03 August 2020
The European Banking Authority (EBA) published today an erratum of the reporting framework 2.10 phase 2. The package includes the Data Point Model (DPM) dictionary, table layouts and XBRL taxonomies. The correction is mostly on column 0010 of table C 114.00 in the SBP framework, where the EBA has addressed the issue of missing members.
08 November 2019
The European Banking Authority (EBA) published today a new release of reporting framework 2.9.1, which includes the validation rules, the DPM data dictionary, and the XBRL taxonomy. This release fixes some modelling issues on COREP Liquidity and FINREP.
08 November 2019
The European Banking Authority (EBA) published today a Report on trends in asset quality of the EU banking sector, which show it has significantly improved over the last four years. Total non-performing loans (NPLs) decreased from over EUR 1.15 trillion in June 2015 (6% as a percentage of total loans) to EUR 636 billion as of June 2019. The NPL ratio declined to 3%, the lowest ratio since the EBA introduced a harmonised definition of NPLs across European countries. The average coverage ratio slightly increased from 43.6% to 44.9% over the same period.
The Report identifies three pillars that determined the overall reduction in NPLs: supervisory attention and political determination to address the NPL issue effectively, coupled by banks’ efforts to enhance their NPL management capabilities. The reduction was also helped by a positive economic growth, low interest rates and decreasing unemployment. Countries with high NPL ratios have led the de-risking process of banks’ balance sheets.
Despite the significant improvement, dispersion of NPL ratios across countries remains wide. As of June 2019, Greece reported the highest NPL ratio (39.2%), followed by Cyprus (21.5%), while five additional countries had a NPL ratio above 5%. In comparison, in June 2015, 17 countries reported NPL ratio above 5% of which 10 countries had a double-digit ratio. Countries with high NPL ratios have larger share in past-due buckets of 1 year and more. These older NPLs are harder to cure, considerably devalued and pose a significant risk to those banks that have an increased share of assets on their balance sheets.
The differences in the speed of the recovery procedures, also due to less efficient legal frameworks and thin secondary markets for NPLs, remain the most significant impediments to the further offloading of NPLs. There are significant ongoing initiatives that aim to further boost the reduction of legacy assets both at European level and in specific countries. However, in light of weakening economic conditions, all banks should closely monitor the asset quality to identify any possible deterioration, especially in riskier segments, and continue actively managing the NPLs in their balance sheets.
Notes to editors
This is the second thematic Report on NPLs, following the one published in July 2016. This Report is based on supervisory data of asset quality metrics, and aims at updating on the progress made so far in addressing NPLs in Europe. It also takes stock of ongoing initiatives to tackle the NPL issue both at EU level and at member state level, identifies challenges to tackle the remaining NPL stock and indicates possible areas where further action is needed.
The report is accompanied by a data visualisation tool that provides a country-by-country analysis of key asset quality metrics.
07 November 2019
The European Banking Authority (EBA) published today the final methodology and draft templates for the 2020 EU-wide stress test along with the key milestones of the exercise. The methodology and templates cover all relevant risk areas and incorporate the feedback received during the discussion with the industry in the summer of 2019. The stress test exercise will be formally launched in January 2020 and the results published by 31 July 2020.
The Board of Supervisors of the European Banking Authority (EBA) agreed on the publication of the 2020 EU-wide stress test package, which includes the methodology, templates and template guidance. Similar to the 2018 exercise, the 2020 EU-wide stress test is a bottom-up exercise with constraints, including a static balance sheet assumption. The exercise is primarily focused on the assessment of the impact of risk drivers on the solvency of banks. Banks are required to stress a common set of risks (credit risk – including securitisations – market risk and counterparty credit risk, and operational risk – including conduct risk). In addition, banks are requested to project the impact of the scenarios on net interest income and to stress P&L and capital items not covered by other risk types.
A draft version of the stress test templates is also published along with a template guidance that contains instructions on how to populate them. The draft version of the templates can still be subject to minor technical adjustments before its final publication.
