ESMA updated its risk assessment to account for the impact of the COVID-19 pandemic. In light of the COVID-19 pandemic and its impact on the EU economy and financial markets, ESMA has assessed the risks in its overall remit, the securities markets, infrastructures and in asset management as very high for the time being. The same applies to liquidity and market risks, with ESMA expecting a rise in the operational, credit, contagion, and consumer risks.
The pandemic, in combination with existing valuation risks, led to large equity market corrections since mid-February, driven by a sharp deterioration in the outlook for consumers, businesses, and the economic environment. Corporate bonds, government bond markets, and a number of investment funds show signs of stress. Market infrastructures continued to function in an orderly manner, despite significant surges in trading activity, the use of circuit breakers, and increases in derivatives margins. ESMA also sees a prolonged period of risk to institutional and retail investors of market corrections and very high risks across the whole of ESMA remit. This risk update complements ESMA's regular monitoring of Trends, Risks, and Vulnerabilities in EU and its Risk Dashboard. The next Risk Dashboard covering the entire first quarter of 2020 will be published according to the regular schedule in May 2020.
Keywords: Europe, EU, Banking, Securities, FMI, Risk Dashboard, COVID-19, Market Risk, Liquidity Risk, Credit Risk, Operational Risk, ESMA
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