is also preparing its next central counterparties (CCPs) stress test. EBA has started to prepare the methodology for its 2020 stress test exercise and EIOPA launched its 2019 Occupational Pensions Stress Test.
    • Lending by Banks—Banks should develop strategies to carefully manage and address large refinancing needs, including building loss-absorbing capacity. In addition, banks should continue with efforts to address the stocks of non-performing loans (NPLs) and should review their business model to improve profitability. Banks must also carefully manage their credit risk and interest rate risk. New bank lending has started to increase and warrants close monitoring of credit quality trends of new lending portfolios. Banks need to ensure that lending standards and covenant requirements do not weaken. The financial sector and banks, in particular, need to carefully manage their sovereign exposure, which might imply a significant impact on their profitability and capital.
    • Insurance SectorSupervisors and insurance companies must ensure that risks of a potentially sudden reassessment of risk premia and continued low interest rates are properly monitored and analyzed while taking appropriate mitigating actions. In this context, the vulnerabilities identified in the 2018 insurance stress test by EIOPA need to be addressed.

     

    Related Links

    Keywords: Europe, EU, Banking, Securities, Insurance, Brexit, Stress Testing, NPLs, ESAs

    Featured Experts
    Related Articles
    News

    SEC Finalizes Capital and Margin Requirements for Security-Based Swaps

    SEC adopted a package of rules and rule amendments to establish capital, margin, and segregation requirements for security-based swaps, under Title VII of the Dodd-Frank Act.

    August 22, 2019 WebPage Regulatory News
    News

    ECB Revises Prudential Provisioning Expectations for New NPEs

    ECB is revising its supervisory expectations for prudential provisioning of new non-performing exposures (NPEs) specified in the “Addendum to the ECB Guidance to banks on non-performing loans” (Addendum)

    August 22, 2019 WebPage Regulatory News
    News

    CFTC Proposes to Revise Information Collection on Margin Requirements

    CFTC is requesting comments on the burdens associated with certain aspects of the Margin Requirements for Uncleared Swaps for Swap Dealers and Major Swap Participants (final rule).

    August 21, 2019 WebPage Regulatory News
    News

    FASB to Delay Effective Date for Insurance Contracts Standard

    FASB issued a proposed Accounting Standards Update that would grant all insurance companies that issue long-duration contracts, such as life insurance and annuities, additional time to apply the standard that addresses this area of financial reporting.

    August 21, 2019 WebPage Regulatory News
    News

    EBA Publishes Phase 2 of Technical Package on Reporting Framework 2.9

    EBA published phase 2 of its technical package on the reporting framework 2.9, which includes validation rules, Data Point Model (DPM) data dictionary, and XBRL taxonomies.

    August 21, 2019 WebPage Regulatory News
    News

    FSB Publishes Responses to Its Consultation Related to SME Financing

    FSB published responses received to the consultation on a report on the evaluation of the effects of financial regulatory reforms on small and medium-sized enterprise (SME) financing.

    August 21, 2019 WebPage Regulatory News
    News

    APRA Revises Related Entities Standard for Banks

    APRA published a strengthened prudential standard APS 222 on associations with related entities, with the aim to mitigate contagion risk within banking groups.

    August 20, 2019 WebPage Regulatory News
    News

    EBA and ESMA Issue Joint Response to EC Letter on Crypto-Assets

    EBA and ESMA issued a joint response to the EC letter, from July 19, 2019, on crypto-assets.

    August 20, 2019 WebPage Regulatory News
    News

    FSB on Responses to Consultation on Wind-Down of Trading Portfolios

    FSB published responses received to the consultation on the solvent wind-down of the derivatives and trading book portfolio of a global systemically important bank (G-SIB).

    August 19, 2019 WebPage Regulatory News
    News

    FSB Publishes Responses to Consultation on Resolvability Disclosures

    FSB published responses received to the consultation on disclosures for resolution planning and resolvability of banks.

    August 19, 2019 WebPage Regulatory News
    RESULTS 1 - 10 OF 3681