The General Board of the European Systemic Risk Board held its 31st regular meeting on 27 September 2018

4 October 2018

In its meeting on 27 September 2018, the General Board of the European Systemic Risk Board (ESRB) noted that risks to the stability of the EU financial system remain elevated amid significant political uncertainties globally and within the EU. The General Board exchanged views on vulnerabilities related to financial and banking markets, focusing on the potential for further market repricing and the implications for the EU financial system, also in relation to the relevant macroprudential policy measures already activated.

Furthermore, the General Board discussed technical aspects of the ongoing monitoring of developments in the EU derivatives markets, which exploits the wealth of information made available to the ESRB under the European Market Infrastructure Regulation (EMIR). EMIR requires transaction-level data on derivative contracts to be reported to trade repositories and grants the ESRB and the European Securities and Markets Authority exclusive access to the full EU-wide dataset.

The General Board also considered the need to establish a broader macroprudential toolkit for insurance. Current (re)insurance regulation already helps prevent or mitigate systemic risk; however, it was designed from a microprudential angle and does not address the key systemic risk types. These considerations are covered in an ESRB report, which proposes a shortlist of options for additional macroprudential provisions, measures and instruments for insurance that the ESRB deems sufficiently promising to warrant further work. The report complements the work undertaken by the European Insurance and Occupational Pensions Authority and reaches broadly similar conclusions. The shortlisted options would address the key systemic risk types by targeting several significant systemic amplifiers, sectoral vulnerabilities and transmission channels. The shortlisted options reflect the specificities of the (re)insurance business and their functioning naturally differs from the toolkit that has been developed for other financial sectors (e.g. the banking sector). While the implementation of these options at the EU level would provide all authorities with the necessary tools and flexibility to address a wide range of systemic risks, the modalities of certain shortlisted options might differ across jurisdictions to reflect differences in the national (re)insurance markets. The ESRB report will be published in the coming months and could feed into the ongoing discussions on the review of the Solvency II Directive.

Regarding appointments, the electoral body composed of General Board members, who are also members of the General Council of the European Central Bank, reappointed Mark Carney (Governor of the Bank of England) as First Vice-Chair of the ESRB and appointed Jan Smets (Governor of Nationale Bank van België/Banque Nationale de Belgique) as a member of the Steering Committee. Governor Smets replaces Klaas Knot, Governor of De Nederlandsche Bank, whose term of office in the Steering Committee has come to an end.

With regard to the Advisory Scientific Committee (ASC), which advises the ESRB on relevant issues from an academic perspective, the General Board appointed 12 members for a term of four years: Thorsten Beck, Cass Business School, German national; Willem Buiter, Citigroup, US and UK national; Elena Carletti, Bocconi University, Italian national; Stephen G. Cecchetti, Brandeis International Business School, US and Italian national; Kathryn Dominguez, University of Michigan, US and Irish national; Sebnem Kalemli-Ozcan, University of Maryland, US and Turkish national; Malcolm Kemp, Nematrian Limited, UK national; Giovanna Nicodano, University of Turin, Italian national; Loriana Pelizzon, Goethe University Frankfurt, Italian national; Isabel Schnabel, University of Bonn, German national; Javier Suárez, CEMFI Madrid, Spanish national; and Lars E.O. Svensson, Stockholm School of Economics, Swedish national. The term of two members (Loriana Pelizzon and Thorsten Beck) starts immediately, while the term of the remaining ten ASC members will start in April 2019. A full list of the 15 current members of the ASC can be found on the ESRB’s website.

Lastly, the ESRB is releasing the 25th 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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