EBA launches discussion on further enhancing supervisory powers of competent authorities

26 June 2020

The European Banking Authority (EBA) published today a discussion paper exploring ways on how to enhance the Bank Recovery and Resolution Directive (BRRD) framework on early intervention measures. The objective is to further enhance crisis management tools available for competent authorities in addition to well-established and widely used supervisory powers laid down in the Capital Requirements Directive (CRD) and in the Single Supervisory Mechanism Regulation (SSMR).   

The BRRD introduced early intervention measures (EIMs) to expand the existing set of powers available to supervisors towards institutions in difficulties. While monitoring the application of EIMs in 2015-2018, the EBA observed a limited use of EIMs across the European Union (EU) during that period. Instead of EIMs, the competent authorities often preferred to apply other pre-BRRD supervisory powers available to them.

The EBA investigated the reasons for these supervisory practices. While recognising that EIMs could be successfully implemented under the existing regulatory framework, the EBA identified some challenges in their application, and is now putting for discussion potential solutions aimed at enhancing the framework.

Consultation process

In order to broaden the supervisory discussion on EIMs conducted among the EU competent authorities, the EBA also invites views from external stakeholders. In particular, the EBA welcomes input from legal professionals, academics and supervisors from outside of the EU.

Comments to this consultation can be sent to the EBA by clicking on the "send your comments" button on the consultation page. Please note that the deadline for the submission of comments is 25 September 2020. All contributions received will be published following the end of the consultation, unless requested otherwise.

Legal basis

Early intervention measures are available to competent authorities pursuant to Articles 27-29 of Directive 2014/59/EU (BRRD). Other supervisory powers include for instance supervisory measures pursuant to Article 104 and 105 of Directive 2013/36/EU (CRD) and Article 16 of Regulation 1024/2013 (SSM-R).

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EBA makes changes to its Q&A tool

17 June 2020

The European Banking Authority (EBA) has expanded the scope of its Questions and Answers (Q&A) process and tool to enable the submission of questions on the Anti-Money-Laundering Directive and Consumer Protection legislation under the EBA’s scope. Going forward, submitted questions, subject to meeting the prescribed criteria, will be published on the EBA website while their answers are being prepared. The EBA has also made some changes to expand and update its online Interactive Single Rulebook.

Legal basis and background

The changes reflect the new Article 16b) of the EBA founding Regulation on Q&A.

The Q&A tool is an important convergence tool that promotes common supervisory approaches and practices by giving guidance on the application of Union legal acts within the scope of the EBA. 
 

EBA calls for input to understand impact of de-risking on financial institutions and customers

15 June 2020

The European Banking Authority (EBA) issued today a call for input to understand the scale and drivers of ‘de-risking‘ at EU level and its impact on customers. This call, which forms part of the EBA’s work to lead, coordinate and monitor the EU financial sector’s AML/CFT efforts, aims primarily to understand why financial institutions choose to de-risk instead of managing the risks associated with certain sectors or customers. This call for input is of interest to stakeholders across the financial sector and its users, as the EBA wants to hear from all groups affected by de-risking. The call for input runs until 11 September 2020.

To manage customers‘ profiles associated with higher money laundering and terrorist financing (ML/TF) risks, financial institutions may decide not to service a particular customer or category of customers. This is referred to as ‘de-risking‘, and affects both financial institutions and its users. De-risking affects particular sectors and customers across the EU, such as banks engaged in correspondent banking relationships, payment institutions and NGOs.

Given the variety of institutions and customers affected by de-risking and the different degree at which Member States are exposed to this phenomenon, the EBA is reaching out to stakeholders across the financial sector and its users to hear from their experiences.

Responses to this call will inform the EBA 2021 Opinion on ML/TF risks and potentially other policy outputs. 

Process

The contributions to the call for input can be submitted by clicking on the "send your comments" button on the EBA's dedicated webpage. All contributions received will be published, unless requested otherwise. The call for input is open until 6 p.m. CET on 11 September 2020.

