Featured Product

    ECB Publishes Seventh Issue of Macroprudential Bulletin in March 2019

    March 27, 2019

    ECB published Issue 7 of the Macroprudential Bulletin, which provides insight into the ongoing work of ECB in the field of macro-prudential policy. The Bulletin presents an overview of the macro-prudential policy measures that are being implemented in euro area countries as of January 01, 2019. Additionally, this issue includes four articles on key macro-prudential topics, including an assessment of bank regulatory reforms ten years after the crisis, results from the new macro-prudential stress test framework, macro-prudential analysis of residential real estate markets, and analyses of the recent decisions on the countercyclical capital buffer (CCyB).

    Post-crisis bank resilience. The first article investigates whether the euro area banking system is more resilient ten years after the global financial crisis. It compares the ability of euro area banks to absorb potential shocks before the 2008 global financial crisis and ten years later, taking into account the impact of post-crisis reforms on bank capital and loss-absorbing capacity, including the new, post-crisis resolution framework. The analysis shows a significant increase in the ability of the euro area banking system to withstand potential shocks without costs for taxpayers after the global financial crisis and the post-crisis wave of reforms. This has been achieved through higher regulatory capital and the new resolution framework, which includes the bail-in tool and the potential intervention of the Single Resolution Fund, as well as a significant reduction in the average probability of default of banks. Notwithstanding the significant increase in the average level of resilience in the euro area banking system, the post-crisis regulatory work is not yet complete. Recent and outstanding regulatory reforms, particularly the finalization of the Basel III package and the minimum requirement for own funds and eligible liabilities (MREL) requirements, should be properly implemented to further strengthen the resilience of banks, especially outlier institutions.

    Results from macro-prudential stress test. The second article summarizes the results of the macro-prudential stress test of the euro area banking sector in 2018-2020 and assesses the resilience of the European banking sector’s resilience, if faced with a global economic recession. The results indicate substantial resilience of the euro area banking system at the current juncture. The macro-prudential stress test predicts a lower negative impact on capital ratios, though higher capital depletion, in billions of euro, than a static balance-sheet stress test. They also show that bank deleveraging tied to deteriorating capitalization and asset quality leads to further deterioration in economic conditions in an adverse scenario.

    Macro-prudential analysis of residential real estate markets. The third article presents ECB framework for assessing financial stability risks stemming from residential real estate markets and for designing macro-prudential policy responses. It also reviews recent developments in residential real estate markets and policy initiatives to address risks. The current analysis indicates that residential real estate vulnerabilities relevant to macro-prudential policy are present in a number of euro area countries. In general, over the past years, the activation of macro-prudential instruments related to residential real estate risks recognizes the need for a proactive policy stance to avoid possible negative consequences for the financial sector and the broader economy. However, the continuation of observed trends in residential real estate markets in some countries suggests that further policy actions remain warranted in the near future.

    Analysis of CCyB decisions. The fourth article reviews the country-specific strategic choices and decisions regarding timing and calibration of CCyB in countries participating in the Single Supervisory Mechanism (SSM). It sheds light on the causes of the different policy choices and exposes limitations encountered in the prominent role of the credit-to-GDP gap in the current Basel framework. Ultimately, assessing risks across euro area countries consistently, while taking into account country-specific factors, supports the effective use of CCyB as a macro-prudential instrument and ensures that similar risk exposures are subject to the same set of macro-prudential requirements. The consistent use of additional risk indicators over time and across countries can help make macro-prudential policy more predictable. 

     

    Related Links

    Keywords: Europe, EU, Banking, Post-Crisis Reforms, Macroprudential Bulletin, CCyB, Residential Real Estate, Stress Testing, Macroprudential Policy, ECB

    Featured Experts
    Related Articles
    News

    APRA Sets LAC for D-SIBs, Proposes to Enhance Crisis Preparedness

    APRA issued a letter on the loss-absorbing capacity (LAC) requirements for domestic systemically important banks (D-SIBs) and published a discussion paper, along with the proposed the prudential standards on financial contingency planning (CPS 190) and resolution planning (CPS 900).

    December 02, 2021 WebPage Regulatory News
    News

    EC to Review Macro-Prudential Rules while ESRB Assesses Policy Stance

    The European Commission (EC) launched a call for evidence, until March 18, 2022, as part of a comprehensive review of the macro-prudential rules for the banking sector under the Capital Requirements Regulation (CRR) and Directive (CRD IV).

    December 01, 2021 WebPage Regulatory News
    News

    FSB Sets Out Good Practices for Crisis Management Groups

    The Financial Stability Board (FSB) published a report that sets out good practices for crisis management groups.

    November 30, 2021 WebPage Regulatory News
    News

    APRA Penalizes Heritage Bank for Incorrect Reporting of Capital

    The Australian Prudential Regulation Authority (APRA) found that Heritage Bank Limited had incorrectly reported capital because of weaknesses in operational risk and compliance frameworks, although the bank did not breach minimum prudential capital ratios at any point and remains well-capitalized.

    November 29, 2021 WebPage Regulatory News
    News

    OSFI Releases Annual Report 2021-2022

    The Office of the Superintendent of Financial Institutions (OSFI) released the annual report for 2020-2021.

    November 29, 2021 WebPage Regulatory News
    News

    OSFI Updates Timeline for Implementation of Certain Basel Rules

    Through a letter addressed to the banking sector entities, the Office of the Superintendent of Financial Institutions (OSFI) announced deferral of the domestic implementation of the final Basel III reforms from the first to the second quarter of 2023.

    November 29, 2021 WebPage Regulatory News
    News

    EC Defers Adoption of Regulatory Standards for Disclosures Under SFDR

    EIOPA recently published a letter in which EC is informing the European Parliament and Council that it could not adopt the set of draft regulatory technical standards for disclosures under the Sustainable Finance Disclosure Regulation (SFDR) within the stipulated three-month period, given their length and technical detail.

    November 29, 2021 WebPage Regulatory News
    News

    FCA Releases MIFIDPRU Application Forms and Third Set of Rules on IFPR

    The Financial Conduct Authority (FCA) published the third in a series of policy statements that set out rules to introduce the UK Investment Firm Prudential Regime (IFPR), which will take effect on January 01, 2022.

    November 29, 2021 WebPage Regulatory News
    News

    APRA Finalizes Capital Adequacy Standards for Banks

    The Australian Prudential Regulation Authority (APRA) published, along with a summary of its response to the consultation feedback, an information paper that summarizes the finalized capital framework that is in line with the internationally agreed Basel III requirements for banks.

    November 29, 2021 WebPage Regulatory News
    News

    CPMI-IOSCO Seek Comments on Access to Central Clearing and Portability

    The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) issued a consultative report focusing on access to central counterparty (CCP) clearing and client-position portability.

    November 29, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7751