ESRB General Board meeting in Frankfurt

The General Board of the European Systemic Risk Board (ESRB) held its 17th regular meeting on 19 March 2015

The General Board exchanged views on risks and vulnerabilities in the financial system. The EU economy remains fragile despite emerging signs of economic recovery. The low interest rate environment, lower oil prices and the depreciation of the euro should support further improvement in economic conditions. Nevertheless, potential negative side effects on financial stability have to be closely monitored. Events concerning Greece have led to limited contagion only, suggesting – amongst other factors – increased resilience of financial markets. Similarly, the financial stability impact of falling oil prices and increased volatility of some exchange rates, in particular of the Swiss Franc, has been contained, also owing to the adoption of targeted macro-prudential measures by national authorities, including those recommended by the ESRB in 2011 (ESRB_2011_1 and ESRB_2013_2).

The General Board had a first yearly discussion on the macro-prudential policy stance in the EU in 2014. This was the first year after the introduction of macro-prudential instruments in the European Union through the CRD/CRR. In 2014, several measures were taken by Member States, aiming mostly at the prevention and mitigation of excessive credit growth and leverage in specific areas. This aimed in particular at the residential real estate sector (mortgage lending) in some jurisdictions. The ESRB is regularly publishing on its web site the measures notified by EU Member States (around 90 in 2014, of which around half reflect an active policy stance, while the rest is of more administrative nature). These measures were aimed at increasing the resilience of the banking sector in particular. The ESRB will start further work on the conceptual framework to assess the macro-prudential policy stance in the EU.

The General Board discussed the potential use of the leverage ratio for macro-prudential purposes. It agreed to publish a new provisional Chapter on the topic in the ESRB Handbook on macro-prudential instruments. The Chapter complements ongoing work at the European Banking Authority and Basel Committee on Banking Supervision on minimum leverage ratio requirements and will be reviewed in 2017, once the Basel Committee has published the final definition and calibration of the micro-prudential leverage ratio. Macro-prudential authorities can vary risk-weighted capital buffers in a countercyclical manner as system-wide risks evolve over the cycle and are setting higher buffers for systemically important banks. This Chapter analyses how leverage ratios, under which capital requirements are set in proportion to exposures regardless of their risk, might interact with such risk-weighted macro-prudential measures. It observes that risk-weighted capital and leverage ratio buffers could be adjusted in a complementary manner to tackle macro-prudential risks, subject to national discretion. This could maintain the complementary role that the leverage ratio plays in the overall capital framework as macro-prudential policies are deployed. The ESRB aims to publish this Chapter in April 2015 with the objective of providing guidance on the design of macro-prudential leverage ratios to macro-prudential authorities in the EU and enhancing coherence and coordination in approach.

The General Board appointed 12 new members of the Advisory Scientific Committee of the ESRB, for a term of 4 years. The Committee advises the ESRB on relevant issues from an academic perspective. The General Board also appointed Professor Philip Lane of the Trinity College Dublin as new Chair, and Professor Marco Pagano of the University Federico II of Naples and Professor Javier Suárez of the Center for Monetary and Financial Studies (CEMFI) of Madrid as Vice-Chairs. According to the ESRB regulation, Chair and Vice-Chairs rotate every 16 months. Chairs and Vice-Chairs of the ESRB have a voting right at the General Board.

The following further members of the Advisory Scientific Committee have been appointed: Elena Carletti, Bocconi University, Italian national; Alberto Giovannini, Chairman Unifortune Asset Management SGR SpA, Italian national; Malcom Kemp, Nematrian, British national; José-Luis Peydró, ICREA - University Pompeu Fabra, Spanish national;  Isabel Schnabel, Johannes Gutenberg University Mainz, German national; Dirk Schoenmaker, Duisenberg school of finance, Dutch national; David Thesmar, HEC Paris, French national; Ernst-Ludwig Von Thadden, University of Mannheim, German national; Josef Zechner, Vienna University of Economics and Business, Austrian national.

A full list of the 15 ASC members can be found at list of ASC members.

The ESRB published the eleventh issue of the risk dashboard today. The risk dashboard is a set of quantitative and qualitative indicators of systemic risk in the EU financial system.

For media enquiries, please contact William Lelieveldt at William.Lelieveldt@ecb.europa.eu