Featured Product

    ESRB Discusses Key Systemic Risks in Securitization Market in EU

    July 01, 2022

    The General Board of the European Systemic Risk Board (ESRB) held its June meeting, with discussions centring on key systemic risks in the European Union and the key policy priorities to address these risks. ESRB also published an updated risk assessment via the risk dashboard for this quarter. Additionally, ESRB published a report setting out a monitoring framework that focuses on systemic risks in the European Union securitization market.

    At the meeting, the General Board noted that the risk of an abrupt and broad-based fall in asset prices remains a severe risk to financial stability and welcomed the third joint ECB-ESRB report on the financial stability implications of climate change. The report expands the risk metrics, enhances the scenario analysis, and outlines initial considerations for potential macro-prudential tools. The General Board also exchanged views on the financial stability implications arising from crypto-based products and decentralized finance and noted that, while potential systemic implications stemming from these market segments currently seem limited, systemic risks could materialize quickly and suddenly. The General Board reaffirmed its support for a quick adoption and implementation of the Markets in Crypto-Assets Regulation and decided that the ESRB should focus its efforts on:

    • considering the need for additional regulatory measures and identifying policy steps to address the potential threat to financial stability
    • making proposals on how to ensure a European and global regulatory standard is developed
    • identifying systemic implications of the crypto-market for the EU financial system, including legal recourse considerations
    • regularly monitoring financial market exposures to crypto-based products and decentralized finance

    The report on securitization market provides macro-prudential oversight of the European Union securitization market and focuses on traditional (that is, off-balance sheet) securitizations. The report shows that the European Union securitization market is small compared with that of the United States. The securitization market is concentrated in a few member states, with banks as the main holders of securitizations. The report mainly focuses on residential mortgage-backed securities (RMBSs) as they are the largest segment of the European Union securitization market, representing more than 60% of the total outstanding securitizations in the European Union at the second quarter of 2021 as residential mortgages represent a major part of bank lending. The report sets out a monitoring framework that focuses on systemic risk, in particular owing to excessive leverage and interconnectedness. The findings show that ESRB does not found any substantial systemic risks emanating from European Union residential mortgage-backed securities, though analysis of other asset classes or types of securitizations not covered in this report could reveal sources of risk. To ensure that emerging risks to financial stability are identified early, ESRB welcomed the actions taken by the European Securities and Market Authority (ESMA) to enhance the quality of European Union securitization reporting. ESRB will also develop its monitoring framework to cover other classes and types of securitization, including collateralized debt obligations (CDOs) such as collateralized loan obligations (CLOs).


    Related Links


    Keywords: Europe, EU, Banking, Systemic Risk, Risk Dashboard, Financial Stability, Credit Risk, Climate Change Risk, Scenario Analysis, Crypto Assets, Decentralized Finance, Residential Mortgage Backed Securities, Regtech, Basel, Collateralized Loan Obligations, MiCA Regulation, ESRB

    Featured Experts
    Related Articles

    OSFI Finalizes on Climate Risk Guideline, Issues Other Updates

    The Office of the Superintendent of Financial Institutions (OSFI) is seeking comments, until May 31, 2023, on the draft guideline on culture and behavior risk, with final guideline expected by the end of 2023.

    March 12, 2023 WebPage Regulatory News

    BIS Paper Examines Impact of Greenhouse Gas Emissions on Lending

    BIS issued a paper that investigates the effect of the greenhouse gas, or GHG, emissions of firms on bank loans using bank–firm matched data of Japanese listed firms from 2006 to 2018.

    March 03, 2023 WebPage Regulatory News

    HMT Mulls Alignment of Ring-Fencing and Resolution Regimes for Banks

    The HM Treasury (HMT) is seeking evidence, until May 07, 2023, on practicalities of aligning the ring-fencing and the banking resolution regimes for banks.

    March 02, 2023 WebPage Regulatory News

    BCBS Report Examines Impact of Basel III Framework for Banks

    The Basel Committee on Banking Supervision (BCBS) published results of the Basel III monitoring exercise based on the June 30, 2022 data.

    February 28, 2023 WebPage Regulatory News

    PRA Consults on Prudential Rules for "Simpler-Regime" Firms

    Among the recent regulatory updates from UK authorities, a key development is the first-phase consultation, from the Prudential Regulation Authority (PRA), on simplifications to the prudential framework that would apply to the simpler-regime firms.

    February 28, 2023 WebPage Regulatory News

    DNB Publishes Multiple Reporting Updates for Banks

    DNB, the central bank of Netherlands, updated the list of additional reporting requests and published additional data quality checks and XBRL-Formula linkbase documents for the first quarter of 2023.

    February 28, 2023 WebPage Regulatory News

    NBB Sets Out Climate Risk Expectations, Issues Reporting Updates

    The National Bank of Belgium (NBB) published a communication on climate-related and environmental risks, issued an update on XBRL reporting

    February 24, 2023 WebPage Regulatory News

    EBA Updates Address Securitization Standards and DGS Guidelines

    The European Banking Authority (EBA) published the final draft of the regulatory technical standards that set out conditions for assessment of homogeneity of the underlying exposures in simple, transparent, and standardized (STS) securitizations.

    February 21, 2023 WebPage Regulatory News

    FSB Publishes Letter to G20, Sets Out Work Priorities for 2023

    The Financial Stability Board (FSB) published a letter intended for the G20 Finance Ministers and Central Bank Governors, highlighting the work that FSB will take forward under the Indian G20 Presidency in 2023

    February 20, 2023 WebPage Regulatory News

    ISSB Standards May Become Effective from January 2024

    The International Organization of Securities Commissions (IOSCO) welcomed the confirmation statement by the International Sustainability Standards Board (ISSB) setting out its progress in the development of its first sustainability-related corporate disclosure standards.

    February 17, 2023 WebPage Regulatory News
    RESULTS 1 - 10 OF 8792