Macroprudential measures for the non-banking financial sector

For the banking sector, a number of macroprudential measures are available to adequately address systemic risks. These macroprudential measures are mainly stipulated in the CRD IV package and harmonized at the European level. For the non-bank sector, however, there are currently very few harmonized macroprudential measures in place. Therefore, in the future, a stronger focus will be put on the non-banking sector, e.g. on insurances (in relation to IRFS 17 requirements and resolution) and investment funds.

The European Systemic Risk Board (ESRB) has already published several recommendations for the non-banking sector. These focus, for example, on systemic risks in the money market fund sector or on liquidity and leverage risks in the investment fund sector. In addition, a whole series of ESRB reports show that the non-bank sector will increasingly become the focus of macroprudential supervision and policy in the future. 

Moreover, during the COVID-19 pandemic, the ESRB issued several recommendations regarding the nonbank sector to strengthen financial stability in the euro area. These relate not only to monitoring the financial stability impact of debt moratoria, guarantees and other fiscal measures taken in response to the COVID-19 pandemic to protect the real economy, but also to restrictions on distributions by banks and insurance companies to preserve the capital resources of financial institutions in times of pandemic. The goal here is to strengthen the resilience of the financial sector and boost lending to the real economy. Other ESRB recommendations address liquidity risks arising from margin calls and from significant redemptions in certain investment funds due to the sharp decline in asset prices.

Cyber and climate risks

Cyber risks are also becoming increasingly important from a macroprudential perspective due to the constantly evolving cyber threat landscape as well as the increase in cyber incidents in Europe. Against this background, it is of particular importance to mitigate financial stability risks that may arise from a coordination failure of a cyber incident. In this context, the ESRB has developed an analytical framework to assess how cyber risks can become a systemic risk to the financial system and issued a recommendation to European supervisors to establish a pan-European cyber incident coordination framework.

Climate change also poses new challenges for regulators, supervisors and central banks, as environmental changes can pose significant risks both to individual financial market participants and to the financial market as a whole. While there are no concrete macroprudential measures, several initiatives are underway at the European and international levels to address climate-related risks to financial stability. The ESRB considers climate-related risks as an emerging risks to financial stability that need to be monitored, assessed and mitigated.

More information on this topic can also be found under the heading "Sustainability in the financial sector". 

• Additional ESRB reports on the banking and non-banking sector are available at the following link.