Changes from report parliamentary committee draft to plenary report

Added14. Warns of spillover effects to the financial sector; takes note in this regard of calls to mitigate systemic vulnerabilities; stresses, however, that any future developments should not undermine national fiscal responsibilities;

Added15. Calls on the Commission to enforce compliance with the EU’s economic governance framework and convergence with fiscal rules of the Stability and Growth Pact to ensure sound and sustainable public finances;

Added16. Recognises that structural reforms to strengthen the euro area’s financial and institutional architecture and reduction of market fragmentation could elevate the international role of the euro and potentially bolster financial and monetary stability; notes the ongoing discussions on the digital euro;

Added17. Highlights the potential instability stemming from highly leveraged financial institutions, while acknowledging they can play economic roles such as hedging, improving market liquidity, price discovery or risk sharing;

Added18. Stresses the importance of coordination among macroprudential supervisors through systemic risk analysis and oversight and alignment with microprudential supervision to ensure compatibility;

Added19. Acknowledges the potential risks to financial stability arising from more frequent manifestations of physical risks of climate and nature hazards and climate-related transition risks;

Banking sector stress and NBFI oversight

Change 13

Changed11.20. Emphasises the need forto fullensure the implementation of the Basel III framework to enhance the resilience and global competitiveness of EU banks; notes the continued lack of clarity concerning implementation of the Basel III standards in some major non-EU-country jurisdictions and the need for the Union’s banking system to remain competitive in an international context; emphasises the importance of maintaining the integrity of the Basel framework, underlining that financial stability itself can be seen as a competitive advantage;

Change 14

Changed12.21. Highlights the importance of keeping a sound macroprudential framework while ensuring simplification, legal clarification and burden reduction, particularly for bankssmaller withentities; ahighlights viewthat there is room for simplification and harmonisation in the design and application of macroprudential buffers; calls on the Commission and supervisory authorities to simplification,systematically legalapply clarificationthe principles of proportionality, cost-efficiency and burdendigital reduction;simplification where possible and without jeopardising financial stability;

Change 15

Removed13. Notes increased vulnerabilities in commercial real estate markets, compounded by rising rates and NBFI exposures;

Added22. Stresses that simplification of the post-2008 financial crisis reforms should be considered if there are clear and substantiated benefits to the real economy and if there are no risks to financial stability; takes note of the debate on the securitisation package;

Removed14. Calls for an assessment of financial institutions’ exposure to geopolitical risks, including indirect effects of sanctions and economic fragmentation;

Added23. Takes note of the ECB analysis on persistent vulnerabilities in commercial real estate markets, compounded by rising interest rates and NBFI exposures, which deserve close monitoring; calls, in this context, for the ESRB to closely monitor the role of NBFIs active in real estate markets and issue relevant recommendations; recognises, in addition, the high levels of household indebtedness;

Added24. Urges the ECB to assess financial institutions’ exposure to geopolitical risks, including indirect effects of sanctions, tariffs and economic fragmentation as part of the regular Supervisory Review and Evaluation Process in the context of strategic autonomy;

25. Acknowledges the growing systemic relevance of NBFIs, which comprise over 40 % of the EU financial sector’s assets; considers that such entities may contribute to financial stability risks when insufficiently regulated;

Change 16

Removed16. Calls for a thorough review of regulatory gaps, including in less regulated areas such as family offices and supply chain finance companies;

Added26. Notes the diversity of NBFIs’ business models and their important financing role; highlights that for many sectors, there is already European sectoral regulation in place, such as for hedge funds (Alternative Investment Fund Managers Directive2), money market funds (Money Market Funds Regulation3), insurance undertakings (Solvency II), investment firms (Investment Firms Directive4 and Regulation5) or pension funds (Directive on institutions for occupational retirement provision6); notes that the current framework, however, focuses primarily on investor protection and market integrity rather than on reducing systemic risks7; calls for a thorough review of regulatory gaps regarding NBFIs, including in less regulated areas such as family offices and supply chain finance companies;

Change 17

Changed17.27. CallsTakes note of the Commission’s 2023 report on the functioning of money market funds and recent amendments to the Money Market Funds framework; calls on the Commission to come forward with a reform of the Money Market Funds RegulationRegulation8 in line with international standards, regulatory progress made in other jurisdictions and the recommendations of the ESRB and ESMA;

Liquidity, margining and digital risks

Change 18

Changed18.28. Highlights the fact that procyclical margin calls during crises such as COVID-19 and the 2022 energy turmoil drove significant liquidity stress; notes the importance of liquidity preparedness, and generally of leverage and capital buffers in this regard;

29. Calls for tools to better capture the scale and speed of liquidity outflows resulting from margin calls during systemic events, especially for energy utilities and NBFIs;

