ESRB Annual Report 2019

Summary:

Annual Report published in July 2020 by the European Systemic Risk Board (ESRB), covering the year from 1 April 2019 to 31 March 2020. This is the ninth ESRB Annual Report.

Further information:

While the inclusion period includes the early onset of the COVID-19 (coronavirus) pandemic, the economic and financial consequences of the COVID-19 crisis have continued to evolve rapidly in subsequent months. For that reason, this Annual Report includes – exceptionally – the ESRB’s assessment of risks up to June 2020, so as to reflect the new systemic risks that have emerged as the European economy has endured this extraordinary macroeconomic shock.

COVID-19 and the associated containment measures have given rise to an economic contraction that is unprecedented in peacetime, triggering exceptional macroeconomic uncertainty and precautionary behaviour. The ESRB has therefore progressively reviewed and updated its systemic risk assessment to account for the new risk landscape resulting from COVID-19.

Prior to the onset of the pandemic, the ESRB took several measures in 2019 to help address systemic risks resulting from real estate markets. To enhance the macroprudential framework beyond the banking sector, the ESRB provided input to the European Insurance and Occupational Pensions Authority’s ongoing review of the prudential framework for the insurance sector, as well as publishing a report which looked at ways of mitigating the procyclicality of margins and haircuts in derivatives markets and securities financing transactions. The Board also continued to act as a forum for the exchange of knowledge and best practices, organising several events aimed at fostering discussion on the subject of macroprudential policy. Finally, this report describes the various changes to the regulation establishing the ESRB2 that came into effect in 2019, including changes to the ESRB’s governance and the enhancement of its accountability framework.