ESRB released its quarterly risk dashboard at the ESRB Board meeting, which was held on June 27, 2019. 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.
The dashboard highlights that risks to EU financial stability remain a concern, as reflected by the market-based indicators of systemic stress in EU over the past quarter. The indicators of systemic stress increased during the second quarter of 2019. Meanwhile, the probability of simultaneous default by large and complex banking groups and EU sovereigns decreased in the second quarter of 2019. The banking sector resilience remained broadly stable while the pace of the reduction of non-performing loans (NPLs) slightly lost momentum. The median common equity tier 1 to risk-weighted assets ratio remained stable at 15.5% in the first quarter of 2019, with the highest capitalized banks reducing their capitalization. Moreover, the median ratio of NPLs to total gross loans and advances slightly increased, reaching 3.2% at the beginning of 2019, up from 2.9% at the end of 2018. Overall, ongoing supervisory and regulatory work needs to support the reduction of vulnerabilities in the European banking sector. The dashboard also shows that, despite a lower profitability due to reduced investment returns, the median solvency ratio of the EU insurance sector is stable above 200%.
Additionally, at the ESRB meeting, the General Board considered the medium-term risks related to vulnerabilities in the residential real estate sector in European Economic Area. The General Board exchanged views on a range of systemic risks and vulnerabilities related to non-bank financial intermediation, including those related to interconnectedness, liquidity, and leverage. ESRB also plans to publish the EU Non-Bank Financial Intermediation Risk Monitor (previously Shadow Banking Monitor) in the coming months. Furthermore, the General Board discussed the key results from the ESRB workshop on the second-round effects from the banking sector stress test. For a better understanding of second-round effects, the General Board decided to supplement the 2018 EBA EU-wide banking sector stress test with a questionnaire. The questionnaire was sent to the 30 largest banking groups in Europe and aggregate results were discussed with representatives from participating banks.
- Press Release
- Risk Dashboard (PDF)
- Overview Note (PDF)
- Annex I on Methodology (PDF)
- Annex II on Description of Indicators (PDF)
Keywords: Europe, EU, Banking, Insurance, Securities, Systemic Risk, Risk Dashboard, ESRB
Previous ArticleEMMI Authorized as EURIBOR Administrator Under Benchmark Regulation
MAS and Temasek jointly released a report to mark the successful conclusion of the fifth and final phase of Project Ubin, which focused on building a blockchain-based multi-currency payments network prototype.
PRA published a public working draft, or PWD, of version 1.2.0 of the BoE Insurance XBRL taxonomy, along with the related technical artefacts.
CPMI published a report that sets out nineteen building blocks for a global roadmap to improve cross-border payments.
EBA published phase 2 of the technical package on the reporting framework 2.10, providing the technical tools and specifications for implementation of EBA reporting requirements.
APRA updated the lists of the Direct to APRA (D2A) validation rules for authorized deposit-taking institutions, insurers, and superannuation entities.
PRA updated the statement that provides guidance to regulated firms on implementation of the EBA guidelines on reporting and disclosure of exposures subject to measures applied in response to the COVID-19 crisis.
EBA updated the 2019 list of closely correlated currencies that was originally published in December 2013.
ESMA published the final report on the guidelines on securitization repository data completeness and consistency thresholds.
FASB issued a proposed Accounting Standards Update that would grant insurance companies, adversely affected by the COVID-19 pandemic, an additional year to implement the Accounting Standards Update No. 2018-12 on targeted improvements to accounting for long-duration insurance contracts, or LDTI (Topic 944).
APRA updated the regulatory approach for loans subject to repayment deferrals amid the COVID-19 crisis.