EBA issues revised list of validation rules

10 September 2018

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.
 
ESAs report finds automation in financial advice slowly growing but scale of market remains limited

05 September 2018

 

The three European Supervisory Authorities (ESAs) – EBA, EIOPA and ESMA – today published the results of their monitoring exercise on automation in financial advice. The Report shows that while the phenomenon of automation in financial advice seems to be slowly growing, the overall number of firms and customers involved is still quite limited. As the identified risks have not materialised and considering the limited growth of the phenomenon, the ESAs believe that no immediate action is necessary. 
 
Through this Report, the risks and benefits of this phenomenon, which had previously been identified by the ESAs have largely been confirmed by national competent authorities (NCAs) and remain valid.
 
In examining emerging business models, the ESAs found that automated services are being offered, through partnerships, by established financial intermediaries, rather than by pure FinTech firms. Additionally, some new trends are emerging such as the use of Big Data, chatbots and a broader range of products.
 
The ESAs concluded that given the overall importance of the topic, and the emergence of some ongoing changes to business models, a new monitoring exercise will be conducted if and when the development of the market and market risks warrant this work.

Background

 
Following the publication of the Report on Automation in Financial Advice in 2016, this new analysis has been carried out through a survey involving NCAs, on the evolution of 'automation in financial advice' in the securities, banking and insurance sectors over the past two years.

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EBA launches consultations on supervisory reporting for the reporting framework 2.9 and prepares for its modular release

28 August 2018

The European Banking Authority (EBA) launched today three public consultations on amendments to the Implementing Technical Standards (ITS) on supervisory reporting for the reporting framework 2.9. The proposed changes to the ITS on supervisory reporting, which are part of the EBA reporting framework 2.9, aim to keep reporting requirements in line with changes in the regulatory framework and with the evolving needs for Supervisory Authorities' risk assessments. The EBA will move to a new modular release for the next reporting framework 2.9 and is, therefore, also publishing its forward schedule of the modular release to help users in their planning.
 
In particular, the three consultation papers cover the following areas:
  • COREP: major revision of securitisation templates (simple, transparent and standardised (STS) regulation);
  • FINREP: amendment of non-performing and forborne exposures reporting, P&L and IFRS16;
  • COREP-LCR: review based on the coming new LCR delegated act.
In September, the EBA will publish draft Data Point Models (DPM) on the proposed changes to COREP, FINREP and LCR reporting.

Consultation process

Responses to the consultations can be sent to the EBA by clicking on the following links:
  • Click here to respond to the consultation on COREP – securitisations;
  • Click here to respond to the consultation on FINREP - NPE&FBE, P&L and IFRS 16; 
  • Click here to respond to the consultation on LCR reporting;

All contributions received will be published after the consultation closes, unless requested otherwise. The deadline for the submission of comments is 27 November 2018 for the first two and 27 October 2018 for LCR reporting.
 
A public hearing on the three consultation will take place at the EBA premises according to the following schedule:
  • On 3 October, from 10:00 to 11:30 UK time for FINREP - NPE&FBE, P&L and IFRS 16; 
  • On 3 October, from 11:30 to 13:00 UK time for COREP – securitisations; 
  • On 10 October, from 11:00 to 12:30 UK time for LCR reporting.

Preparation for the modular release of reporting framework 2.9

The EBA has started preparations for the next reporting framework release (version 2.9). As the amendments to the reporting framework will apply from different reference dates due to different application dates in the underlying regulatory requirements, the modular components of each reporting release are also published and applied at different points in time to mirror those reference dates. This will have an impact on the release plan of the technical package, which needs to take into account different application dates.

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EBA updates XBRL taxonomy 2.8

09 August 2018

The European Banking Authority (EBA) published today a corrective update to the XBRL taxonomy that Competent Authorities shall use for the remittance of data under the Implementing Technical Standards (ITS) for reference dates of 31 December 2018 onwards.

This update, which replaces the previously published 2.8 Data Point Model (DPM) and XBRL taxonomy, corrects various implementation errors in the previously published XBRL formula, and in the data model for several tables for Prudent Valuation in COREP. It also includes additional changes to the validation rules and a change to a resolution template.
 
EBA updates its guides on supervisory data

25 June 2018

The European Banking Authority (EBA) published today two updated versions of its guides on data. Both the EBA methodological guide on how to compile risk indicators and detailed risk analysis tools and the EBA guidance note on compiling IMF FSIs with EBA ITS data provide useful insights to users on how to explore supervisory data available through the EBA reporting framework. 
 
The EBA methodological guide on Risk Indicators and DRATs includes now updated formulas and guidance in light of IFRS 9 changes introduced with the EBA reporting framework version 2.7 from reference date March 2018. 
Similarly, the EBA guidance on how to compute IMF FSIs using EBA ITS data is now updated to cater for the same IFRS 9 changes.  Apart from IFRS 9 developments, additional guidance on how to compute IMF FSIs has been included. 
 
