The General Board of the European Systemic Risk Board held its 33rd regular meeting on 21 March 2019

28 March 2019

The General Board of the European Systemic Risk Board (ESRB) highlighted the repricing of risk premia in global financial markets and the deterioration of the economic outlook as the main risks to financial stability in the European Union. The risk of a repricing in global markets remains high owing to significant (geo)political and policy uncertainties, both globally and within Europe. Slowing growth momentum could also negatively affect the profitability of EU financial institutions and further challenge debt sustainability in the public and private sectors. The European Commission, the European Central Bank (ECB), the Bank of England and the European Securities Markets Authority (ESMA) updated the ESRB member institutions on their preparations for the UK’s withdrawal from the European Union.

The General Board continued to discuss the results 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)[1]. The monitoring exercise highlights the importance of the availability of high-quality data; the ESRB Secretariat is cooperating closely with ESMA and other ESRB member institutions to ensure high data quality.

The General Board exchanged views on the major trends in macroprudential policy in the EU in 2018. Most Member States had taken some macroprudential policy measures[2] and the majority of these measures were of a tightening nature. The most frequently used instruments over the past year were the countercyclical capital buffer, the systemic risk buffer and the cap on the loan-to-value ratio. The ESRB will publish its “Review of Macroprudential Policy in the EU in 2018” in the second quarter of 2019.

The General Board considered two reports prepared by the ESRB Advisory Scientific Committee (ASC). The first report discusses the contribution of regulatory complexity to systemic risk and considers some principles to enhance current regulation, in view of the significant level of complexity and uncertainty in the financial system. In the second report the ASC discusses the main channels through which the exchange-traded funds market may affect systemic risk. Both reports will be published in the coming months.

The General Board amended the ESRB Recommendation (2016/14) on closing real estate data gaps by adding a new sub-recommendation addressed to Eurostat (to identify a minimum set of common definitions of physical market indicators of commercial real estate), aligning definitions in the text with those included in EU legislation (including, for example, AnaCredit), and updating the deadlines for implementing the Recommendation. The General Board intends to publish the amended Recommendation together with an accompanying explanatory document that clarifies certain technical aspects.

Finally, the General Board approved a set of adverse scenarios prepared jointly by ECB staff and the ESRB Task Force on Stress Testing for:

  • the 2019 EU-wide stress test of institutions for occupational retirement provision by the European Insurance and Occupational Pensions Authority (EIOPA);
  • the ESMA 2019 EU-wide central counterparty stress test;
  • the ESMA guidelines on stress test scenarios under article 28 of Regulation (EU) 2017/1131 on money market funds.

The General Board also discussed the results of the 2018 EU-wide stress test of insurers and highlighted the importance of the individual disclosure of the stress test results for market transparency and level playing field.

The electoral body composed of General Board members who are also members of the General Council of the ECB appointed Mr Pierre Wunsch, Governor of the Nationale Bank van België/Banque Nationale de Belgique as a member of the Steering Committee for a three-year term. Governor Wunsch replaces Jan Smets, whose term of office as Governor of Nationale Bank van België/Banque Nationale de Belgique has come to an end.

The General Board also appointed Professor Martin Oehmke as a member of the ASC for a four-year renewable term. Professor Martin Oehmke, who replaces Professor Prasanna Gai, holds a PhD from Princeton University and is currently a professor at the London School of Economics.

Lastly, the ESRB is releasing the 27th 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.

For media queries, please contact William Lelieveldt, tel.: +49 69 1344 7316.

[1]EMIR requires transaction-level data on derivative contracts to be reported to trade repositories and grants the ESRB and the ESMA exclusive access to the full EU-wide dataset.
[2]An overview of measures is published on the ESRB website and updated on a monthly basis.