Legal Basis 

The EBA is mandated under Art. 6(5) of Directive (EU) 2015/849  to develop a biennial Opinion on the risks of money laundering and terrorist financing affecting the Union's financial sector. The EBA also has a legal mandate to lead, coordinate and monitor the financial sector’s fight against ML/TF across the EU. [For more information, check the factsheet]

EBA proposes enhanced standardisation of disclosure requirements laid down in the Non-Financial Reporting Directive

11 June 2020

The European Banking Authority (EBA) submitted today its response to the European Commission’s public consultation on the review of the Non-Financial Reporting Directive (NFRD). The EBA welcomes this consultation, and agrees with the need to revise the NFRD so as to meet the demand for relevant, reliable and comparable company disclosure on non-financial matters. The EBA also highlights the need to increase standardisation by setting out mandatory rather than voluntary requirements, so as to ensure comparable disclosures. Finally, the EBA supports this review as a good opportunity to expand the scope of companies covered by the NFRD, in a proportionate way.

The European Securities and Markets Authority (ESMA) and the European Insurance and Occupational Pensions Authority (EIOPA) have also provided responses to the consultation. Along with their responses, the three European Supervisory Authorities (ESAs) have submitted a joint letter from their Chairs, highlighting certain key messages, which are of particular importance for the future of Europe’s non-financial reporting regime.
 

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EBA issues revised list of validation rules

10 June 2020

The European Banking Authority (EBA) issued today a revised list of validation rules in its Implementing Technical Standards (ITS) on supervisory reporting, highlighting those which have been deactivated either for incorrectness or for triggering IT problems. Competent Authorities throughout the EU are informed that data submitted in accordance with these ITS should not be formally validated against the set of deactivated rules.

EBA launches consultation on technical standards specifying the prudential treatment of software assets

09 June 2020

The European Banking Authority (EBA) launched today a consultation on draft Regulatory Technical Standards (RTS) specifying the prudential treatment of software assets. As the banking sector is moving towards a more digital environment, the aim of these draft RTS is to achieve an appropriate balance between the need to maintain a certain margin of conservatism in the prudential treatment of software assets and their relevance from a business and an economic perspective. The consultation runs until 09 July 2020.

As part of the Risk Reduction Measures (RRM) package adopted by the European legislators, the Capital Requirements Regulation (CRR) has been amended and introduced, among other things,  an exemption from the deduction of intangible assets from Common Equity Tier 1 (CET1) items for prudently valued software assets, the value of which is not negatively affected by resolution, insolvency or liquidation of the institution. In addition, the EBA has been mandated to develop draft RTS to specify how this provision shall be applied.

These draft RTS specify the methodology to be adopted by institutions for the purpose of the prudential treatment of software assets. In particular, these draft RTS introduce a prudential treatment based on their amortisation, which is deemed to strike an appropriate balance between the need to maintain a certain margin of conservatism in the treatment of software assets as intangibles, and their relevance from a business and an economic perspective. The proposed approach is expected to be easy to implement and applicable to all institutions in a standardised manner.  

The EBA will closely monitor the evolution of the investments in software assets going forward, including the link between the proposed prudential treatment and the need for EU institutions to make some necessary investments in IT developments in areas like cyber risk or digitalisation.

Consultation process

Comments to this consultation can be sent to the EBA by clicking on the "send your comments" button on the consultation page. Please note that the deadline for the submission of comments is 09 July 2020. All contributions received will be published following the end of the consultation, unless requested otherwise.

A public hearing will take place on 23 June 2020 from 14.30 to 17.00 CET. 

Legal basis 

These draft RTS have been developed according to Article 36(4) of Regulation (EU) No 575/2013 (Capital Requirements Regulation – CRR), which mandates the EBA to “specify the application of the deductions referred to in point (b) of paragraph 1 of Article 36, including the materiality of negative effects on the value which do not cause prudential concerns”. 

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ESAs announce public hearing on ESG disclosures

09 June 2020

The three European Supervisory Authorities (EBA, EIOPA and ESMA - ESAs) will organise a public hearing on proposed environmental, social and governance (ESG) disclosure standards for financial market participants, advisers and products.

The aim of the public hearing is to explain and discuss the content of the consultation paper published on 23 April, on the draft RTS under the Regulation on sustainability‐related disclosures in the financial services sector. The hearing will be of interest to any stakeholder affected by the Regulation on sustainability-related disclosures in the financial services sector, such as financial market participants, financial advisers, including their representative associations, environmental associations, investor representatives or consumer bodies, and consultants or academics and representatives from the EU and national institutions

To attend the hearing, please register by 25 June using the form available on the public hearing page.  Registered participants will receive information on how to join the hearing online or by dial-in after the close of the registration period.
 

