ESMA escalates risk fears after Brexit

ESMA’s updated risk assessment “intensified” to reflect the effects of the EU referendum.

The European Securities and Markets Authority (ESMA) announced it has updated its risk assessment, following the EU referendum last month.

The updated dashboard now reflects the severe market movements in equity, bond and currency markets across Europe, immediately following Brexit.

Market, liquidity and contagion remits have been changed to show an increased risk, “as political and event risks have intensified.” ESMA said.

Since the referendum, European equity prices fell 5%, as financial services company stocks plummeted 19%.

Sterling lost 10% against the euro, 13% to the US dollar and 17% vs the Japanese yen – with the euro also dropping 3% against the dollar.

Equity price volatility surged 235% on 24 June – the day Brexit was announced – and market turnover doubled.

ESMA said the economic uncertainty is likely to remain in future with “continued high market risk” leading to a further increase in market, liquidity and contagion risks.

“The market uncertainty triggered by the outcome of the referendum comes on top of an already fragile market environment,” the risk assessment concluded. 

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