ESMA deteriorates risk outlook for EU securities market

ESMA deteriorates risk outlook for EU securities market

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The European Securities and Markets Authority (ESMA) has deteriorated its risk outlook for the EU securities market, following the result of the UK referendum on EU membership, the regulator said on Tuesday in a notice about its latest risk report. Market, liquidity and contagion risks may increase going forward, as political and event risks have intensified, and the macroeconomic environment may deteriorate.

The UK voted on 23 June to exit the European Union (Brexit), causing markets to experience deep volatility and the British pound (GBP) to fall sharply on the Euro (EUR) to its lowest in more than 30 years.

The outcome of the UK EU referendum had a significant impact in foreign exchange and equity markets, while EU financial market infrastructures proved resilient, according to the ESMA.

The overall risk levels remained at the highest level of “very high” in the January-June 2016 period. Market and credit risks also remain “very high”. Liquidity and contagion risk remain “high”. The deteriorating liquidity risk outlook reflects increased fund outflows following the referendum, leading to the suspension of redemptions in a number of open-ended funds holding UK commercial property.

ESMA risk outlook H1 2016

ESMA has reported earlier that it expected the overall risk in the EU securities markets to remain at very high levels in Q2 2016.

The regulator said it has forwarded its report results to the EU Commission, Parliament and Council.

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.

You can view the full ESMA report by clicking here.

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