ESAs report on risks and vulnerabilities for EU financial system

The Joint Committee of the European Supervisory Authorities, comprising the European Banking Authority (EBA), ESMA and the European Insurance and Occupational Pensions Authority (EIOPA), has published its spring 2017 report on risks and vulnerabilities in the EU’s financial system.

The report focuses on continued challenges highlighted in the August 2016 report, but also highlights increasing challenges posed by rapid advances in information and communication technologies (ICT), including cyber risks. The main risks affecting the financial system are considered to be:

• low profitability of financial institutions;
• valuation risks around search for yield and repriing of risk premia;
• interconnectedness within the financial system; and
• cyber risks and IT-related operational risks.

The report also highlights the vulnerability of the European financial sector due to political and economic uncertainty.