ECB欧洲央行-Letter-from-the-ECB-President-to-Ms-Eva-Kaili,-MEP,-on-the-European-financial-sector_3页_130kb

ECB Summary on Financial Supervision and Shadow Banking

Core Content

The European Central Bank (ECB) has responded to a letter from Ms Eva Kaili, a Member of the European Parliament, regarding the supervision of non-bank financial institutions and shadow banking. The letter was forwarded by Mr Andrea Enria, Chair of the ECB's Supervisory Board, and the ECB provided a detailed explanation of its supervisory approach and the measures taken to enhance financial system resilience since the 2008 crisis.

Main Points

1. Reforms and Resilience

• Since the 2008 financial crisis, the EU has implemented significant reforms to improve the resilience of the financial system.
• These reforms have focused on both banking sector and non-bank financial institutions.
• Key measures include:
  • The leverage ratio to capture risks from on- and off-balance-sheet items.
  • The new securitisation framework to ensure adequate capitalisation.
  • EBA guidelines on exposures to shadow banking entities.
  • Risk-sensitive capital requirements for equity investments in funds.

2. Shadow Banking Monitoring

• The European Systemic Risk Board (ESRB) publishes an annual monitoring report on the shadow banking system in the EU.
• The ECB and other supervisory authorities contribute to this report.
• The ECB also regularly communicates on systemic risks through its semi-annual Financial Stability Review (FSR).
• The latest FSR highlights the importance of monitoring new and emerging risks from non-bank financial intermediation, especially liquidity strains in the investment fund sector.

3. Macroprudential Toolkit

• The ECB supports the development of a macroprudential toolkit for investment funds and other non-bank financial entities.
• This toolkit is intended to address risks arising from the growing non-bank sector and improve the coordinated response to systemic risks.
• The ECB also advocates for targeted changes to the governance and operational framework of the ESRB to enhance its efficiency and effectiveness.

4. Microprudential Efforts

• The ECB focuses on microprudential efforts to improve the resilience of individual banks.
• For 2019, key risk drivers identified include:
  • Geopolitical uncertainties
  • Non-performing loans (NPLs) and potential for future build-up
  • Cybercrime and IT disruptions
  • Potential repricing in financial markets
  • Low interest rate environment
  • Regulatory changes
  • Euro area economic and fiscal conditions
  • Cases of misconduct
  • Real estate market developments
  • Structural business challenges
  • Non-bank competition
  • Climate-related risks

5. Regulation of Investment Firms

• The ECB emphasizes the need for regulatory alignment between systemic banking institutions and large, complex, interconnected investment firms.
• These firms may pose systemic risks due to their bank-like activities and interlinkages with the shadow banking sector.

6. Step-in Risks

• The ECB highlights the importance of implementing the Basel Committee's guidelines on step-in risks.
• Step-in risks occur when banks provide financial support to other entities for reputational reasons.
• These risks are not captured by standard capital and liquidity requirements, so better visibility of interlinkages is essential.

Key Information

• The ECB's supervisory priorities are based on the main challenges facing banks.
• The ECB uses analytical tools and models to assess systemic risks on a quarterly basis.
• These models consider financial contagion, direct bilateral claims, and common exposures to illiquid assets.
• The ECB evaluates potential losses in the event of bank defaults or fire sales.
• The ECB advocates for a coordinated regulatory approach to address risks from both banking and non-banking sectors.

References

1. Risk-sensitive capital requirements for banks' equity investments in funds.
2. Alternative Investment Fund Managers Directive (AIFMD) and Money Market Fund Regulation (MMFR).
3. European Market Infrastructure Regulation (EMIR) and Securities Financing Transaction Regulation (SFTR).
4. ESRB annual monitoring report on the shadow banking system.
5. ECB's semi-annual Financial Stability Review (FSR).
6. ECB Banking Supervision: SSM Supervisory Priorities 2019.
7. Opinion of the ECB on the review of prudential treatment of investment firms (CON/2018/36).
8. Guidelines for the identification and management of step-in risk (Basel Committee, October 2017).