EUROPE: ESMA issues first risk report on EU securities markets

Friday February 15 2013

The European Securities and Markets Authority (ESMA) has published its first report on trends, risks and vulnerabilities in European Union (EU) securities markets and a risk dashboard for the 4th Quarter 2012. The report looks at the performance of securities markets in 2012, assessing both trends and risks in order to develop a comprehensive picture of systemic and macro-prudential risks in the EU that can serve both national and EU bodies in their risk assessments. By regularly looking into cross-border and cross-sector trends and risks both at the wholesale and retail level, ESMA’s report will contribute to promoting financial stability and enhancing consumer protection.

The report finds that EU securities markets and investment conditions in the EU improved in 2012, especially in the second half of the year; while systemic risk in EU securities markets decreased in the fourth quarter. The recovery can be linked to the ECB’s announcement of Outright Monetary Transactions (OMT) in early August, which alleviated pressure on euro area sovereign bond markets and reduced uncertainty among market participants. However, risk indicators remained at high levels: amongst other factors, this was due to the on-going sovereign debt and banking crisis, the realignment of risk assessments by investors, funding risk, potential long-term implications of low interest rates and obstacles to orderly market functioning.

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