ESRB General Board meeting in Frankfurt
The General Board of the European Systemic Risk Board (ESRB) held its 26th regular meeting on 22 June 2017.
The General Board highlighted the repricing of risk premia in global financial markets as the main risk to financial stability in the EU. The General Board also noted that risks to the baseline scenario have been reduced, with economic growth becoming more broad-based and financial market sentiment improving. Despite the improving baseline scenario, tail risks remain elevated amid geopolitical and policy uncertainties, both in the global economy and in Europe. These uncertainties could act as potential triggers for a repricing of risk premia in global financial markets. An episode of repricing of risk premia and a subsequent rise in yields could also lead to a re-emergence of market concerns about public and private sector debt sustainability in some EU countries. Furthermore, the ESRB General Board continued to discuss cyclical and structural vulnerabilities in the insurance, pension fund and banking sectors as well as potential risks to financial stability arising from liquidity mismatch and leverage in investment funds. Finally, the General Board exchanged views on financial stability aspects related to fair value of financial instruments classified as level 2 and 3 assets.
The General Board endorsed the publication of the ESRB report on resolving non-performing loans (NPLs) in the EU. The report, which proposes a range of actions that could be considered in the short and medium term, will be published in the coming months.
The General Board also considered the financial stability implications of the implementation of International Financial Reporting Standard 9 (IFRS 9). These considerations are covered in an ESRB report which analyses, from a macroprudential perspective and with a focus on banks, two main areas of IFRS 9: the new approach to the classification and measurement of financial assets and the new expected credit loss (ECL) approach to the measurement of impairment allowances. The report will be published in the coming months.
Effective recovery and resolution frameworks are essential to mitigate the potential systemic implications of a distress of a financial institution. Therefore, the General Board exchanged views on the macroprudential aspects of the recovery and resolution regime for central counterparties (CCPs) and endorsed an opinion in this regard. The General Board also endorsed the ESRB report on recovery and resolution frameworks in insurance. Both documents will be published in the coming months.
Finally, the General Board endorsed the publication of an ESRB report discussing regulatory yield curves in insurance and their macroprudential consequences. The report will be published in the coming months.
The ESRB will release the 20th 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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