EBA issues revised list of ITS validation rules

11 June 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.

EBA updates list of credit institutions subject to an LCR inflow cap derogation

19 January 2018

The European Banking Authority (EBA) published today an updated list of credit institutions exempted from or subject to a higher cap on inflows in the calculation of the Liquidity Coverage Ratio (LCR) in accordance with the provisions laid down in the LCR Delegated Act. Three new institutions have been added to the previous list published in May 2017. 
 
The list includes the specialised credit institutions, which have been exempted from the cap on inflows or that are subject to a higher cap of 90%, in accordance with Article 33(3 to 6) of the LCR Delegated Act. 
 
The list will be maintained and updated on a regular basis, and is compiled using the information provided by the competent authorities.
 

Legal basis and background

 
The list is compiled and updated in accordance with the second subparagraph of Article 33(5) of LCR Delegated Act, which mandates the EBA to publish and maintain that list on the basis of the information received from competent authorities. 

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EBA consults on standards on estimation and identification of an economic downturn in IRB modelling

22 May 2018

The European Banking Authority (EBA) launched today two consultations on draft regulatory technical standards (RTS) specifying an economic downturn and on a set of Guidelines related to the estimation of loss given default (LGD) appropriate for conditions of an economic downturn. The draft RTS specify the nature, severity and duration of an economic downturn, while the Guidelines focus on the appropriate estimation of the LGD in a situation of economic downturn. This package is part of the EBA's broader work on the review of the IRB approach aiming at reducing the unjustified variability in the outcomes of internal models, while preserving the risk sensitivity of capital requirements. The consultations run until 22 June 2018.
 
Based on the feedback received in the first consultation, which took place on 1 March 2017, these draft RTS now focus solely on the identification approach. To this end, the draft RTS require institutions to consider relevant macroeconomic and credit factors when specifying the nature of an economic downturn. In particular, the severity and duration of an economic downturn should be specified taking into account the time series for the identified relevant macroeconomic and credit factors. 
 
The draft Guidelines has been developed to supplement the RTS and clarify how institutions should quantify LGD estimates appropriate for an economic downturn identified according to the draft RTS. To this end, the draft Guidelines focus on the methods institutions should use to quantify downturn LGD estimates. Several approaches are allowed and will be driven by the availability of loss data for the estimations. In situations with limited data availability, more prescriptive approaches are applied.
 
The RTS and the Guidelines together harmonise the modelling approach and, therefore, aim at creating a more level playing field across IRB institutions in this area. Specifically, the  RTS ensure that an economic downturn for comparable portfolios are subject to the same economic downturn and the Guidelines provide guidance on downturn LGD estimation taking into account the specificities of the institutions' processes, underwriting standards and general response to adverse economic conditions. The approach followed in drafting the RTS and the Guidelines ensures the application of harmonised identification and LGD estimation methods.
 

Consultation process

 
Comments to these consultations 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 22 June 2018.
 
All contributions received will be published following the close of the consultation, unless requested otherwise. A public hearing and workshop will then take place at the EBA premises on 1 June from 11:00 to 13:00 UK time. 
 

Legal basis and next steps

 
The draft RTS have been developed in accordance with Articles 181 (3)(a) and 182 (4)(a) of the Capital Requirements Regulation (CRR), which mandate the EBA to draft regulatory technical standards to specify the nature, severity and duration of an economic downturn referred to in paragraphs 181 (1)(b) and 182(1)(b).
 
The EBA has developed the draft Guidelines on its own initiative, in accordance with Article 16 of its founding Regulation, which mandates the Authority to issue guidelines and recommendations addressed to competent authorities or financial institutions with a view to establishing consistent, efficient and effective supervisory practices within the ESFS, and to ensuring the common, uniform and consistent application of Union law.
 
The draft Guidelines will be included in the EBA Guidelines on PD, LGD estimation and treatment of defaulted assets published on 20 November 2017. 
 

