Bank of Italy has published seven new Occasional Papers (nn. 729-735):
- No. 735 – Do house prices reflect climate change adaptation? Evidence from the city on the water
- No. 734 – PUMA cooperation between the Bank of Italy and the intermediaries for the production of statistical, supervisory and resolution reporting
- No. 733 – Price rigidities, input costs, and inflation expectations: understanding firms’ pricing decisions from micro data
- No. 732 – Data and methods to evaluate climate-related and environmental risks in Italy
- No. 731 – Easier said than done: why Italians pay in cash while preferring cashless
- No. 730 – Buy now pay later: market overview and outlook
- No. 729 – The impact of the war in Ukraine on energy prices: consequences for firms’ financial performance
(Only in Italian)
The ESRB expresses its concern about certain amendments to the Commission’s draft proposals, which were deemed to be minimal changes compared to what is needed to help prevent or mitigate risks to financial stability and protect European citizens.
Of particular concern is the role of certain powers to support national authorities in identifying and mitigating liquidity risks that are insufficient, watered-down or non-existent.
On this point, the ESRB continues, recent market developments in the UK should serve as a wake-up call, as
- liquidity risk is pervasive. Even financial institutions that (i) are not committed to liquidity transformation as part of their business model and (ii) have long-term liabilities and pursue liability-oriented investment strategies may be exposed to liquidity risk. Widespread surrenders of life insurance contracts may be another source of liquidity risk.
- Prevention is more efficient and less costly than crisis management. Liquidity risk can materialise quickly and threaten financial stability with negative consequences for the real economy. It is therefore crucial that supervisory authorities can act preventively. When it comes to liquidity, powers that only apply in ‘exceptional situations’ risk being ‘too little, too late’.
Therefore, liquidity risk provisions should be carefully considered as part of the ongoing Solvency II review.
It is crucial to enable supervisors to identify insurance companies that may have a vulnerable liquidity profile and, if necessary, to intervene before the liquidity risk materialises.
The letter, including the suggestions in the annex, is consistent with the proposals made by the ESRB in its response to the Commission services’ consultation on the Solvency II review.
In conclusion, the ESRB emphasises that the focus on liquidity risk should in no way be interpreted at the expense of solvency.
It would be detrimental to financial stability if capital requirements were significantly lowered.
Furthermore, the existence of a European regulatory framework for recovery and resolution in the insurance sector is necessary to safeguard financial stability and policyholder protection in a very important part of the financial sector.
In the report, ESMA provides a picture of the European business landscape in 2021, including the net effect of Brexit and the process of relocation from the UK to the European Union.
ESMA has published a Final Report on amending the regulatory technical standards (RTS) on the Settlement discipline, to simplify the cash penalties process by putting the Central securities depository (CSDs) in charge of collection and distribution, including for CCP-cleared transactions.
The proposed amendment would remove the CCP-run separate process established in Article 19 of the RTS for the collection and distribution of cash penalties for settlement fails on cleared transactions. It would also put the CSDs in charge of the entire process of collecting and distributing penalties according to Articles 16, 17 and 18 of the same regulation, establishing a single harmonised process for all transactions (both cleared and uncleared).
