Report on Macroprudential policy issues arising from low interest rates by the ESRB

Published: 10 January 2017

The European Systemic Risk Board (ESRB) has recently published a report assessing the risks linked to low interest rates. The main risk identified relates to low profitability of credit institutions, which will put pressure on their overall resilience as well as push for further risk-taking activities with lower lending standards.

The report calls for specific policy measures in relation to non-bank lending entities, notably introducing activity-based regulation to complement entity-based regulation and that way reduce possibilities for regulatory arbitrage, addressing some areas that remain partly uncovered by existing regulations (leverage, liquidity, funding, interconnectedness of institutions) and enhancing stress testing to enable a system-wide assessment of the impact of liquidity shocks. If you have any questions in relation to this, please contact Marie-Adelaide de Nicolay.