1. Bank regulation -

1.1 Prudential regulation -

The ESRB has published a speech by Christine Lagarde, President of the ECB and Chair of the ESRB, on its first general warning about financial stability risks that it published in September last year. The ESRB considers that the general warning has indeed proved impactful over the past year and that it has worked towards reducing policymakers’ “inaction bias” with regard to the implementation of macroprudential policy. The ESRB’s view remains that all relevant institutions will need to continue to take action to prevent the risks identified in its warning that have not yet materialised from doing so over the medium term. The ESRB expects that bank profitability will be adversely affected by the rise in funding costs, reflecting higher policy rates, and by much lower lending volumes...