Key milestone dates of the 2020 EU-wide stress test exercise
Third submission to the EBA at the end of June 2020
Notes to editors
The aim of the EU-wide stress test is to assess the resilience of EU banks to a common set of adverse economic developments in order to identify potential risks, inform supervisory decisions and increase market discipline.
The EBA's EU-wide stress tests are conducted in a bottom-up fashion, using consistent methodologies, scenarios and key assumptions developed jointly with other authorities.
In particular, the exercise is coordinated by the EBA and carried out in cooperation with the European Central Bank (ECB), the European Systemic Risk Board (ESRB), the European Commission (EC) and the Competent Authorities (CAs) from all relevant national jurisdictions.
To give banks sufficient time to prepare for the exercise, the EBA publishes the methodology and templates well ahead of the formal launch, which will include relevant macroeconomic scenarios.
30 October 2019
The European Banking Authority (EBA) published today its second opinion addressed to the EU Commission on the implementation of the Deposit Guarantee Schemes Directive (DGSD) in the EU. The Opinion focuses on the payouts by deposit guarantee schemes (DGSs) and proposes a number of changes to the EU legal framework, aimed at strengthening depositor protection, improving depositor information, enhancing financial stability and reinforcing operational effectiveness of DGSs.
In its Opinion, the EBA assesses nine different topics related to DGS payouts and sets out 30 proposals on how to improve the current EU legal framework. The proposals include changes in relation to cases where depositors have lost access to their funds but payouts have not started, and cases where there are money laundering and terrorism financing (ML/TF) concerns. The Opinion also proposes improvements to the treatment of specific situations, such as the treatment of beneficiary accounts and depositors temporarily holding deposits above the coverage level or with banks headquartered in another EU Member State.
More specifically, based on recent real-life cases, the Opinion proposes changes aimed at ensuring that depositors are not unduly left without access to their funds when the decision that deposits have become unavailable has not (yet) been made by the authorities. The Opinion proposes that, in such instances, depositors should have access to an appropriate daily amount from their deposits.
Similarly, the EBA proposes that the EU framework could benefit from more clarity on DGS payouts where there are ML/TF concerns, including the introduction of powers necessary to suspend payouts to depositors suspected of ML/TF. The Opinion also proposes how cooperation between DGSs and AML authorities can be improved and highlights the importance of informing depositors in such instances. Given the complexity of such cases, the EBA is of the view that further analysis is needed, both from the DGS and the AML perspective.
Finally, throughout the Opinion, the EBA underlines the importance of enhancing depositor protection, and clearly informing depositors about the most relevant features of such protection, in normal times, as well as during a DGS payout. In this respect, the EBA proposes, for example, that depositors should be clearly informed about their rights in relation to temporary high balances, and the possibility that their deposits would be set-off against their liabilities that have fallen due before their deposits had became unavailable. The EBA also proposes that depositors should have sufficient time to claim their funds after a bank failure.
Article 19(6) DGSD requires the EBA to support the EU Commission in its development of a report on the progress towards the implementation of the DGSD. This Opinion is the second part of the EBA’s fulfilment of this mandate, which should be read alongside two other Opinions – on eligibility of deposits, coverage level and cooperation between DGSs, and on DGS funding and uses of DGS funds.
This Opinion follows the first one on the eligibility of deposits, coverage level and cooperation between DGSs, which was published in August 2019. The third and final EBA opinion on DGS funding and uses of DGS funds, will be published in early 2020.
The EBA invites the Commission to consider the proposals outlined in the Opinion when preparing a report on the implementation of the DGSD to be submitted to the European Parliament and the Council.
29 October 2019
The European Banking Authority (EBA) published today a report identifying potential impediments to the cross-border provision of banking and payment services in the EU. Developed under the EBA’s FinTech Roadmap, this Report calls on the European Commission to facilitate cross-border access, including the update of interpretative communications on the cross-border provision of services and further harmonisation of consumer protection, conduct of business and AML/CFT requirements, in order to facilitate the scaling up of activity cross-border.
Digital solutions can increase choice by enabling consumers access to a wider population of providers of financial services. However, the full potential of these solutions has not yet been achieved in the EU, in part due to divergences in regulatory requirements and supervisory practices across the Member States. Identifying and resolving these issues is a necessary step to addressing barriers to market entry, supporting the scaling up of financial services across the EU, and improving the competitiveness of the EU Single Market.
