ESRB Report Examines Macro-Prudential Measures Adopted in EU in 2018
ESRB published a report that provides an overview of the macro-prudential measures that were adopted in EU in 2018. Across EU, most member states adopted macro-prudential measures in 2018 and more measures were taken in 2018 than in 2017, which is the previous review period.
The report describes the changes in policy frameworks and outlines the national macro-prudential measures that were adopted in 2018. It first reviews certain trends seen across different instruments and then turns to specific instruments. The report also contains three special features. Special Feature A considers the use to date of national flexibility measures under Article 458 of the Capital Requirements Regulation (CRR) by member states, along with the lessons learned from their experience with these measures. Special Feature B introduces the concept of macro-prudential stance, particularly the interlinkages between the stance assessment and the policy action assessment. Special Feature C provides an overview of the upcoming changes to macro-prudential provisions in CRR and the Capital Requirements Directive (CRD) IV.
Apart from the activation of the countercyclical capital buffer (CCyB) and the increase in the CCyB rate in several European Economic Area member states, nine member states introduced a systemic risk buffer (SyRB) or recalibrated the SyRB rate. As there are indications that the financial cycle is turning in some countries, more member states tightened the CCyB. By the end of 2018, twelve countries in the European Economic Area had decided on a positive CCyB rate. Despite extensive international and European guidance for the use of CCyB, differences in key features of the national frameworks remained. These include the objective of the instrument, the neutral buffer rate, and the indicators used to inform the buffer decision. Given shortcomings of the credit-to-GDP gap as a reference indicator for CCyB decisions, particularly after periods of prolonged excessive credit growth and for transition economies, some member states developed adjusted indicators and placed greater weight on additional indicators and discretion to arrive at a policy judgment. After that, the most frequently introduced measure in 2018 pertained to the caps on debt service-to income (DSTI) ratios. Changes to the methodology used to identify systemically important institutions (SIIs) and to set their buffers were also made relatively often.
Related Link: Report (PDF)
Keywords: Europe, EU, Banking, Systemic Risk, CCyB, CRR, SyRB, CRD IV, Macro-Prudential Policy, Macro-Prudential Measures, ESRB
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Blake Coules
Across 35 years in banking, Blake has gained deep insights into the inner working of this sector. Over the last two decades, Blake has been an Operating Committee member, leading teams and executing strategies in Credit and Enterprise Risk as well as Line of Business. His focus over this time has been primarily Commercial/Corporate with particular emphasis on CRE. Blake has spent most of his career with large and mid-size banks. Blake joined Moody’s Analytics in 2021 after leading the transformation of the credit approval and reporting process at a $25 billion bank.
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Previous Article
ESRB Publishes Working Paper on Bank Capital ForbearanceRelated Articles
BIS Report Notes Existing Gaps in Climate Risk Data at Central Banks
A Consultative Group on Risk Management (CGRM) at the Bank for International Settlements (BIS) published a report that examines incorporation of climate risks into the international reserve management framework.
EBA Publishes Multiple Regulatory Updates for Regulated Entities
The European Banking Authority (EBA) published the final guidelines on liquidity requirements exemption for investment firms, updated version of its 5.2 filing rules document for supervisory reporting, and Single Rulebook Question and Answer (Q&A) updates in July 2022.
APRA Consults on Prudential Standard for Operational Risk
The Australian Prudential Regulation Authority (APRA) is seeking comments, until October 21, 2022, on the introduction of CPS 230, which is the new cross-industry prudential standard on operational risk management.
EC Amends Rule on Securitizations; ESRB Updates Reciprocation Measures
The European Commission published a Delegated Regulation 2022/1301 on the information to be provided in accordance with the simple, transparent, and standardized (STS) notification requirements for on-balance-sheet synthetic securitizations.
APRA Announces Revisions to Capital Framework for Banks
The Australian Prudential Regulation Authority (APRA) is announced revisions to the capital framework for authorized deposit-taking institutions to implement the "unquestionably strong" capital ratios and the Basel III reforms.
EBA Examines Remuneration Data and Use of Large Exposure Exemptions
The European Banking Authority (EBA) published a report that examines the use of certain exemptions included in the large exposures regime under the Capital Requirements Regulation (CRR).
UK Authorities Publish Discussion Paper on Critical Third Parties
The Bank of England (BoE), the Prudential Regulation Authority (PRA), and the Financial Conduct Authority (FCA) published a joint discussion paper that sets out potential measures to oversee and strengthen the resilience of services provided by critical third parties to the financial sector in UK.
BoE Issues Update on Ongoing Data Transformation Program
The Bank of England (BoE) issued a communication to firms to provide an update on the progress of the joint data transformation program—which is being led by BoE, the Financial Conduct Authority (FCA), and the industry—for the financial sector in UK.
EBA Issues Draft Methodology and Templates for 2023 Stress Tests
The European Banking Authority (EBA) published the draft methodology, templates, and template guidance for the European Union-wide stress test in 2023.
EBA Issues SREP Guidelines and Standards for Investment Firms
The European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) jointly published the final guidelines on common procedures and methodologies for the supervisory review and evaluation process (SREP) for investment firms.
