(1)

The outbreak of the coronavirus (COVID-19) pandemic and the subsequent enforcement of containment measures represent a severe shock to European economies. Debt moratoria, and public guarantee schemes and other measures of a fiscal nature are being put in place by Member States to protect non-financial corporations and households from the effects of the pandemic. While these measures target the non-financial sector, they nevertheless have implications for financial stability.

(2)

The effectiveness of these measures in terms of preserving financial stability will depend on their size and design features. These need to be carefully monitored at the national level so that adjustments can be made in good time, using the flexibility that is provided by the Union’s temporary State aid framework to support the economy in the context of the COVID-19 outbreak (3).

(3)

Given the high degree of integration of Member State economies, the various measures implemented by one Member State will have an impact on other Member States through positive or negative spillovers. These spillovers should be taken into account in a comprehensive assessment of the Union-wide financial stability implications of the measures taken by national authorities to protect the real economy in response to the COVID-19 pandemic.

(4)

Ensuring the effectiveness of national measures in securing financial stability requires close monitoring and cooperation between national macroprudential authorities and national fiscal and supervisory authorities, in line with their respective competences. On 14 May 2020 the European Systemic Risk Board (ESRB) addressed a letter to the national fiscal authorities of the Union encouraging an intensified dialogue from an early stage between the relevant authorities at national level (4).

(5)

The ESRB is responsible for the macroprudential oversight of the financial system within the Union and contributes to the mitigation and prevention of systemic risks. For this purpose, the ESRB intends to monitor and regularly discuss the Union-wide financial stability implications of the national measures introduced to protect the real economy in response to the COVID-19 pandemic. The ESRB intends to focus particularly on cross-border and cross-sectoral implications. This monitoring should continue only as long as there is a potential impact of these measures on financial stability in the Union.

(6)

Monitoring the Union-wide financial stability implications of such measures will require the reporting of relevant national information by the national macroprudential authorities. Requests by the ESRB for relevant information from those authorities should take into consideration the principle of proportionality and avoid duplication of reporting requirements by focusing on information that is not available from other sources.

(7)

The ESRB intends to complement and enhance the monitoring and assessment that is being carried out at the national level. The aim of the ESRB is to foster an exchange of experiences and the early identification of cross-border and cross-sectoral issues. At a later stage, it will also take a coordinated view of the approaches to phasing-out the measures. For these purposes, the ESRB intends to establish a feedback channel to allow the sharing of information across reporting authorities.

(8)

This Recommendation does not create new reporting requirements for the financial services industry. To obtain information, the ESRB should rely on reporting by national macroprudential authorities of information that has been collected for the purpose of their national monitoring, which in turn would rely on reporting by national fiscal authorities and government agencies engaged in the delivery of the measures. The ESRB should also rely on data collected by its member institutions, in particular the European Banking Authority, the European Insurance and Occupational Pensions Authority, the European Central Bank and the Single Resolution Board.

(9)

This Recommendation is without prejudice to the monetary policy mandates of the central banks in the Union.

(10)

Recommendations of the ESRB are published after the addressees have been informed, and after the General Board has informed the Council of the European Union of its intention to issue a recommendation and having provided the Council with an opportunity to react,

(a)

Design features and uptake of measures: in particular the volume; types of financial support (such as debt moratoria, loan guarantees, subsidised loans, or equity participations); beneficiaries and eligibility conditions; duration; and information on the use of the measure (e.g. volume and number of applications received and accepted).

(b)

Implications for financial stability: in particular the flow of credit to the real economy; the liquidity, solvency and indebtedness of the non-financial sector; and the financial soundness of the financial institutions, including observed and expected trends in non-performing loans and the ability to meet liquidity and capital requirements.

(a)

‘national macroprudential authority’ means a national authority with the objectives, arrangements, tasks, powers, instruments, accountability requirements and other characteristics set out in Recommendation ESRB/2011/3 of the European Systemic Risk Board (5) or, where such authority has not been set up, a designated authority in accordance with Chapter 4 of Title VII of Directive 2013/36/EU of the European Parliament and of the Council (6) or Article 458(1) of Regulation (EU) No 575/2013 of the European Parliament and of the Council (7).

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