ECB :The current situation

[Politics.be]

The General Board of the European Systemic Risk Board (ESRB) held its sixth regular meeting today. The current situation Since the previous General Board meeting on 22 March 2012, markets have experienced new bouts of volatility and uncertainty. Notwithstanding mitigating factors, such as the provision of central bank liquidity and recapitalisation initiatives, systemic risk remains high.

Since April 2012 the borrowing costs of most national governments have risen
again, reflecting political uncertainties in a number of EU countries, as well as
market fears of a further aggravation of the sovereign crisis. Furthermore, growth
projections have worsened significantly since the beginning of the year, with
foreseeable negative repercussions for the loan portfolios and profits of banks
adding to the pressures on banks stemming from heightened uncertainty.
Moreover, many EU banks still face a need to reduce their leverage ratios and
reliance on wholesale funding to more sustainable levels.
The macro-prudential perspective
A further economic slowdown and an aggravation of the sovereign debt crisis could
endanger the resilience of an already stressed banking sector, disrupt the provision
of credit to the real economy and exacerbate an already high systemic risk.
The fundamental challenges remain: limiting contagion between Member States
across the EU; and promoting a macroeconomic strategy that supports growth and
fiscal consolidation.
Addressing these challenges requires measures to tackle vulnerabilities at their
source that lie beyond the remit of the ESRB and European System of Financial
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Supervision. Within this broader context, and from a macro-prudential point of view,
the ESRB encourages authorities to:
􀁸 Support credible mechanisms for the recapitalisation and restructuring of the
banking sector based on:
o increased consistent valuation and transparency about banks’ asset
quality;
o the imposition of strong conditionality on the relevant banks with regard
to the use of any publicly funded recapitalisation;
o the resolution of non-viable institutions.
􀁸 Continue with measures to build resilience among banks generally by:
o requiring capital levels accumulated so far to be maintained and
encouraging banks to assume their responsibilities in financing the real
economy;
o ensuring a focus on banks’ leverage as well as risk-sensitive capital
adequacy measures for improving resilience.
􀁸 Exchange information and, when necessary, coordinate actions at the ESRB
so as to ensure the efficiency of macro-prudential measures, including those
mentioned above.
While acknowledging the efforts made so far, the ESRB reiterates its call for all
national and European authorities to act to safeguard financial stability, and to do so
in unison, with speed and ambition. The ESRB stands ready to work together with
the relevant institutions to this end and, within its remit, to take all necessary steps
to contribute to safeguarding financial stability in the EU.
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Appointments
The General Board elected Mr Ewald Nowotny, Governor of the Oesterreichische
Nationalbank, as member of the Steering Committee to replace Mr Athanasios
Orphanides.
More information about the ESRB can be found at www.esrb.europa.eu.
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