The first important challenge is the identification of when a digital activity is to be regarded as a cross-border provision of services. Although this is a crucial element in determining which regulatory and supervisory frameworks apply, currently, competent authorities and firms lack clear guidance on how to classify cross-border activity under the freedom to provide services or right of establishment.
The second challenge stems from areas of EU law that are not fully harmonised or are not yet covered by EU law. In particular, the EBA identifies issues related to authorisations and licencing, consumer protection, conduct of business requirements and anti-money laundering (AML) and countering the financing of terrorism (CFT).
Left unaddressed these issues may impede institutions and other FinTech firms from providing banking and payments services cross-border within the EU. Therefore, the EBA recommends the European Commission take action, including the update of its interpretative communications to support the identification of cross-border services taking account of the digitisation of financial services and the development of legislative proposals to further harmonise requirements relating to consumer protection, conduct of business and AML/CFT.
Further information can be found in the report and ‘Q&A’.
The Report has been prepared pursuant to Article 9(4) of the EBA's Founding Regulation which mandates the EBA to establish a Committee on financial innovation ‘which brings together all relevant competent national and supervisory authorities with a view to achieving a coordinated approach to the regulatory and supervisory treatment of new or innovative financial activities and providing advice for the Authority to present to the European Parliament, Council and the European Commission'.
In accordance with the March 2018 European Commission and the , the EBA has been carrying out work to assess potential issues that firms, particularly those using digital means, may face when seeking to provide services cross-border. This work is intended to complement the work underway by the , due to report in the coming months.
24 October 2019
The European Supervisory Authorities (ESAs) have today issued a Supervisory Statement in order to promote a consistent application by national competent authorities (NCAs) of the scope of the Regulation for packaged retail and insurance-based investment products (PRIIPs Regulation) to bond markets.
The statement responds to uncertainty as to the scope of the PRIIPs Regulation. This uncertainty risks divergent applications by NCAs, with negative consequences for achieving uniform levels of retail investor protection and a level playing field amongst product manufacturers and distributors within the EU. NCAs are recommended to apply the supervisory guidance included in the Statement.
23 October 2019
The European Banking Authority (EBA) published today an Opinion addressed to the EU Commission with recommendations to ensure that disclosure requirements in EU law take account of the increasing use of digital marketing channels for financial services and the resultant issues potentially affecting consumers. The recommendations relate primarily to the scope and consistency of disclosure rules, the timing of disclosure, the presentation format and accessibility of information. In addition, they cover advertisements, pre-contractual information, rights of withdrawal, complaints handling and post sale information.
In order for consumers to make informed decisions about their financial products and services, they should have access to high-quality information, which should be provided at the appropriate time, via suitable means, and explaining the features and costs across the lifetime of the service.
In the EU, relevant requirements for the marketing of services that are bought at a distance are set out in the Distance Marketing of Financial Services Directive (2002/65/EC, DMFSD). The European Commission is currently evaluating the effectiveness of this Directive. Today’s opinion aims at providing input to the Commission’s evaluation, by providing recommendations as to how the Directive could be amended in order to ensure that it takes account of the increasing use of digital marketing channels and the resultant issues that potentially arise for consumers.
The EBA’s competence to deliver this opinion is based on Article 34(1) of Regulation (EU) No 1093/2010 (the EBA Regulation), as information requirements under the DMFSD relates to the EBA’s area of competence. In addition, Article 9(1)(d) requires the EBA to take a leading role in promoting transparency, simplicity and fairness in the market for consumer financial products or services across the internal market, inter alia by contributing to the development of common disclosure rules.
Furthermore, the Opinion is based on Article 9(2), which mandates the EBA to monitor new and existing financial activities and to adopt guidelines and recommendations with a view to promoting the safety and soundness of markets and convergence of regulatory practice, and on Article 9(4), which mandates the EBA to provide advice to the European Parliament, the Council and the Commission on new or innovative financial activities.
