The European Securities and Markets Authority (ESMA), the EU’s securities regulator, has published the second Trends, Risks and Vulnerabilities (TRV) report for 2019. The report identifies a deteriorating outlook for the asset management industry and continued very high market risk.
The European Securities and Markets Authority (ESMA), the EU’s securities regulator, has published the second Trends, Risks and Vulnerabilities (TRV) report for 2019. The report identifies a deteriorating outlook for the asset management industry and continued very high market risk. Recent trade tensions have triggered renewed volatility, and concerns over a no-deal Brexit remain key risk drivers for the second half of 2019.
Investors are facing very high market risk, as they navigate an environment of potentially inflated asset valuations, subdued economic growth prospects, and flattening yield curves. Changed monetary policy expectations may boost their risk appetite and reignite search-for-yield strategies, leaving investors vulnerable to volatility episodes and abrupt shifts in market sentiment.
Credit risk and liquidity risk remain high, with isolated events highlighting pockets of risk in the asset management industry. While the level of credit risk is stable, the deteriorating quality of outstanding corporate debt, the growth in leveraged loans and collateralised loan obligations should warrant the attention of public authorities. As a result, ESMA’s risk outlook for the asset management sector has deteriorated.
In this edition of the TRV, ESMA also looks in more detail at three vulnerabilities facing the financial markets:
This report is split into two parts with the statistical annex published as a separate document. Also accompanying the report is the third Risk Dashboard for 2019.
Next Finance , September 2019
See online : Trends, Risks, and Vulnerabilities (TRV) Report (No 2, 2019)
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