ESMA: EU securities markets seen still in high risk in Q2 2016

ESMA: EU securities markets seen still in high risk in Q2 2016

Do not invest more money than you can afford to lose.


The overall risk in the European securities markets in the second quarter of 2016 is expected to remain at high risk levels, the European Securities and Markets Authority (ESMA) said on Wednesday in a monthly Risk Dashboard report. In the first quarter risk levels remained high, with market and credit risks being at the highest level of very high.

This was reflected in major price swings in global equity markets, especially affecting financial institutions at the beginning of  2016, and high volatilities across market segments. Liquidity risk was at high levels amid sustained investors’ uncertainty, potentially leading to portfolio reallocation and related liquidity pressures.

The news is no surprise, since in mid-March the ESMA published an analysis for the June-December 2015 period, saying that the EU securities markets remain high with the market risk indicator remaining at very high with a stable outlook. “We continue to consider market risk very high, following materialization of the valuation risk. Our credit risk assessment remains unchanged at very high levels,” the report read at the time.

The ESMA identified as key risk sources in the securities markets in January-March the uncertain EU and global economic outlook, the commodities price dynamics, the global financial developments, the sluggish structural reforms and the low EU growth and inflation.

ESMA 1Although some market conditions such as sovereign liquidity, and CDS volumes were relatively stable, compared to the previous quarter, others stayed at the same low levels or even worsened, including commodities prices and equity valuation.


In the beginning of the first quarter, systemic stress increased, but in March it moderated. This eas mainly driven by bond and equity market dynamics and is reflected in movements of the composite systemic stress indicator (CISS).

The ESMA is an independent EU authority that directly supervises and safeguards the EU financial markets. It has established a single rulebook for EU financial markets and promotes the convergence of the regulatory bodies of EU countries. In addition, it also assesses risks to investors, markets and financial stability.

In the EU, a financial service license issued by any member state applies to the markets of all other EU countries. However, in case of misconduct entities are supervised and penalized by the authorities under which regulation they fall. EU forex brokers predominately choose to be regulated in Cyprus or the UK.

Source: ESMA

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