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    ECB Issues Multiple Regulatory Updates in February 2022

    February 28, 2022

    The European Central Bank (ECB) published an updated list of supervised entities in the European Union, with the number of significant supervised entities being 115 as of the January 01, 2022 cut-off date. In another development, an ECB assessment concluded that Sberbank Europe AG and its two Banking Union subsidiaries, Sberbank d.d. in Croatia and Sberbank banka d.d. in Slovenia, are failing or likely to fail due to a deterioration of their liquidity situation. Sberbank Europe AG and its subsidiaries experienced significant deposit outflows as a result of the reputational impact of geopolitical tensions. The Single Resolution Board needs to confirm this ECB assessment before deciding on, and implementing, the subsequent steps. Additionally, ECB published the results of the December 2021 survey on credit terms and conditions in euro-denominated securities financing and over-the-counter derivatives markets (also known as SESFOD).

    The survey results show that the overall credit terms and conditions offered by banks to counterparties tightened slightly over the period from September 2021 to November 2021. A small net percentage of respondents reported less favorable overall credit terms for all counterparty types. While price terms tightened across the board, non-price terms tightened only for insurance companies and non-financial corporations. The December 2021 survey included special questions about market-making activities. Survey respondents reported that market-making activities had decreased for many types of debt security and derivative over the past year, but were expected to broadly increase in 2022. Respondents cited competition from other banks as the main driver of changes in market-making activities over the last year and willingness to take on risk as the main driver of expected changes in market-making activities in the year ahead. Respondents expressed confidence in their ability to act as market-makers in times of stress for many asset classes—broadly confirming their assessment of the past two years—with the important exception of corporate bonds, for which they expressed very low confidence. Looking ahead, a small net percentage of respondents to the December survey expected a further tightening of price terms for all types of counterparty over the period from December 2021 to February 2022, while non-price terms were expected to ease for most types of counterparty. 

     

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    Keywords: Europe, EU, Banking, Resolution Framework, SSM, Significant Credit Institutions, Less Significant Credit Institutions, Banking Supervision, SESFOD, Credit Risk, Credit Terms and Conditions, Lending, Sberbank, ECB, SRB, Basel, Croatia, Slovenia

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