Featured Product

    ESRB Publishes Risk Dashboard in June 2020

    ESRB released the 32nd quarterly risk dashboard at its June Board meeting. The risk dashboard provides a set of quantitative and qualitative indicators of systemic risk in the financial system in EU. The overview note accompanying the risk dashboard summarizes the recent development of indicators and contains two annexes describing the methodology and the covered risk indicators. This issue of risk dashboard highlights that, during the second quarter of 2020, the indicators of systemic stress gradually decreased and stabilized at a lower level. At the June meeting, the Board also discussed the impact of the COVID-19 pandemic on the financial system in EU and the additional measures taken in response to COVID-19 pandemic.

    The risk dashboard shows that the debt levels remain elevated across countries and sectors in EU, although most countries have somewhat deleveraged over the last few years. Credit to the private sector continued to grow robustly in many EU member states during the first months of the COVID-19 crisis. The cost of borrowing for the private sector remained low in April, reflecting low refinancing costs for banks and low risk pricing. Overall, the EU banking sector capitalization was robust before the onset of the COVID-19 crisis, but it suffered challenges related to profitability, and in some cases, to asset quality due to legacy assets. Profitability of banks in EU remained steadily low in the fourth quarter of 2019. The median ratio of common equity tier 1 (CET1) to risk-weighted assets remained broadly stable at 15.6% in the fourth quarter of 2019. At the same time, the median ratio of non-performing loans to total gross loans and advances was around 2.6% in the fourth quarter of 2019. 

    ESRB, at its June meeting, highlighted that the EU bodies, along with the governments, central banks, and supervisory and resolution authorities, have taken unprecedented actions to mitigate the negative impact of COVID-19 pandemic on the real economy. It was also highlighted that the General Board continued its COVID-19-related work in the five priority areas that were identified earlier this year. The following are the key highlights of the June Board meeting:

    • An ESRB working group has been set up to facilitate the implementation of the ESRB Recommendation on monitoring the financial stability implications of debt moratoria, public guarantee schemes, and other measures of a fiscal nature taken to protect the real economy in response to the COVID-19 pandemic. The working group held its first meeting on June 17, 2020. The General Board emphasized that it is important for macro-prudential authorities to monitor the implications of support measures at the national level and, in particular, for ESRB to monitor any cross-sector and cross-border issues that may arise. The templates to support this monitoring were published on June 25, 2020. The General Board will discuss the results of the monitoring exercise in the second half of 2020.
    • The General Board agreed on the follow-up to the ESRB Recommendation and report on liquidity risks arising from margin calls. In this regard, ESRB will analyze the structure of the clearing market in Europe from a financial stability perspective and its resilience in times of stress. This work will focus on interconnectedness and concentration in the provision of clearing services by central counterparties and clearing members. Furthermore, ESRB will analyze developments in non-centrally cleared markets, including the anti-procyclicality performance of the ISDA’s Standard Initial Margin Model.
    • The General Board exchanged initial views on the stress test scenario for the EBA 2021 EU-wide stress test. The Advisory Scientific Committee contributed to this discussion with a note providing insights on reforming bank stress testing in EU. An Advisory Scientific Committee Insight note will be published in the coming weeks.
    • The General Board appointed Enrico Perotti, Professor of International Finance at the University of Amsterdam, as a member of the Advisory Scientific Committee.


    Related Links

    Keywords: Europe, EU, Banking, Insurance, Securities, COVID-19, Systemic Risk, Risk Dashboard, Procyclicality, NPLs, Credit Risk, Liquidity Risk, Loan Moratorium, Guarantee Scheme, Stress Testing, EU-Wide Stress Test, ESRB

    Featured Experts
    Related Articles

    US Agencies Issue Several Regulatory and Reporting Updates

    The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.

    January 04, 2023 WebPage Regulatory News

    ECB Issues Multiple Reports and Regulatory Updates for Banks

    The European Central Bank (ECB) published an updated list of supervised entities, a report on the supervision of less significant institutions (LSIs), a statement on macro-prudential policy.

    January 01, 2023 WebPage Regulatory News

    HKMA Keeps List of D-SIBs Unchanged, Makes Other Announcements

    The Hong Kong Monetary Authority (HKMA) published a circular on the prudential treatment of crypto-asset exposures, an update on the status of transition to new interest rate benchmarks.

    December 30, 2022 WebPage Regulatory News

    EU Issues FAQs on Taxonomy Regulation, Rules Under CRD, FICOD and SFDR

    The European Commission (EC) adopted the standards addressing supervisory reporting of risk concentrations and intra-group transactions, benchmarking of internal approaches, and authorization of credit institutions.

    December 29, 2022 WebPage Regulatory News

    CBIRC Revises Measures on Corporate Governance Supervision

    The China Banking and Insurance Regulatory Commission (CBIRC) issued rules to manage the risk of off-balance sheet business of commercial banks and rules on corporate governance of financial institutions.

    December 29, 2022 WebPage Regulatory News

    HKMA Publications Address Sustainability Issues in Financial Sector

    The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.

    December 23, 2022 WebPage Regulatory News

    EBA Updates Address Basel and NPL Requirements for Banks

    The European Banking Authority (EBA) published regulatory standards on identification of a group of connected clients (GCC) as well as updated the lists of identified financial conglomerates.

    December 22, 2022 WebPage Regulatory News

    ESMA Publishes 2022 ESEF XBRL Taxonomy and Conformance Suite

    The General Board of the European Systemic Risk Board (ESRB), at its December meeting, issued an updated risk assessment via the quarterly risk dashboard and held discussions on key policy priorities to address the systemic risks in the European Union.

    December 22, 2022 WebPage Regulatory News

    FCA Sets up ESG Committee, Imposes Penalties, and Issues Other Updates

    The Financial Conduct Authority (FCA) is seeking comments, until December 21, 2022, on the draft guidance for firms to support existing mortgage borrowers.

    December 20, 2022 WebPage Regulatory News

    FSB Reports Assess NBFI Sector and Progress on LIBOR Transition

    The Financial Stability Board (FSB) published a report that assesses progress on the transition from the Interbank Offered Rates, or IBORs, to overnight risk-free rates as well as a report that assesses global trends in the non-bank financial intermediation (NBFI) sector.

    December 20, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8697