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EU markets improve but systemic risk remains
23 September 2013
Esma finds mixed outlook in quarterly trends report
The European Securities and Markets Authority's (Esma) Trends, Risks, Vulnerabilities (TRV) Report for Q2 has found European markets still face severe risks, despite improving conditions.
The report examines market performance in the first half of 2013, looking at trends and risks to fully understand the systemic and macro-prudential risks facing the EU.
It found while conditions have improved since the end of 2012, systemic risks remain at an elevated level, with concerns over funding sources, low interest rates and recent market fluctuations resulting in increased market risk.
Steven Maijoor, Esma chair, said: “While the easing of stress in financial markets is a positive sign, systemic risks in the EU remain high and uncertainty in the international market environment has risen.
Valuations in securities markets, volatility in fund flows, and continuity issues around financial benchmarks remain a matter of concern. Faced with these issues regulators and market participants should remain vigilant.
“Esma’s work on identifying those risks facing Europe’s securities markets is an important component in the European System of Financial Supervision’s efforts to foster recovery in its markets and promote financial stability.”
The report found that although securities markets conditions have shown a moderate improvement, increased sovereign borrowing costs were a drag on markets.
It also found liquidity risk remained high, despite policy action from the EU, while concerns about the valuation of equity and bond markets and the risk of contagion between market segments were a worry for investors.