Rashim Arora, FRM, SCR’s Post

"How to enhance the role of macroprudential authorities in monitoring interconnectedness, deploying macroprudential tools and ensuring cross-border coordination within the EU”? This was the main theme of the panel I have attended in Brussels, a whole day of technical workshop organised by the European Commission to contribute to the international debate on macroprudential policies for NBFI (Non-Bank Financial Intermediation).     This event follows the adoption in January 2024 of the Commission report https://lnkd.in/enpyNfEE on the macroprudential review for credit institutions, the systemic risks and vulnerabilities of NBFI, and the interconnectedness with the banking sector. With the aim to increase stakeholder engagement.   During this panel, I have made the points on the following: 1. There is a strong need to make clear distinction in the wide range of NBFIs. 2. Asset managers are different from banks on many aspects. Accordingly, banking-like macro prudential measures cannot be transposed as such to investment funds and their managers. 3. In addition, these are already highly regulated with investor protection central to this framework. These rules will be extended with additional requirements on liquidity management tools adopted through the revision of the AIFMD and UCITS directive. It is important to wait for effective implementation of these tools and their impact before envisaging any additional requirements in the macro prudential space. 4. A lot is also to be done on data with real sharing between policy makers and effective analysis to get better understanding. 5. The concept of lead supervision with the notion of "group” is going into the right direction. Effective functioning needs however to be further defined to ensure it is relevant to the asset management sector and that interaction between supervisors is well organised. Thanks for this interesting debate! -Tobias Buecheler, Head of Regulatory Affairs, Allianz -Rodrigo Buenaventura, President, Comisión Nacional del Mercado de Valores (Spain) -Mark Cassidy, Director, Financial Stability, Central Bank of Ireland -Steffen Kern, Chief Economist and Head of Risk Analysis, European Securities and Markets Authority -Francesco Mazzaferro, Head of ESRB Secretariat, European Systemic Risk Board -Klaus Wiedner, Director, DG FISMA, European Commission (moderator) More information about the "Targeted consultation assessing the adequacy of macroprudential poliocies for non-bank financial intermediation" https://lnkd.in/eynUwrrD

The recent #EUCommission's 'Report on the monitoring of climate-related risk to financial stability' is a neat summary of the main observed risks and vulnerabilities to the #European financial ecosystem (banks, non-banks) stemming both from transition and physical #climaterisks. It sums up the results of the supervisory stress tests and sensitivity analyses (by the #ECB and the #ESA's) and highlights the EU macro and micro-prudential policies being used to combat climate-related financial vulnerabilities. While #climatestresstests are useful as a learning exercise, the report mentions key challenges that undermine their results (and calls to use them as a floor estimate) : ❌ Historical relationships that demonstrate robust links between key economic and financial indicators and climate are missing or misleading ❌ Not all relevant asset exposures are captured (ex: trading book is excluded for bank climate stress tests) ❌ Calibrating an optimal time horizon. The time horizon of 1- 5 years for conventional stress tests is much too short to examine the full extent of transition risks from climate change. ❌ Not having a dynamic balance sheet (relative to the time horizon), reflecting changes in business models could be highly unrealistic. ❌ Not adequately capturing the multiple feedback loops between real economic activities and the financial sector that aggravate financial risks ❌ System-level vulnerabilities amplified by the interactions within the financial system, i.e. between banks and insurers or funds and banks in case of asset devaluation ❌ Losses on biodiversity and nature degradation may exacerbate climate-risks ❌ climate change could have a wider and compounding impact on the economy than currently modelled, i.e. indirect impact of climate change on food prices, migration, asset repricing, etc. Up to 95% of climate losses are uninsured in some euro-area countries, feeding into the sovereign-financial institutions risk amplification channels....It's important to start looking at contagion, second-round effects and system amplifiers given the inter-connectedness of the financial system. report here: https://lnkd.in/epjA9c3n

💡 Forvis Mazars October webinar series - 8, 15 and 17 October 👉 Unpacking EU climate-related guidelines and expectations 👉 IFRS 9 quantitative benchmarking and analysis of capital and liquidity requirements 👉 Unpacking EU regulatory expectations for IRRBB and CSRBB Our experts Xavier Larrieu, Christophe Bonnefoy, Eric Cloutier, Szymon Turkowski, CFA, PRM, Davis Maze Maze, Corentin Garreau, Michal Cotelnic and myself will share valuable insights on these hot topics for EU banks. #ForvisMazars #QuantitativeFinance #ClimateRisk Please join us by registering here:

The ECB has published its 2025 – 2027 supervisory priorities, calling on banks to focus on resilience to macro-financial risks and severe geopolitical shocks, tackling governance and climate-related shortcomings, and driving digital strategies to address emerging challenges. This includes sharpening risk management frameworks, aligning with supervisory standards on climate risk, and adapting to new technologies. Explore KPMG’s latest insights on the ECB’s supervisory priority areas for 2025 – 2027 and crucial recommendations for banks to consider: https://lnkd.in/duHDNQNm #SSM #ECB #BankingSupervision

Read our brief, follow-up report on managing #strandingrisks within banking portfolios. This report builds on our initial conceptual paper (https://shorturl.at/iSfVY) examining how banks think about transition risk mitigation, especially for assets-at-risk. This time we explain how #Europeansupervisors can leverage micro and macroprudential tools to embed stranding risk considerations within banks' transition risk frameworks. Read on more below.

The ECB has published its 2025 – 2027 supervisory priorities, calling on banks to focus on resilience to macro-financial risks and severe geopolitical shocks, tackling governance and climate-related shortcomings, and driving digital strategies to address emerging challenges. This includes sharpening risk management frameworks, aligning with supervisory standards on climate risk, and adapting to new technologies. Explore KPMG’s latest insights on the ECB’s supervisory priority areas for 2025 – 2027 and crucial recommendations for banks to consider: https://shorturl.at/Ilhp4 #SSM #ECB #BankingSupervision

The ECB has published its 2025-2027 supervisory priorities, calling on banks to focus on resilience to macro-financial risks and severe geopolitical shocks, tackling governance and climate-related shortcomings, and driving digital strategies to address emerging challenges. This includes sharpening risk management frameworks, aligning with supervisory standards on climate risk, and adapting to new technologies. Explore KPMG’s latest insights on the ECB’s supervisory priority areas for 2025-2027 and crucial recommendations for banks to consider: https://shorturl.at/Ilhp4 #SSM #ECB #BankingSupervision

The ECB has published its 2025 – 2027 supervisory priorities, calling on banks to focus on resilience to macro-financial risks and severe geopolitical shocks, tackling governance and climate-related shortcomings, and driving digital strategies to address emerging challenges. This includes sharpening risk management frameworks, aligning with supervisory standards on climate risk, and adapting to new technologies. Explore KPMG’s latest insights on the ECB’s supervisory priority areas for 2025 – 2027 and crucial recommendations for banks to consider: https://shorturl.at/Ilhp4 #SSM #ECB #BankingSupervision

💡 Forvis Mazars October webinar series - 8, 15 and 17 October 👉 Unpacking EU climate-related guidelines and expectations 👉 IFRS 9 quantitative benchmarking and analysis of capital and liquidity requirements 👉 Unpacking EU regulatory expectations for IRRBB and CSRBB Our experts Xavier Larrieu, Christophe Bonnefoy, Eric Cloutier, Szymon Turkowski, Aleksander Gorczanski, Davis Maze Maze, Corentin Garreau, Pierre-Alexandre Germont and myself will share valuable insights on these hot topics for EU banks. #ForvisMazars #QuantitativeFinance #ClimateRisk Please join us by registering here:

The Basel Committee published a discussion paper on the uses and design features of Climate Scenario Analysis (CSA) exercises. The discussion paper presents the outcome of analytical work conducted by the Task force on climate-related financial risks (TFCR). The discussion paper highlights that CSA may be used for multiple purposes and, while there are key features in all CSA, there are also usage-specific considerations that need to be taken into account. It was great working on this with Kevin Stiroh Theresa Löber Azusa Takeyama Ricardo José Nunes Pereira Moraes Olga Streltchenko Mario Morelli Caterina Ciancaglioni Rie Asakura jean-philippe Svoronos David Ignell, CFA among others. We hope this publication encourages banks to continue to invest in building their capabilities and advances the emergence of common practices for the practical application of CSA within risk management and supervision and further enhance the ability of banks and supervisors assess climate-related financial risks.