The most influential European financial watchdogs—European Banking Authority (EBA), European Securities and Markets Authority (ESMA) and European Insurance and Occupational Pensions Authority (EIOPA)—stated that the risks of crypto market volatility are similar to those of the Gamestop and Archegos dramas.
Rising prices, rising volumes, rising risks
Today, Sept. 8, 2021, a new report was released by European Supervisory Authorities. In a document dubbed "Joint Committee Report on Risks and Vulnerabilities in the EU Financial System," the most dangerous threats to financial stability have been clarified.
1/3 #ESAs highlight risks in phasing out crisis measures and call on financial institutions to adapt to ? cyber risks.— ESMA - EU Securities Markets Regulator ?? (@ESMAComms) September 8, 2021
? financial interconnectedness
? materialisation of event-driven risks #GameStop
? ESAs joint #RiskAssessment report: https://t.co/C6zGSsX0Hb pic.twitter.com/Yxq7eg2t07
The regulators stressed that banking institutions should be prepared for the increasing volatility of all markets, possible deterioration of asset quality and the growing risk of credit losses.
Also, in terms of the retail investing segment, rising valuations for new asset types, massive price swings in crypto assets and event-driven risks (like the Gamestop mania) pose huge threats to the financial system.
As covered by U.Today previously, in January 2021, traders from Reddit pumped a number of penny stocks, including Gamestop (GME) and AMC Entertainment Holdings (AMC). Many high-profile asset management funds saw their positions liquidated.
Manias should be monitored closely: Regulator
Authorities should closely monitor the processes of "yield increases" in terms of their impact on both financial institutions and retail investors.
Also, the ESMA listed cyberattacks are among the most dangerous factors for financial stability on EU markets.
As U.Today previously reported, on March 17, 2021, the ESMA stated that cryptocurrencies remain unregulated and risky.