In its latest Financial Stability Review published today, the ECB says "vulnerabilities in the corporate sector are increasing as the pandemic evolves". Bank valuations fell to record lows and bank funding costs increased, despite the enhanced resilience since the global financial crisis. ECB published results of the financial stability review in May 2020. All Rights Reserved. © Copyright 2020 Moody's Analytics, Inc. and/or its licensors and affiliates. According to the ECB Financial Stability Review, decisive policy responses to the Corona-virus pandemic have helped to prevent a seizing-up of the financial system. EBA published a report analyzing the impact of the unwind mechanism of the liquidity coverage ratio (LCR) for a sample of European banks over a three-year period, from the end of 2016 to the first quarter of 2020. Euro area banks, although now better capitalized, are likely to face significant losses and further pressure on profitability. Among other issues, the financial stability review assesses operations of the financial system so far during the COVID-19 pandemic. Sources: ECB, Thomson Reuters Eikon, BvD News, web searches for “credit lines” and ECB calculations. IASB started the post-implementation review of the classification and measurement requirements in IFRS 9 on financial instruments and added the review as a project to its work plan. The risk of corrections in euro area residential and commercial real estate markets has increased in the wake of the pandemic. Andreas Pfeil, EBA, will act as discussant. As news unfolded of the spread of the virus, global financial markets responded with sell-offs, volatility and a sharp increase in borrowing costs, which rivalled ‒ and at times exceeded ‒ those seen during the 2008 global financial crisis. FSB published a letter from its Chair Randal K. Quarles, along with two reports exploring various aspects of the market turmoil resulting from the COVID-19 event. Since February 2020, the Corona-virus pandemic has disrupted social and economic life across the euro area and the globe, to an extent unseen in most of our lifetimes and unexpected six months ago. The Financial Stability Review provides an overview of potential risks to financial stability in the euro area. Banks should benefit from the action of prudential authorities across the euro area to ease capital requirements and grant more operational flexibility to maintain the flow of credit to the economy. Banks continue to face the challenges of operating in business continuity mode, including the associated increase in cyber risk. However, even as infection rates fall in many countries, the impact on the economy and markets has unearthed and increased existing vulnerabilities for euro area financial stability, according to the May 2020 Financial Stability Review (FSR) of the European Central Bank (ECB). Financial Stability Review , May 2020 – Overview 4 Overview Medium-term risks to financial stability have increased markedly Wide-ranging policy measures, including monetary, fiscal and prudential policies, helped prevent a seizing-up of the financial system and support the recovery. FSB published a report that examines progress in implementing policy measures to enhance the resolvability of systemically important financial institutions. It also sets out policy considerations for both the near term and the medium term. Since February 2020, the coronavirus (COVID-19) pandemic has disrupted social and economic life across the euro area and the globe, to an extent unseen in most of our lifetimes and unexpected six months ago. ECB published results of the financial stability review in May 2020. The assessment shows that credit rating downgrades of banks might increase their market funding costs, limit their ability to achieve minimum requirement for own funds and eligible liabilities, or MREL, targets, and weigh on future profitability. This issue of the review contains two special features: one feature analyzes trends in real estate lending standards and derives implications for financial stability while the other feature discusses derivatives-related liquidity risk facing investment funds. It does so to promote awareness of these systemic risks among policymakers, the financial industry and the public at large, with the ultimate goal of promoting financial stability. HKMA issued a letter to consult the banking industry on a full set of proposed draft amendments to the Banking (Capital) Rules for implementing the Basel standard on capital requirements for banks’ equity investments in funds in Hong Kong.