 Regulation (EU) No 1093/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Banking Authority) amending Decision No 716/2009/EC and repealing Commission Decision 2009/78/EC (OJ L 331, 15.12.2010, p. 12).
23 October 2019
The European Banking Authority (EBA) published today an Opinion on the regulatory treatment of securitisations of non-performing exposures (NPE). Securitisations can play an instrumental role in reducing NPE stocks in credit institutions’ balance sheets but such a role may be hindered by certain provisions in the EU law securitisation framework. This Opinion recommends various amendments to the Capital Requirements Regulation (CRR) as well as to the Securitisation Regulation to remove the identified constraints. The Opinion is addressed at the European Commission and contributes to the objectives of the Council of the EU’s “Action plan to tackle non-performing loans in Europe”. A copy of the Opinion has been sent to the European Parliament and the Council.
NPE securitisations are transactions backed by pools comprised exclusively or almost exclusively of NPE at the time of inception. Though structurally similar to other securitisations, the underlying assets have distinctive features that set NPE securitisations apart from those from an economic substance perspective, namely due to the large discount on their nominal value and their specific underlying risks.
The Opinion explains that the regulatory framework imposes certain constraints on credit institutions using securitisation technology to dispose of NPE holdings, namely:
The Opinion recommends that the Commission consider a number of targeted amendments to the CRR and the Securitisation Regulation to remove these constraints whilst maintaining the integrity of the prudential framework. The recommendations should be viewed as preliminary and subject to additional analytical work, namely the amendments to the CRR that may require limited calibration. Furthermore, the potential amendments to the CRR should be, to the extent possible, consistent with comparable international standards.
The Opinion has been drafted in accordance with Article 34(1) of Regulation (EU) No 1093/2010, by virtue of which the Authority may, on its own initiative, provide opinions to the European Parliament, the Council and the Commission on all issues related to its area of competence. The regulatory treatment of NPE securitisations falls within the remint of the EBA’s areas of competence.
02 October 2019
The European Banking Authority (EBA) published today two reports, which monitor the impact of implementing the final Basel III reforms and the current implementation of liquidity measures in the EU. The EBA Basel III capital monitoring report is the latest in a regular exercise using the methodology of the Basel Committee of Banking Supervision and is not comparable to the broader Call for Advice report published in July 2019. The present report includes an assessment of the impact of the full implementation (to 2027) of the Basel III package on EU banks based on data as of 30 June 2018. The report on liquidity measures and evaluates the liquidity coverage requirements currently in place in the EU. Overall, the EBA estimates that the Basel III reforms, once fully implemented, would determine an average increase by 19.3% of EU banks' Tier 1 minimum required capital. The liquidity coverage ratio (LCR), which was fully implemented in January 2018, stood at around 149% on average in June 2018, well above the minimum threshold of 100%.
The results of the Basel III capital monitoring exercise, based on data as of 30 June 2018, show that European banks' minimum Tier 1 capital requirement would increase by 19.3% at the full implementation date (2027). The impact of the risk-based reforms is 20.4%, of which the leading factors are the output floor (5.4%) and operational risk (4.7%).
To comply with the Pillar 1 requirements in the new framework, EU banks would need EUR 26 billion of additional total capital, of which EUR 24.9 billion of Tier 1 capital.
Change in total T1 MRC, as percentage of the overall current Tier 1 MRC, due to the full implementation of Basel III (2027) (weighted averages, in %)
Of which: G-SIIs
Source: EBA quantitative impact study (QIS) data (December 2018); sample: 113 banks.
The EBA report on liquidity measures shows that EU banks have continued to improve their compliance with the liquidity coverage ratio (LCR). In December 2018, the average LCR was 149%. The aggregate gross shortfall amounted to EUR 15.7 billion and it is entirely attributed to four banks that monetised their liquidity buffers during times of stress. An in-depth analysis of potential currency mismatches in LCR levels suggests that banks tend to hold significantly lower liquidity buffers in some foreign currencies, in particular US dollar and GBP. Insome cases LCR ratios in USD or GBP are well below 100%. The analysis of the impact of the LCR on lending does not provide clear empirical evidence of this relationship.
Notes to the editors