In their Autumn 2022 Joint Risk Report published on Monday 12 September, the European Financial Supervisory Authorities (ESAs -EBA, ESMA and EOIPA) advise competent national authorities, financial institutions and market participants to act in response to the deteriorating economic outlook.
The economic outlook is deteriorating as high inflation, and rising energy prices have increased vulnerabilities across the financial sectors.
The ESAs advise financial institutions and supervisory authorities to continue to prepare for a deterioration in asset quality in the financial sector. This needs to be monitored, particularly concerning property loans, assets that benefited from temporary support measures related to the Covid-19 pandemic and those that are particularly vulnerable to rising inflation and high energy and commodity prices.
The impact of further increases in policy rates and potential sudden increases in risk premia should also be closely monitored. The high market volatility resulting from the current economic and geopolitical situation could also lead to short-term concerns and disruptions for market infrastructures.
The ESAs also advise financial institutions and supervisory authorities to monitor inflation risks.
Finally, financial institutions and supervisory authorities should continue to manage the risks associated with the environment and digitalisation carefully. They should ensure that appropriate technologies and control frameworks are in place to deal with threats to information security and business continuity, including risks arising from increasingly sophisticated cyber attacks.
To read the joint ESAs report: https://aeur.eu/f/31m (Original version in French by Anne Damiani)