ESRB Report Reviews Macro-Prudential Policy in EU
ESRB published a report that examines developments in the macro-prudential policy framework in EU during 2020. The report notes that the key source of systemic risk in EU stems from the negative impact of the pandemic on economic activity and the resulting rising solvency pressures in the private sector. The report highlighted that banks have benefited from a variety of support measures but are facing deteriorating asset quality. Looking ahead, public support measures will need to shift from a defense of the pre-pandemic status quo to more targeted solutions that help viable companies to adjust to the post-pandemic world. Phasing out across-the-board measures is particularly warranted when these delay the recognition of loan losses.
The report also noted that policies could also attach higher importance to addressing the debt burden of viable but overindebted firms. Furthermore, member states should review and improve collateral enforcement procedures and strengthen the capacity of the judiciary to avoid bottlenecks. A swift adoption of the proposed EU Directive on credit servicers, credit purchasers, and the recovery of collateral (2018/63) would be helpful in simplifying extrajudicial collateral enforcement, reducing the cost of non-performing loan (NPL) resolution and removing obstacles for NPL sales to specialized credit purchasers. The negative impact of a further increase of provisions on bank capital also compounds the need to step up efforts to achieve higher operational efficiency, including through consolidation. To address the imminent challenges, banks need to recognize and provision for new NPLs early on and enhance their internal NPL management and resolution capacity. To ensure sufficient credit supply throughout the crisis, banks’ capital buffers need to be usable for banks to continue financing the economy and absorb losses, and macroprudential authorities have started discussing the lessons to be drawn from the impact of the COVID-19 crisis on the buffer framework.
In addition, ESRB has published its annual report, which describes its risk assessment and contributions to the macroprudential policy framework over the period April 01, 2020 to March 31, 2021. ESRB also published an issues note on money market funds, which sets out the ESRB’s analysis of systemic vulnerabilities in MMFs and preliminary policy considerations on how to reform MMFs. ESRB will further analyze a range of issues, including the wider markets in which MMFs operate, the behavior and expectations of investors in MMFs, as well as the structure of MMFs and the liquidity management tools available to them, with a view to adopting a Recommendation by the end of 2021. Finally, ESRB released its quarterly risk dashboard at its June Board meeting.
Related Links
- Press Release
- Report on Macro-Prudential Policy (PDF)
- Annual Report (PDF)
- Press Release on Issue Note on MMFs
- Issue Note on MMFs (PDF)
Keywords: Europe, EU, Banking, Systemic Risk, COVID-19, Macro-Prudential Policy, Residential Real Estate, Credit Risk, NPLs, Risk Dashboard, Annual Report, Money Market Funds, Guarantee Scheme, ESRB
Featured Experts

María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer

Victor Calanog, Ph.D.
Leading economist; commercial real estate; performance forecasting, econometric infrastructure; data modeling; credit risk modeling; portfolio assessment; custom commercial real estate analysis; thought leader.

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.
Previous Article
ECB/ESRB Report Shows Uneven Climate Change Impact Across EURelated Articles
APRA Publishes Results of Climate Risk Self-Assessment Survey
The Australian Prudential Regulation Authority (APRA) has published the findings of its latest climate risk self-assessment survey conducted across the banking, insurance, and superannuation industries.
ACPR Publishes Updates Related to CRD IV and Covered Bonds
The French Prudential Supervisory Authority (ACPR) published a notice related to the methods for calculating and publishing prudential ratios under the Capital Requirements Directive (CRD IV) and the minimum requirement for own funds and eligible liabilities (MREL).
EIOPA Publishes Guidance on Climate Change Scenarios in ORSA
The European Insurance and Occupational Pension Authority (EIOPA) published the risk dashboard based on Solvency II data and the final version of the application guidance on climate change materiality assessments and climate change scenarios in the Own Risk and Solvency Assessment (ORSA).
EBA and ECB Respond to Proposals on Sustainability Disclosures
The European Banking Authority (EBA) and the European Central Bank (ECB) published their responses to the consultations of the International Sustainability Standards Board (ISSB) and the European Financial Reporting Advisory Group (EFRAG) on sustainability-related disclosure standards.
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.
EIOPA Issues SII Taxonomy and Guide on Sustainability Preferences
The European Insurance and Occupational Pensions Authority (EIOPA) published Version 2.8.0 of the Solvency II data point model (DPM) and XBRL taxonomy.
EESC Opines on Proposals on CRR and European Single Access Point
The European Union published, in the Official Journal of the European Union, an opinion from the European Economic and Social Committee (EESC); the opinion is on the proposal for a regulation to amend the Capital Requirements Regulation (CRR).
HM Treasury Publishes Multiple Regulatory Updates in July 2022
HM Treasury published a draft statutory instrument titled “The Financial Services (Miscellaneous Amendments) (EU Exit) Regulations 2022,” along with the related explanatory memorandum and impact assessment.
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.