Risk Dashboard June 2016
The European Systemic Risk Board (ESRB) published its quarterly risk dashboard.
The ESRB was set up in 2010 with a macro prudential mandate to oversee the EU financial system and to prevent and mitigate systemic risk. The ESRB monitors and assesses risks in banks, insurers, asset managers, shadow banks, financial market infrastructures and other financial institutions and markets. In those instances where it identifies a risk, the ESRB can issue warnings and recommendations. Recommendations can be addressed to the Union as a whole or to Member States, European supervisory authorities or national supervisory authorities.
The ESRB risk dashboard consists of a set of quantitative and qualitative indicators of systemic risk in the EU financial system. This provides an overview of the interlinkages and composite measures of systemic risk, macro risk, credit risk, funding and liquidity, market risk, profitability and solvency and structural risk.
The risk dashboard issued in June 2016 reports a decrease in systemic risk at the end of the first quarter of 2016, following an increase in the beginning of the year. This is measured by means of an index, the Composite indicator of systemic stress (CISS) which looks at financial stress in the financial intermediaries sector, money markets, equity markets, bond markets and foreign exchange markets. Moreover, the risk appetite of market participants is increasing, with the global risk aversion indicator turning negative in the first quarter of 2016. With respect to macro risk, the ESRB Risk Dashboard indicates continued recovery whereas levels of debt continue to remain a source of vulnerability in several countries, both for the public and non-financial corporate sectors. Bank lending to both households and the non-financial corporate sector also continued to recover gradually. The profitability of banks in the EU, as indicated by the average return on equity, has decreased for the third consecutive quarter in the beginning of 2016. The Risk Dashboard also reports continued growth in the size of the non-banking and non-insurance segments of the financial sector.
The full version of the ESRB Risk Dashboard may be accessed from the ESRB website https://www.esrb.europa.eu/home/html/index.en.html under Reports & Research.
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