ESMA Issues Second Report on Trends, Risks, and Vulnerabilities in 2017
ESMA published its second report of the year on trends, risks, and vulnerabilities in the EU. The report identifies high asset price valuations as the major risk for European financial markets in the second half of 2017. This report covers market developments from January to June 2017 and provides an outlook for the next reporting period.
The risk assessment for the second half of 2017 remains unchanged from the first half of 2017. The key risk drivers are uncertainties around geopolitical developments, the resilience of economic growth, and debt sustainability. Market performance reflected increasing market confidence and improved expectations on the future economic outlook in EU and globally. This is echoed in increased capital flows into strategies yielding higher returns. Substantive risk sources include economic growth in the EU and elsewhere that needs to prove resilient; structural problems in many EU member states continuing to be addressed; internationally, rising public and private debt levels of increasing concern; persistence of high asset price valuations; and prevailing geopolitical and political uncertainties.
Brexit-related uncertainties remain among the most important political sources of risk. Market and credit risks, as a result of geopolitical, growth, and debt concerns, continued to be very high, while liquidity and contagion risks remained stable but high. The outlook on operational risk remains elevated but the outlook is now negative due to heightened concerns around cyber security. The report on trends, risks, and vulnerabilities is updated twice annually and is complemented by the quarterly Risk Dashboard.
Related Links
Keywords: Europe, EU, Securities, Market Risk, Credit Risk, Liquidity Risk, Operational Risk, ESMA
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Blake Coules
Across 35 years in banking, Blake has gained deep insights into the inner working of this sector. Over the last two decades, Blake has been an Operating Committee member, leading teams and executing strategies in Credit and Enterprise Risk as well as Line of Business. His focus over this time has been primarily Commercial/Corporate with particular emphasis on CRE. Blake has spent most of his career with large and mid-size banks. Blake joined Moody’s Analytics in 2021 after leading the transformation of the credit approval and reporting process at a $25 billion bank.
Dieter Van der Stock
IFRS subject matter expert; LDTI subject matter expert; accounting authority; risk management specialist
Previous Article
MAS Amends Disclosure Requirements Under Notices 637, 651, and 653Related Articles
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.
BIS Bulletin Examines Cognitive Limits of Large Language Models
The use cases of generative AI in the banking sector are evolving fast, with many institutions adopting the technology to enhance customer service and operational efficiency.
ECB is Conducting First Cyber Risk Stress Test for Banks
As part of the increasing regulatory focus on operational resilience, cyber risk stress testing is also becoming a crucial aspect of ensuring bank resilience in the face of cyber threats.
EBA Continues Momentum Toward Strengthening Prudential Rules for Banks
A few years down the road from the last global financial crisis, regulators are still issuing rules and monitoring banks to ensure that they comply with the regulations.
EU and UK Agencies Issue Updates on Final Basel III Rules
The European Commission (EC) recently issued an update informing that the European Council and the Parliament have endorsed the Banking Package implementing the final elements of Basel III standards