ESRB published its eighth annual report, which details its achievements and activities between April 01, 2018 and March 31, 2019. During this period, ESRB continued its close monitoring of sources of systemic risk in the European financial system and economy. The annual report highlights that the key identified risks financial stability are repricing of risk premia in global financial markets; weaknesses in balance sheets of banks, insurers, and pension funds; debt sustainability challenges in sovereign, corporate, and household sectors; and vulnerabilities in the shadow banking system and contagion to the wider financial system. Besides these key risks to financial stability, ESRB continued to work on the financial stability implications of climate change and technological developments, including systemic cyber risk.
The above-mentioned key identified risks formed the basis for the adverse macro-financial scenario that ESRB provided to EBA for the 2018 EU-wide banking sector stress test. These risks were also reflected in the adverse scenarios that were provided to EIOPA for the 2018 insurance sector stress test. The following are the key highlights other ESRB work during the year:
- Recommended reciprocation of national flexibility measures in Belgium, France, and Sweden, in addition to a materiality threshold for the systemic risk buffer in Estonia
- Provided the adverse market scenarios to EIOPA for third EU-wide stress test for Institutions for Occupational Retirement Provision (IORPs) and to ESMA for third EU-wide stress test for credit counterparties
- Continued to assess the financial stability implications of IFRS 9 and published two reports on the topic
- Contributed to the development of the macro-prudential policy framework by setting out initial considerations to support policymakers in preparing decisions
- Monitored macro-prudential measures adopted in EU and facilitated exchange of views among its members on such measures; there was a significant increase in the number of macro-prudential measures adopted over last as more than half of the countries in the European Economic Area took some macro-prudential policy action in 2018
- Identified options to further strengthen the macro-prudential framework for (re)insurance and reviewed the financial stability implications of central counterparty interoperability arrangements
- Took first step toward developing a common framework for a macro-prudential stance
Related Link: Annual Report (PDF)
Keywords: Europe, EU, Banking, Insurance, Reinsurance, Pensions, Macro-Prudential Policy, Systemic Risk, Stress Testing, Annual Report, IFRS 9, Shadow Banking, ESRB
Previous ArticleEBA Intends to Clarify End-Treatment of Grandfathered Instruments
BIS published a paper that provides an overview on the use of big data and machine learning in the central bank community.
APRA finalized the reporting standard ARS 115.0 on capital adequacy with respect to the standardized measurement approach to operational risk for authorized deposit-taking institutions in Australia.
ECB published a guide that outlines the principles and methods for calculating the penalties for regulatory breaches of prudential requirements by banks.
MAS and The Association of Banks in Singapore (ABS) jointly issued a paper that sets out good practices for the management of operational and other risks stemming from new work arrangements adopted by financial institutions amid the COVID-19 pandemic.
ACPR announced that a new data collection application, called DLPP (Datalake for Prudential), for collecting banking and insurance prudential data will go into production on April 12, 2021.
BCB announced that the Financial Stability Committee decided to maintain the countercyclical capital buffer (CCyB) for Brazil at 0%, at least until the end of 2021.
EIOPA has launched a European-wide comparative study on non-life underwriting risk in internal models, also kicking-off of the data collection phase.
SRB published an overview of the resolution tools available in the Banking Union and their impact on a bank’s ability to maintain continuity of access to financial market infrastructure services in resolution.
EBA is consulting on the implementing technical standards for Pillar 3 disclosures on environmental, social, and governance (ESG) risks, as set out in requirements under Article 449a of the Capital Requirements Regulation (CRR).
ESAs Issue Advice on KPIs on Sustainability for Nonfinancial Reporting