On 31 March 2022, the European Systemic Risk Board (ESRB) published a concept note ‘Review of the EU Macroprudential Framework for the Banking Sector’.

In the concept note the ESRB proposes enhancements to the existing EU macroprudential framework for the banking sector for the next decade. Table 1 in the concept note provides an overview of the ESRB’s policy proposals and refers to the respective main sources of systemic risk in the EU that need to be addressed. The concept note also:

  • Outlines the main systemic risks in the EU banking sector over the next decade, showing why there is a need to enhance and adjust the macroprudential framework.
  • Focuses on two instruments which have been used frequently across the EU: capital buffers and risk weights. Based on the experience with these instruments over the last decade, specific areas are identified where the macroprudential framework needs to be enhanced.
  • Provides proposals to broaden the macroprudential framework in the EU to better mitigate systemic risks which have arisen in the last decade. These include: enshrining the availability of borrower-based measures in EU law, taking a more system-wide perspective on liquidity risks and taking a holistic approach to reviewing the macroprudential framework in light of other institutions in the financial sector providing bank-like services.
  • Provides proposals to address new hybrid risks which are threatening the stability of the banking sector and are expected to increase further, such as systemic cyber risks and climate-related financial risks.
  • Provides proposals to facilitate cooperation and coordination among authorities at all levels in a broader regulatory context.