ESAs warn of risks resulting from a fragile economic outlook

Summary:

The European Supervisory Authorities (EBA, EIOPA, and ESMA) have released their Autumn 2023 Joint Committee Report, highlighting the high economic uncertainty and financial stability risks in the EU financial system. The report warns national supervisors and financial market participants of the risks stemming from the ongoing uncertainty, inflation, and geopolitical tensions. To mitigate these risks, the ESAs recommend that financial institutions and supervisors closely monitor the impact of interest rate changes, asset quality, and inflation risk, and prioritize effective risk management and governance arrangements.

Key Takeaways:

High economic uncertainty and financial stability risks in the EU financial system
Ongoing inflation, geopolitical tensions, and interest rate changes contribute to the risk environment
ESAs recommend vigilance from all financial market participants
Financial institutions and supervisors should monitor asset quality, interest rate risks, and inflation risk
* Effective risk management and governance arrangements are essential for financial institutions to remain resilient