Change 19

Changed20.30. Stresses the need for resilient clearing infrastructure, robust collateral frameworks and coordinated supervision of central counterparties;counterparties (CCPs); notes the Commission’s decision to extend the equivalence regime for UK-based CCPs and notes continuing concerns regarding European dependence on non-EU CCPs;

Change 20

Changed21.31. Supports greater transparency and macroprudential oversight in margining practices, including stress testing and scenario analysis;analysis, drawing on the FSB's recent work on liquidity preparedness for margin and collateral calls;

32. Expresses its concern regarding growing interlinkages between crypto-asset and decentralised finance markets and the traditional financial system; supports the FSB, the standard-setting bodies and the ESRB in their efforts to install a regulatory framework and harmonise its classification;

Change 21

Removed23. Flags the potentially systemic relevance of developments in the markets for crypto-assets;

Added33. Takes note of the FSB’s analysis that for the time being, financial stability risks arising from crypto-asset markets appear limited9; flags, however, the potentially systemic relevance of developments in the markets for crypto-assets; notes the largely speculative nature of crypto-assets and their important role in illicit transactions; urges the Commission and the ESRB to closely follow evolutions in this field;

Removed24. Encourages investments in cyber-resilience to protect financial infrastructure against external threats;

Added34. Welcomes the fact that the European Union has put in place a prudential framework for crypto-assets (MiCAR); stresses the importance of timely and consistent implementation and calls on the Commission to monitor remaining regulatory gaps;

RemovedEnhancing supervisory coordination, data capabilities and crisis preparedness

Added35. Highlights the fast growth of the stablecoin market, which remains so far largely restricted to the crypto ecosystem; notes that the regulatory landscape with regard to stablecoins in major non-EU-country jurisdictions is rapidly changing; urges the Commission to assess whether there are potential channels of contagion, such as in the case of multi-issuance;

Removed25. Supports a holistic, system-wide and activity-based supervisory approach to dealing with risks and vulnerabilities associated with different types of activity across the financial sector, such as lending, transactions and asset management;

Added36. Highlights that the Union has adopted measures to strengthen the digital resilience of financial entities, most notably through the Digital Operational Resilience Act10; encourages innovation in the field of digital finance and extensive investment in cyber-resilience to protect financial infrastructure against external threats; calls on the Commission and the ECB to map and address dependencies of the European financial system on non-EU digital service providers, single points of failure and the risk of hybrid attacks;

Removed26. Emphasises the role of the Single Resolution Mechanism (SRM) in ensuring robust crisis resolution and the ECB’s function as lender of last resort to safeguard liquidity and trust during crises;

Added37. Underlines that improvements in financial literacy can contribute to individual resilience, more stable financial markets, and increased participation in the CMU;

Removed27. Supports the ECB, the ESRB and the European supervisory authorities in safeguarding EU financial stability and addressing emerging global financial risks;

Added38. Notes that maintaining reasonable and reliable logistics and infrastructure for cash availability remains an essential element of financial stability and public trust;

AddedEnhancing supervisory coherence, data capabilities and crisis preparedness

Added39. Supports a holistic, more coherent system-wide and activity-based supervisory approach identifying and addressing risks and vulnerabilities associated with different types of activity across the financial sector, such as lending, transactions and asset management;

Added40. Emphasises the importance of a robust and credible crisis management framework; highlights the role of the Single Resolution Mechanism in ensuring the effective resolution of failing institutions and supports the ECB’s function as lender of last resort to safeguard liquidity and trust during crises; notes that a backstop for the Single Resolution Fund is still missing;

Added41. Supports the ECB, the ESRB, the European and national supervisory authorities and the Authority for Anti-Money Laundering and Countering the Financing of Terrorism in safeguarding EU financial stability and addressing emerging global financial risks, including coherent supervision by ESMA for systemic cross-border NBFIs;

42. Warns against regulatory arbitrage and underlines the need to address hidden leverage vulnerabilities revealed in past disruptions;

Change 22

Added43. Calls on the Commission to uphold a high level of ambition in implementing the FSB recommendations on leverage in the EU;

44. Underscores that authorities, both at national and EU level, should have qualitative, easily accessible data and have adequate resources to analyse the data;

Change 23

Changed30.45. Calls for enhanced transparency, data sharinganalytics amongcapabilities and streamlined data-sharing mechanisms between national and EU authorities, includingwith respect of data protection safeguards, in order to support a more comprehensive risk monitoring framework and system-wide stress-testing capabilities;capabilities, including on cyber-resilience, energy outages and the collateral framework; notes that some national authorities have already communicated their intention to carry out stress tests on interconnections between the banking sector and the NBFI sector;

Change 24

Changed31.46. Calls for strengthened cooperation with international financial institutions, including the IMFIMF, the Basel Committee on Banking Supervision, the BIS and the FSB, to tackle cross-border stability risks;

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47. Instructs its President to forward this resolution to the Council and the Commission.