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EBA releases updated data on Deposit Guarantee Schemes across the EU

23 May 2018

The European Banking Authority (EBA) published today 2017 data relating to two key concepts in the Deposit Guarantee Schemes Directive (DGSD): available financial means, and covered deposits. The EBA publishes this data on a yearly basis, with the objective of enhancing the transparency and public accountability of deposit guarantee schemes (DGSs) across the EU to the benefit of depositors, markets, policymakers, DGSs and Members States.
 
Available financial means data provided for 31 December 2017 shows that 32 out of a total of 43 DGSs in EU Member States have increased their funds since 31 December 2016. This results from the levies paid by the members of those DGSs, which have been raised in order to reach the target level of 0.8% of covered deposits set out in the DGSD by July 2024.  For another six DGSs, the available financial means have decreased mainly because these DGSs were required to use their funds to reimburse depositors within the course of 2017, and no significant changes occurred in the remaining five DGSs. The data also shows that the target level of 0.8% of covered deposits has already been achieved by 17 of the 43 DGSs.

Legal basis

The EBA is collecting this data in accordance with Art. 10(10) of the DGSD.

EBA updates list of O-SIIs in the EU

23 May 2018

The European Banking Authority (EBA) updated today the 2017 list of Other Systemically Important Institutions (O-SIIs) in the EU. O-SIIs – those institutions which, along with Global Systemically Important Institutions (G-SIIs) are deemed systemically important – have been identified by the relevant authorities across the Union according to harmonised criteria provided by the EBA Guidelines. This list also reflects the additional capital buffers that the relevant authorities have set for the identified O-SIIs.
 
The EBA Guidelines on criteria to assess O-SIIs define the size, importance, complexity (or cross-border activities) and interconnectedness of such institutions.
 
These Guidelines provide additional flexibility for relevant authorities to apply their supervisory judgment when deciding to include other institutions that might have not been automatically identified as O-SIIs. This approach allows for the assessment of all financial institutions across the EU in a comparable way, whilst still not excluding those firms which may be deemed for one EU jurisdiction on the basis of certain specificities. 
 
The EBA acts as the single point of disclosure for the list of O-SIIs across the EU, while each relevant authority discloses information for its respective jurisdiction, along with further details on the underlying rationale and identification process. This additional information is key for understanding the specific features of each O-SII and get some insight in terms of supervisory judgment, optional indicators used, buffer decisions and phase-in implementation dates.
 
The list of O-SIIs is disclosed on an annual basis, along with any Common Equity Tier 1 (CET1) capital buffer requirements, which may need to be set or reset. Higher capital requirements will become applicable at least one year after the publication of the O-SIIs list to give institutions enough time to adjust to the new buffer requirements.
 
EBA to hold public hearing on Commission proposal to develop European Secured Notes

21 May 2018

On Tuesday 26 June 2018, from 10.00 to 12.00 UK time, the European Banking Authority (EBA) will be holding a public hearing to outline its draft answer to the Commission's Call for Advice (CfA) on the European Secured Notes. The hearing comes ahead of the publication of the EBA's final report, which is expected by mid-July 2018.
 
The Commission's CfA is asking the EBA 1) to assess whether a dual-recourse instrument similar to covered bonds may provide a useful funding alternative to banks engaged in lending to SMEs and lending to infrastructure projects 2) to advise on the potential structure of this new product and 3) to determine an appropriate EU framework and regulatory treatment.
 
A presentation of the draft report will be uploaded on the EBA website one week ahead of the public hearing. 
 
To register to the public hearing, click here
ESAs Joint Board of Appeal decides on an appeal against ESMA

18 May 2018

The Joint Board of Appeal of the European Supervisory Authorities (ESAs – European Banking Authority, European Insurance and Occupational Pensions Authority, and European Securities and Markets Authority) published today its decision (link) in an appeal brought by "A" against the European Securities and Markets Authority (ESMA). 
 
