ESRB General Board meeting in Frankfurt

The General Board of the European Systemic Risk Board (ESRB) held its 21st regular meeting on 17 March 2016.

The General Board highlighted persistent weaknesses in banks’ balance sheets as key vulnerabilities in the EU banking sector in its exchange of views on risks and vulnerabilities in the financial system. At the beginning of the year, European and global financial markets recorded substantial volatility, exacerbated by general uncertainty about the global economic recovery. Moreover, concerns over both asset quality and the challenges for sustainable medium-term profitability in the EU banking sector were reflected in the re-pricing observed in banks’ equity and subordinated debt markets. In this context, the General Board underlined the importance of addressing issues related to asset quality in the EU banking sector. The General Board also continues to discuss macroprudential issues and structural changes related to the low interest rate environment, with a view to identifying areas in which macroprudential policies may be needed.

There was a substantial increase in the use of macroprudential measures implemented or planned in 2015.This increase largely reflected the application of the mandatory measures introduced under the framework of the Capital Requirements Directive and the Capital Requirements Regulation, namely the designation of systemically important institutions and the implementation of the regime for the counter-cyclical capital buffer. These developments are covered in the second ESRB annual review of macroprudential policy in the EU, which will be published in the second quarter of 2016. The ESRB regularly publishes on its website the measures notified by EU Member States and recently revised the disclosure requirements for this information so as to improve its comprehensiveness, timeliness and user-friendliness.

Moreover, the General Board discussed the EU Shadow Banking Monitor, a report prepared jointly by the ESRB Advisory Technical Committee and Advisory Scientific Committee. The Monitor provides an assessment of structural changes and an overview of key risks associated with the shadow banking sector’s activities and will eventually be developed into an annual publication. The first edition of the EU Shadow Banking Monitor will be published in the coming months.

Finally, the General Board approved adverse scenarios prepared by the ESRB for the 2016 EU-wide stress tests of the insurance sector by the European Insurance and Occupational Pensions Authority and for the 2016 EU-wide stress test of central counterparties by the European Securities and Markets Authority.

The ESRB will release the 15th issue of its risk dashboard today. The risk dashboard is a set of quantitative and qualitative indicators of systemic risk in the EU financial system.

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