The ESAs report that the following factors give rise to risks to the stability of the EU financial sector:
On September 21st, the Joint Committee of the European Supervisory Authorities published its Autumn 2017 Report on risks and vulnerabilities in the European Union's financial system.
The Report signals risks to the stability of the European financial sector and highlights vulnerabilities stemming from the following set of factors:
These factors are consistent with the ESAs’ previous report of March 2017, but with an additional emphasis on challenges posed by political uncertainties and fragmentation threats.
Notably, given that the JC Report on Risks and Vulnerabilities of March 2017 considered as key risks to the EU financial system: (i) the persistent low profitability of financial institutions, (ii) risks around the adequate valuation of asset prices and price volatilities, (iii) increasing interconnectedness via direct and indirect exposure and (iv) information-technology-related risks in a fast-changing technological environment, this autumn’s Report largely reflects risk theme continuity, with an additional emphasis on challenges posed by political uncertainties and fragmentation threats. In fact, the ESAs’ approach coalesces with market participant sentiment, as the KPMG CEO Outlook 2017 indicates that 52% of UK CEOs place geo-political risk high on the list of current financial market concerns, “believ(ing) that the political landscape has a greater impact on their organisation than they have seen for many years”.