On Monday 13th January 2020, EIOPA published the instructions and technical specifications for the MCRCS YE2019. The MCRCS is an annual Europe-wide comparative study on the modelling of market and credit risk. Its main objective is to compare risk charges for a selection of asset portfolios to be used as a tool for the supervisory review of internal models. Additionally, the study aims to highlight the causes of potential differences between internal models by analysing risk charges for individual asset classes such as fixed income or equity. In this edition, the study will include a specific focus on interest rate risk modelling.
The European Securities and Markets Authority (ESMA) today published its second statistical report on European Union (EU) Alternative Investment Funds (AIF). The study found that the EU AIF sector in 2018, as measured by Net Asset Value (NAV), amounted to €5.8tn or nearly 40% of the total EU fund industry. The report is based on data from 30,357 AIFs, or almost 100% of the market.
The European Securities and Markets Authority (ESMA) the EU’s securities regulator, today publishes its second Annual Statistical Report (Report) analysing the European Union’s (EU) derivatives markets. The Report, based on data submitted under the European Markets and Infrastructure Regulation (EMIR), provides a comprehensive market-level view of the EU’s derivatives markets in 2018, which had a total size of €735tn gross notional amount outstanding, an increase of 11% on 2017.
The European Banking Authority (EBA) published the second part of its advice on the implementation of Basel III in the EU, which complements the Report published on 5 August 2019. Today’s publication includes an assessment of the impact of the revisions to the credit valuation adjustment (CVA) and market risk frameworks, and the corresponding policy recommendations. It also provides a macroeconomic impact assessment of the full Basel III package. When accounting for the 2019 FRTB standards, the impact assessment shows that the full implementation of Basel III, under conservative assumptions, will increase the current minimum capital requirement (MRC) by 23.6% on average. This impact is lower than the 24.4% originally estimated in the August 2019 report, and would imply an aggregate shortfall in total capital of EUR 124.8 billion. The macroeconomic impact assessment shows that the implementation of Basel III will have net benefits for the economy of the European Union. The EBA reaffirms its support for a full implementation of the final Basel III standards in the EU.
The European Securities and Markets Authority (ESMA), the EU’s securities regulator, today publishes its latest risk dashboard for the European Union’s securities markets, covering the third quarter of 2019.
The European Banking Authority (EBA) published today its final Guidelines on ICT and security risk management. These Guidelines establish requirements for credit institutions, investment firms and payment service providers (PSPs) on the mitigation and management of their information and communication technology (ICT) and security risks and aim to ensure a consistent and robust approach across the Single market. These Guidelines will enter into force on 30 June 2020.
The European Banking Authority (EBA) published today a Report on trends in asset quality of the EU banking sector, which show it has significantly improved over the last four years. Total non-performing loans (NPLs) decreased from over EUR 1.15 trillion in June 2015 (6% as a percentage of total loans) to EUR 636 billion as of June 2019. The NPL ratio declined to 3%, the lowest ratio since the EBA introduced a harmonised definition of NPLs across European countries. The average coverage ratio slightly increased from 43.6% to 44.9% over the same period.
The European Banking Authority (EBA) published today the final methodology and draft templates for the 2020 EU-wide stress test along with the key milestones of the exercise. The methodology and templates cover all relevant risk areas and incorporate the feedback received during the discussion with the industry in the summer of 2019. The stress test exercise will be formally launched in January 2020 and the results published by 31 July 2020.
The Directorate General for financial stability, financial services and capital markets union organises a conference to discuss the challenges and opportunities of the review of the Solvency II directive. The conference furthermore aims to gather ideas on whether new risks or developments that insurers face or are going to face would require regulatory action.
Valdis Dombrovskis, Vice-President of the European Commission as well as EIOPA Chair Gabriel Bernardino will give keynote speeches. Discussions will be organised around four panels, covering the areas to be reviewed, and allowing further exchange on the future of the European insurance sector. The list of speakers will include experts from the insurance industry, from the supervisory community, from the civil society and from the European Parliament.
The European Insurance and Occupational Pensions Authority (EIOPA) has today published the responses from national competent authorities on their compliance, intention to comply or non-compliance with the recommendations set out in EIOPA’s ‘Recommendations for the insurance sector in light of the United Kingdom withdrawing from the European Union.’
The private sector working group on euro risk-free rates has published a report containing recommendations, from a risk management perspective, on the transition to new risk-free rates. The analysis conducted in the report consists of: (i) general risk management considerations; (ii) risk management implications of transitioning from EONIA to the euro short-term rate (€STR); (iii) risk management implications of €STR-based fallback rates for EURIBOR; and (iv) additional risk management considerations for the asset management and insurance sectors.
At its meeting on 26 September 2019, the General Board of the European Systemic Risk Board (ESRB) discussed the rising threat of protectionism and the geopolitical uncertainties that have led to a further deterioration in the outlook for growth. In this context, markets are expecting that the interest rates remain low for a prolonged period of time. As a result, financial market repricing, the balance sheet vulnerabilities of European Union (EU) financial institutions and unsustainable indebtedness remain the main risks to financial stability in the EU. The weaker economic outlook could further increase the vulnerabilities of EU financial institutions and pose a challenge to debt sustainability in the public and private sectors.
The European Securities and Markets Authority (ESMA), the EU’s securities markets regulator, has published its 2020 Work Programme (WP), setting out its priorities and areas of focus for the next 12 months in support of its mission to enhance investor protection and promote stable and orderly financial markets.