EBA launches consultation on technical standards on capital requirements of non-modellable risks under the FRTB

04 June 2020

The European Banking Authority (EBA) launched a consultation on draft Regulatory Technical Standards (RTS) on the capitalisation of non-modellable risk factors (NMRFs) for institutions using the new Internal Model Approach (IMA) under the FRTB (Fundamental Review of the Trading Book). These draft RTS are one of the key deliverables included in the roadmap for the new market and counterparty credit risk approaches published on 27 June 2019. The consultation runs until 4 September 2020.

The draft RTS specify all technical details that are essential for determining the own funds requirements related to non-modellable risks. In particular, they set how institutions are to determine the stress scenario risk measure corresponding to a non-modellable risk factor.

Given that the capitalisation of non-modellable risk factors is a key component of the own funds requirement for market risk, the EBA also launched a data collection exercise in June 2019 to fine-tune and calibrate the methodologies that were proposed in the Discussion Paper on ‘Implementation in the EU of the revised market risk and counterparty credit risk frameworks’ published on 18 December 2017. Thus, the proposed draft RTS are the result of an iterative process where the views of market participants have been sought several times.  

Consultation process

Comments to this consultation can be sent to the EBA by clicking on the "send your comments" button on the consultation page. Please note that the deadline for the submission of comments is 4 September 2020.

A public hearing will then take place via conference call on 3 July 2020 from 16:30 CET. The dial in details will be communicated in due course.

All contributions received will be published following the close of the consultation, unless requested otherwise.

Legal basis

These draft RTS have been developed according to Article 325bk(3) of REGULATION (EU) 2019/876 of the European Parliament and of the Council of 20 May 2019 amending Regulation (EU) No 575/2013. 

Article 325 bk(3) of that Regulation requires the EBA to develop draft RTS to specify (a) how institutions are to develop extreme scenarios of future shock applicable to non-modellable risk factors; (b) a regulatory extreme scenario which institutions may use when they are unable to develop an extreme scenario of future shock in accordance with point (a) or which competent authorities may require that institution apply; (c) the circumstances under which institutions may calculate a stress scenario risk measure for more than one non-modellable risk factor; (d) how institutions are to aggregate the stress scenario risk measures of all non-modellable risk factors.

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EBA announces timing for publication of its 2020 Spring EU-wide transparency exercise

02 June 2020

The European Banking Authority (EBA) announced today that its 2020 Spring EU-wide transparency exercise with bank by bank data will be released on Monday 8 June at 18:00 CEST. 

EBA consults on draft amended technical standards on own funds and eligible liabilities

29 May 2020

The European Banking Authority (EBA) published today a Consultation Paper on the draft amended Regulatory Technical Standards (RTS) on own funds and eligible liabilities. Since their entry into force, the RTS on own funds have significantly enhanced regulatory harmonisation of prudential rules and contributed to strengthening the quality of regulatory capital. With the revised Capital Requirements Regulation (CRR) introducing new criteria and requirements for eligible liabilities, these amended RTS capture several aspects of eligible liabilities as well as the changes to the own funds framework. The consultation runs until 31 August 2020.

The draft RTS align existing provisions to changes introduced in the revised CRR in the area of own funds. This is the case, in particular, for provisions relating to the regime of supervisory prior permission for the reduction of own funds and market making.

In addition, the draft amended RTS specify some of the newly introduced criteria for eligible liabilities instruments derived from the own funds regime. These include the absence of direct or indirect funding for the acquisition of ownership of eligible liabilities, the absence of incentives to redeem, the need for the resolution authority’s prior permission for the reduction of eligible liabilities. For some of these aspects, the mandates attributed to the EBA explicitly require to ensure full alignment between eligible liabilities and own funds.

Consultation process

Responses to this consultation can be sent to the EBA by clicking on the “send your comments” button on the consultation page. All contributions received will be published following the close of the consultation, unless requested otherwise. Please note that the deadline for the submission of comments is 31 August 2020.

A public hearing on this consultation will take place at the EBA premises in Paris on 24 June 2020 from 10:00 to 12:30 CET.

Legal basis and background

The EBA has updated the RTS on own funds, in accordance with the original RTS mandates granted to the EBA under Articles 28(5), 29(6), 52(2), 76(4), 78(5) and 79)2) of Regulation (EU) No 575/2013 (‘CRR’). The draft amended RTS related to eligible liabilities have been developed in accordance with Articles 72b(7) and 78a(3) CRR.