Facebook LinkedIn

ASF has published the first edition on 2020 of the Report on the stability of the nonbanking financial markets

Bucharest, 14th of May, 2020 – The Financial Supervisory Authority (ASF) has published the first edition on 2020 of the Report on the stability of the non-banking financial markets.  

The document presents the current status and continues the assessment of the risks and the potential vulnerabilities related to private pensions market, capital market and insurance market, considering the financial stability, as evidenced by the interpretation of the indicators reported by the entities supervised by ASF, up to March 31, 2020, as well as of the most recent data and information available, with regards to the evolution of the financial markets.

The vulnerabilities within the non-banking financial system have critically changed, due to the beginning of the sanitary crisis COVID-19. The uncertainty in the global economic evolution stands as a risk for all countries, and, particularly, for the approximately 550 entities supervised by ASF.  

In the current context, the major objective of the Financial Supervisory Authority for the year 2020 is represented by the mitigation of the impact of COVID-19 pandemic on the stability of the non-banking financial market and, implicitly, the protection of the nonbanking services and products consumers. 

Therefore, there have already been implemented various measures, among which: the reduction by 25% of all the charges due to ASF, governance requirements for the carry out of distance meetings, the possibility of the private pensions administrators to invest in government bonds a percentage higher than 70% of the assets value, the prorogation of various reporting terms, recommendations regarding the transparency of the issuers in relation to the stakeholders, the checking of business continuity plans, as well as the release of certain warnings concerning the cyber risk. 

From the perspective of the risks related to the three nonbanking financial markets, ASF analysis has revealed the following aspects:

  • The risks related to the stability and well-functioning of the pensions funds rest at low levels, due to the operation of the guarantees in defined contributions private pensions system type (at the level of the amount of the contributions), excluding from the start the risk of solvability that represents the major concern in case of pensions systems based on benefits definition (still predominant in Europe both as number and as assets); 
  • Given the current context defined by COVID-19 pandemic, for the market of the collective investment undertaking, the most relevant are the investment risks, the credit risk and the liquidity risk. Further on, they are generally managed adequately, at the level of the entire market, by diversification and compliance with the investment policies undertaken by the funds prospects. The reduced complexity of the market determines that these risks should not be amplified by using the financial leverage, the complex financial instruments (e.g. derivatives, structured, bonds resulting from securitization etc) not bearing a significant share in total assets. For the second component of the capital market, the local capital market, the market risk and the liquidity risk are the relevant ones.
  • The business risk for the insurance market is being determined by a potential decrease of the volume of gross subscribed premiums and an increase of the ransom of the policies in force.  Nevertheless, most insurance companies in Romania do not assess COVID-19 impact as being a major one over the risk profile (pursuant to the consultations carried out between ASF and the insurers) and over their financial position. Some insurers have performed additional stress tests and impact assessments and the impact was marginal.

The overall image resulting from the information and assessments presented in the report emphasizes the resilience of the nonbanking financial system, despite short-term shocks received given the context of the current crisis triggered by COVID – 19 pandemics.

The Report on the stability of the nonbanking financial markets can be consulted HERE.

*******

About ASF

ASF is the national authority set up in 2013 through OUG 93/2012 approved by Law 113/2013, for the regulation and supervision of insurance markets, private pensions and the capital market. ASF contributes to strengthening the integrated operating framework of the three sectors, which amounts over 10 million participants. More information can be found at www.asfromania.ro.