Safe Bank

The paper analyses the level of risk in the European banking system in the fourth quarter of 2022. The analysis covers: capital adequacy, profitability, credit risk and asset quality, market risk, operational risk and liquidity and funding risk. The overall position of EU banks is good - they have strong capital and liquidity positions. Credit risk is at the relatively low level (although macroeconomic risks may increase it in future periods). Market risk is low. Operational risk remains fairly high, mainly due to IT risk. Some challenges may lie in securing stable funding, influenced by the recent bank failures in the US and Credit Suisse, which significantly increased uncertainty in financial markets and raised the cost of funding for banks. Currently, external factors are mainly the key risk factors for European banks.

The consequences of the financial crisis and in-depth analyses of financial market practices led, among other things, to the exposure of problems with the use of benchmark rates, particularly LIBOR. Criticism of the LIBOR calculation methodology inspired banking regulators to initiate a reform of this benchmark towards a move away from expert declarations by participating banks to a system based on actual transactions and liquid markets. The article outlines the origins of the LIBOR rate, its characteristics in selected countries and role in today's financial markets. It then shows the basic assumptions behind the reform of money market indices in the US, the UK, Switzerland, the euro area and Japan and compares them with the LIBOR rate.

A key conclusion of the analysis of the reforms of benchmark interest rate indices in the five currency areas is that there is no single common method for setting them and new risk-free (RFR)-type overnight indices that meet international IOSCO standards are now being used. The new RFRs allow for the calculation  of forward reference rates beyond the overnight period, by calculating them on the basis of historically available O/N (backward-looking) rates.

Recently, many initiatives have been observed around the world aimed at reforming the methods of calculating benchmark rates in order to make them dependent on real transactions to the extent possible. From 2018, similar actions were taken in Poland in order to fully adjust the interest rate benchmarks to the so-called BMR Regulations. Since 2018, work has also been carried out in parallel to create the risk-free rate. The aim of the article is to assess the reasons for the interest rate benchmark reform in Poland taking into account its purposefulness, as well as the stability and security of the functioning of the Polish economy (financial and real sphere). Such a reform is an expression of the Polish financial market's desire to meet the most demanding international standards. Undoubtedly, the actions taken in Poland should be considered justified and in line with international practice. However, for this reform to be implemented effectively, it is necessary to address the identified threats, e.g. ensuring a sufficient number of transactions on the basis of which the benchmark is calculated, providing reliable legal and operational grounds for the introduction of the new WIRON index and undertaking educational activities among Poles, including financial institutions employees, to ensure understanding of the activities carried out.

Abstract: In view of the high dynamics of changes in the current market environment, insurance undertakings should particularly strive for effective risk management, care for ensuring profitability of operations and have appropriate capital buffers. The aim of the article is to present one of the aspects of market risk, i.e. interest rate risk in insurance undertakings and the measurement of the above-mentioned risk according to the Solvency Capital Requirement (SCR) standard formula methodology. The article refers to the changes planned in this area as part of the revision of the Solvency II system. In this regard, it should be emphasized that the solvency requirements significantly improve the protection of consumer interests, but also require effective capital management from insurance undertaking, which may be the result of an analysis of the structure of investments or a change in the structure of products offered by insurance undertaking. As part of the analysis, the potential impact of the change of the WIBOR reference index to WIRON on the activities of insurance undertakings was also determined.

The aim of the article is to present the genesis and course of the liquidity crisis in March 2023, which affected American banks providing services to entities operating on the new technology market, and which then covered the Swiss bank Credit Suisse. The article presents the characteristics of banks and actions taken by safety net authorities, including new facilities worked out to deal with liquidity problem. With the continuous development of the economy and semergence of new, not yet fully explored areas of non-banking business activity, such as trading in digital assets, separate risks may arise, the materialization of which may unexpectedly penetrate the banking system, and through the run on deposits may create a threat to financial stability. Electronic means of communication and social media has become a strong catalyst for such events. Experience from March 2023 shows that ultimately the stabilization of the system is guaranteed by the central bank, and the fiscal backstop for extraordinary liquidity assistance should not be limited by unnecessary conditions.

The paper presents the results of a study of the relationship between the ESG indicator and selected indicators of financial stability of banks. The empirical analysis was carried out using the system estimator of the generalized method of moments (system GMM, SGMM). The panel study uses data for 64 banks from 20 European countries for the years 2010-2021, including 9 dependent variables and 18 independent variables. The results show the existence of a non-linear relationship between the ESG indicator and the examined variables, robust for all performed analyzes. The results are important from the regulatory point of view, as they identify the impact of the transition towards ESG on the stability of the surveyed banks, and thus on the stability of the banking sector throughout Europe, with particular emphasis on the CEE region, for which such studies have not been published so far.