EBA does not object to the Swedish FSA proposed measures to address macroprudential risk

28 June 2018

The European Banking Authority (EBA) published today an Opinion following the notification by Finansinspektionen, the Swedish Financial Supervisory Authority (FSA) of its intention to change the method it currently uses to apply a risk weight floor for Swedish mortgages through Pillar 2 by replacing it with a requirement within the framework of Article 458 of the Capital Requirements Regulation (CRR). The new proposed measure is primarily driven by structural changes in the Swedish banking market and aims at enhancing the resilience of Swedish banks to potential severe downward corrections in residential real estate markets. Based on the evidence submitted, the EBA does not object to the adoption of the proposed measure, which the Swedish FSA intends to apply to credit institutions that have adopted the Internal Rating-Based (IRB) Approach. 
 
With the application of the proposed measure, Swedish institutions adopting the IRB approach would incur in the same credit institution-specific minimum level of 25% for the average risk weight on Swedish housing loans as currently applied through Pillar 2. This limit will act as a backstop to ensure that these credit institutions fully capture the risk of credit losses stemming from Swedish mortgages.
 
In its Opinion, addressed to the Council, the European Commission and the Swedish Authorities, the EBA acknowledges, in line with the warning on the vulnerabilities of the residential real estate sector issued by the European Systemic Risk Board (ESRB), that the combined increase in house prices and debt levels could pose a threat to the financial stability of banks in Sweden in the event of a downturn. 
 
In light of this conclusion, the EBA does not object to the deployment, by the Swedish FSA, of macroprudential measures
 
 
EBA consults on Guidelines on outsourcing

22 June 2018

The European Banking Authority (EBA) launched today a public consultation on its draft Guidelines on outsourcing. These Guidelines, which review the existing CEBS Guidelines on outsourcing published in 2006, aim at establishing a more harmonised framework for outsourcing arrangements of all financial institutions in the scope of the EBA's action. The draft Guidelines provide a clear definition of outsourcing and specify the criteria to assess whether or not an outsourced activity, service, process or function (or part of it) is critical or important. In particular, the revised Guidelines cover credit institutions and investment firms subject to the Capital Requirements Directive (CRD), but also payment institutions subject to the revised Payment Services Directive (PSD2) and electronic money institutions subject to the e-money Directive. The consultation runs until 24 September 2018.
 
Over the recent years, there has been an increasing tendency by institutions to outsource activities in order to reduce costs and improve flexibility and efficiency. In the context of digitalisation and increasing importance of information technology (IT) and financial technologies (FinTech), financial institutions are adapting their business models, processes and systems to embrace such technologies. Outsourcing to cloud service providers gained rapidly importance in many industries. Overall, IT has become one of the most prevalent outsourced activities. Outsourcing is also relevant in the context of gaining or maintaining access to the EU financial market. In particular, third country institutions may set up subsidiaries or branches in the EU in order to get or maintain access to EU financial markets and infrastructures, while the parent institution would provide a material part of the business activities. 
 
The revised Guidelines deal with the responsibilities of the management body for the establishment of an appropriate framework for outsourcing, its implementation and application in a group, the due diligence process and risk assessment before entering in such arrangements. The Guidelines also clarify aspects related to the contractual arrangements, the monitoring and documentation of outsourcing arrangements as well as the supervision by competent authorities.
 
Against this background, the Guidelines specify that the responsibility of the institution's management body can never be outsourced. Outsourcing must not lead to a situation where an institution becomes a so-called ‘empty shell' that lacks the substance to remain authorised. Institutions must remain able to oversee all risks and to manage outsourcing arrangements. Institutions should be able to effectively control, challenge the quality and performance of outsourced processes, services and activities, and carry out their own risk assessment and ongoing monitoring. 
 
The  Guidelines set up a framework for the due diligence process of institutions with the objective of ensuring that functions are only outsourced to reliable service providers so that the ongoing provision of services and compliance with regulatory requirements is ensured. Institutions must ensure audit and access rights in written outsourcing agreements both for themselves and for competent authorities and are required to maintain a register of all outsourcing arrangements. 

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 24 September 2018.
 
A public hearing will take place at the EBA premises on 4 September 2018 from 10:00 to 12:00 UK time. All contributions received will be published following the end of the consultation, unless requested otherwise.

Legal basis and next steps

These draft Guidelines have been developed according to Article 74 of Directive 2013/36/EU, which mandates the EBA to further harmonise institutions' governance arrangements, processes and mechanisms across the EU, Directive 2015/2366/EU, Directive 2009/110/EC and Article 16 of Regulation (EU) No 1093/2010. The Recommendations on outsourcing to cloud service providers  have been fully integrated in the EBA draft Guidelines on outsourcing and will be repealed when the Guidelines enter into force.
 
