ESRB publishes report on system-wide approach to macroprudential policy

4 December 2024

The European Systemic Risk Board (ESRB) has today published a report setting out several areas in which legislative action by the European Commission is needed to support financial stability and the capital markets union. The report is the ESRB’s response to the Commission’s targeted consultation assessing the adequacy of macroprudential policies for non-bank financial intermediation. It provides a conceptual framework that combines the prevailing focus on entities with a focus on activities, thereby taking a system-wide approach to macroprudential policy. The ESRB encourages the Commission to make use of this system-wide approach in its regular reviews of legislation or when considering new legislation.

The ESRB calls on the Commission to close known gaps in the regulatory framework and to facilitate data sharing across authorities during the first half of the legislative term. Specifically, the ESRB requests the Commission to address vulnerabilities in EU money market funds and to progress the work on addressing vulnerabilities in investment funds. Moreover, the ESRB is of the view that it is important to implement proposals and recommendations by international bodies on margining to ensure liquidity preparedness for margin calls. Regarding crypto assets, the ESRB sees a need to clarify the regulatory perimeter for crypto activities in the Markets in Crypto-Assets Regulation and to harmonise the classification of crypto-assets across Member States. The ESRB also calls on the Commission to ensure that authorities have the data and analytical resources they need.

The ESRB also identified areas that the Commission should tackle during the second half of the legislative term. As part of this, the ESRB suggests that the Commission consider how reciprocity under Article 25 of the Alternative Investment Fund Managers Directive could be implemented. The ESRB also invites the Commission to review existing arrangements for policy cooperation across the EU and to assess and work on the conditions for enabling the European Supervisory Authorities to supervise the most systemically relevant cross-border actors in financial markets. The ESRB also believes there is a need to enhance transparency in asset management activities and better incorporate a macroprudential perspective in associated regulation. To improve the functioning of government bond markets, the ESRB sees merit in incentivising the central clearing of government bond cash and repo markets. Finally, the ESRB also calls on the Commission to establish activity-based regulation that would enable authorities to apply borrower-based measures and set exposure concentration limits for highly indebted firms.

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