Contagion and operational risks are considered very high, as are liquidity and market risks, the European Securities and Markets Authority (ESMA) found in its first Trends, Risks and Vulnerabilities (TRV) 2023 report, published on Thursday 9 February.
“The confluence of high risks across the ESMA remit and fragile market liquidity may test the resilience of the financial system against possible future shocks”, warned Verena Ross, Chairwoman of the Authority, in a statement.
Credit risk also remains high and is expected to increase, reflecting growing concerns about public and corporate debt. Risks remain very high in the securities markets and the outlook for asset management is now bleaker, while environmental risks remain high.
According to the report, the tightening of global financial conditions has weighed on economic activity, while inflation remains very high. Volatility in energy markets remained high despite a general decline in prices. In addition, structural vulnerabilities expose markets and market participants to the risk that shocks to markets are amplified by liquidity supply and demand imbalances.
To read the report: https://aeur.eu/f/5a0 (Original version in French by Anne Damiani)