The EBA Guidelines will apply to competent authorities across the EU, as well as to institutions on a solo and consolidated basis, payment institutions and electronic money institutions. 
 

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EBA adds PSD2 to its online Interactive Single Rulebook and Q&A tools

22 June 2018

The European Banking Authority (EBA) has updated its online Interactive Single Rulebook and Q&A tool with the inclusion of the Payment Services Directive (PSD2).
 
Users will now be able to review on the EBA website all the EBA's final Technical Standards and Guidelines associated with the PSD2 by navigating through the Directive on an article by article basis. The inclusion of the PSD2 into the Q&A tool will also allow users to submit any questions they may have on the application of this Directive and the EBA's work related to it.
 
The purpose of the Q&A tool is to support the consistent and effective application of the EU regulatory framework for the banking sector, the Single Rulebook. The Q&A tool also contributes to the completion of the legislative framework by ensuring any remaining regulatory loopholes are addressed. The process is based on close and on-going interaction with the European Commission so that responses in the Q&A tool are fully consistent with EU legislative texts.
 

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European Supervisory Authorities hold its 2018 Consumer Protection Day

22 June 2018

The Joint Committee of the European Supervisory Authorities (ESAs) is holding today its sixth annual Consumer Protection Day. The event brings together 250 consumer representatives, finance industry representatives and regulators to address major challenges facing consumer protection in financial services across the European Union.
 
Steven Maijoor, Chair of the European Securities and Markets Authority and the current Chair of the Joint Committee, said:
 
"The ultimate goal of the ESAs' activities, both individually and through the Joint Committee, is ensuring a consistent level of consumer and investors protection across the European Union. Today's agenda reflects the main activities of the ESA's current work for achieving better outcomes for consumers and also captures new developments that require special attention from a regulatory and supervisory side." 
 
Mario Centeno, President of the Eurogroup, will deliver a keynote speech, followed by three panel discussions that will focus on:
 
  • net performance of retail products and information to consumers on costs and past performance
     
  • the regulatory and supervisory approach to Virtual Currencies, as part of the bigger digitalisation agenda; and
     
  • concerns about whether self-placement can go hand-in-hand with the fundamental principle of investing in the best interest of customers.
More information about the Consumer Protection Day is available here.
EBA consults on the conditions to allow institutions to calculate capital requirements of securitised exposures (Kirb) in accordance with the purchased receivables approach

19 June 2018

The European Banking Authority (EBA) launched today a public consultation on draft Regulatory Technical Standards (RTS) specifying the conditions to allow institutions to calculate capital requirements of the securitised exposures (KIRB) in accordance with the purchased receivables approach laid down in the amended Capital Requirements Regulation (CRR). These draft RTS aim at striking the right balance between the need to acknowledge the specific circumstances under which institutions calculate capital requirements in the context of a securitisation transaction and the need to maintain appropriately safe and prudent requirements on the internal modelling of capital requirements. The consultation runs until 19 September 2018.
 
In order to expand the use of the Securitisation Internal Ratings-Based Approach (SEC-IRBA), that sits now at the top of the hierarchy of approaches for calculating capital requirements of securitisation positions, the CRR amendment accompanying the Securitisation Regulation introduces the possibility of using the provisions that normally apply to purchased receivables under the general IRB credit risk framework. This way, institutions may calculate the KIRB, and the corresponding risk parameters, (probability of default - PD - and loss given default - LGD), under the provisions of the purchased receivables and then use them as input in the SEC-IRBA, along with other information on the securitisation position. 
 
This draft RTS specify the conditions under which institutions may use the provisions on purchased receivables to make them fully workable in the context of securitisation transactions. For these purposes, retail securitised exposures shall be treated as purchased retail receivables and non-retail securitised exposures as purchased corporate receivables.
 
The main areas that the draft RTS covers are the following: 
  • General approach to the relationship between the IRB rules on purchased receivables and the SEC-IRBA framework
     
  • Eligibility conditions to compute KIRB
     
  • IRB permissions and prior experience
     
  • Eligibility to use the retail risk quantification standards
     
  • Use of proxy data

Consultation process

Responses 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 19 September 2018. A public hearing will take place at the EBA premises on 4 September 2018 from 14:00 to 16:00 UK time. 

Legal basis

The RTS have been developed according to Article 255(9) of Regulation (EU) No 575/2013 (CRR), as amended by Regulation (EU) 2401/2017. Article 255(9) mandates the EBA to develop draft regulatory technical standards to further specify the conditions to allow institutions to calculate KIRB for the pools of underlying exposures in accordance with Article 255(4). 
 

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