The Joint Committee of the European Supervisory Authorities (ESAs) published its ESA report for the second half of 2017 on risks and vulnerabilities in the EU financial system which finds the following risks as potential sources of instability:

  • sudden repricing of risk premia as witnessed by the recent spike in volatility and associated market corrections 
  • uncertainties around the terms of Brexit
  • cyber-attacks
  • climate change and the transition to a lower carbon economy.

The ESA report repeats the warning to retail investors investing in virtual currencies.

The ESAs advise the following policy actions by European and national competent authorities as well as financial institutions: 

  • supervisory stress testing (repricing risk)
  • considering timely mitigation actions to prepare for Brexit including possible relocations and actions to address contract continuity risks (Brexit risk)
  • improving fragile IT systems, explore inherent risks to information security, connectivity and outsourcing (cyber risks)
  • considering sustainability risk in governance and risk management frameworks and develop responsible, sustainable financial products (climate change risk).