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The European Securities and Markets Authority (ESMA) has published a report on the EU alternative investment funds (AIFs) market, highlighting the risks posed by leveraged AIFs and real estate funds.
Real Estate (RE) Funds: Facing challenges due to declining transactions and liquidity mismatches.
Sector Decline: -3% in 2022, driven by valuation losses in bonds and equities
Regulatory Measures: Authorities addressing identified risks to ensure financial stability
ESMA is developing guidelines to clarify MiCA rules, focusing on reverse solicitation and classification of crypto-assets under MiFID II.
- Tokenized Financial Instruments Recognition
- Crypto-Assets as Transferable Securities
- Crypto-Assets as Money Market Instrumen
- Guidance on NFT Classification
FinTech increases risk-taking by financial institutions, varying based on bank strength, industry characteristics, and country-specific conditions.
- Risk management and competition regulations in the financial sector.
- Robust risk management frameworks, partnerships with FinTech firms, and regulations to manage competition.
- Increased risk-taking by banks and NBFCs due to FinTech competition, potentially leading to financial sector instability.
AI's impact in financial services and credit risk management is significant, driven by advances in predictive analytics and machine learning, as reported by UK Finance.
- Anticipated surge in AI utilization across the financial services sector in 2024.
- Exponential growth in demand for oversight and validation processes expected.
- AI's evolution expected to transform risk management in the financial services industry.