04 July 2014

The AMF publishes its 2014 mapping of risk and trends in the financial markets and savings

The trend in the market structure of a reduction in the number of securities traded on exchanges (regulated markets and multilateral trading facilities combined) continued in 2013. Liquidity fragmentation among the various trading venues remains high. Trading on systems that do not meet transparency requirements (dark pools), while still modest, continues to make headway with the risk of damaging the price formation process. Practices on the derivative markets are changing to mirror the increased reliance on underlying assets (collateralisation) out of concerns to reduce risk and in response to implementation of a framework to strengthen transaction transparency and security (Dodd-Frank Act in the United States and EMIR in Europe).

Given these trends, the 2014 mapping highlights as the most significant risks likely to weigh on financial stability, market organisation and financing the economy:

• financial tensions fuelled by a lack of coordination in fiscal consolidation the gradual exit from unconventional monetary policies and possible adjustments required by implementation of the Single Supervisory Mechanism for banks in Europe; 
• a faster-than-anticipated increase in long-term interest rates or risk premiums, which may make vulnerable parties that are in debt or holding assets whose prices could undergo a sudden correction;
• financial institutions facing an economic environment that remains fragile, stronger prudential requirements and/or whose lack of coordination favours regulatory arbitrage, with consequences for financing the economy;
• an increased need for high-quality collateral, with a risk of reuse and poorly managed transformation, especially given a supply of underlying assets that may be limited locally in the event of market stress.

Full press release

Full report

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