The Board of Appeal unanimously dismissed the appeal
In accordance with Article 61 of the ESMA Regulation, the appellant "A" has two months to appeal the Board of Appeal's decision to the Court of Justice of the EU.
 
ESAs consult on amendments to joint EMIR standards

04 May 2018

The European Supervisory Authorities Authority (ESAs) launched today two joint consultation to amend Regulatory Technical Standards (RTS) on the clearing obligation and risk mitigation techniques for OTC derivatives not cleared. These standards, which implement the European Market Infrastructure Regulation (EMIR), aim to amend the current regulation on the clearing obligation and risk mitigation techniques on OTC derivatives not cleared by a central counterparties (CCPs) in order to provide a specific treatment for simple, transparent and standardised (STS) securitisation and ensure a level playing field with covered bonds. The consultations run until 15 June 2018.
 
The Securitisation Regulation and the amended EMIR provide a specific treatment for STS Securitisation in relation to the  clearing obligation and on risk mitigation techniques on non-cleared OTC derivatives frameworks. 
 
The consultation on the draft RTS on the clearing obligation clarify which arrangements under covered bonds or securitisations adequately mitigate counterparty risk and thus may benefit from an exemption from the clearing obligation. 
 
The consultation on the draft RTS on risk mitigation techniques aims at extending the type of special treatment currently associated with covered bonds to STS securitisations. The proposed treatment, i.e. no exchange of initial margins and collection only of variation margins, is applicable only where a STS securitisation structure meets a specific set of conditions equivalent to the ones required to covered bonds issuers to be able to benefit of that same treatment.

Consultation process

Comments to the consultations can be sent to EBA and ESMA respectively, online by clicking on the "send your comments" button on the consultation pages. 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 15 June 2018.
 
A public hearing will take place at the EBA premises on 31 May 2018, from 15.00 to 16.00 UK time. 

Legal basis

The ESAs have developed these two CPs in accordance with Articles 4 and 11 of EMIR as amended under Article 42 of the Securitisation Regulation, which contains two mandates for the ESAs on the clearing obligation and on risk mitigation techniques for OTC derivatives not cleared. 
 

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EBA consults on Guidelines on disclosure of non-performing and forborne exposures

27 April 2018

The European Banking Authority (EBA) launched today a consultation on its Guidelines on disclosure by credit institutions of information on non-performing and forborne exposures. The Guidelines specify the information related to non-performing (NPE) and forborne exposures and foreclosed assets that banks should disclose and provide uniform disclosure formats. By addressing potential asymmetries of information and providing common disclosure on the quality of banks' assets, the Guidelines seek to foster transparency and market discipline. The consultation runs until 27 July 2018.
 
The Guidelines apply to credit institutions that are subject to all or part of the disclosure requirements specified in the Capital Requirements Regulation (CRR). These requirements, including the frequency of the disclosure, are applied in a proportionate manner based on the significance of the credit institution and the level of NPEs. 
The Guidelines include ten disclosure templates, of which four are applicable to all credit institutions and six apply only to significant institutions with a high level of NPEs. Overall, this uniform disclosure helps provide meaningful information to market participants on credit institutions' asset quality. In addition, for those institutions with high level of NPEs, the Guidelines help gain a better insight into the features and distribution of their problematic assets, the quality and value of their collaterals and the efficiency of their recovery function.
 
The content of the uniform templates included in the Guidelines has been developed in parallel with the amendments to the reporting framework on non-performing exposures, which the EBA will consult on. Although the two consultations will be run separately, the EBA will ensure consistency between the disclosure Guidelines and the amended FINREP framework.

Consultation process

Comments 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 27 July 2018.
A public hearing will take place at the EBA premises on 27 June 2018 from 10.30 to 12:30 UK time.

Legal basis and background

The EBA has developed these Guidelines in accordance with the EBA Regulation, and following the conclusions reached by the Council in July 2017 to set up an Action Plan to tackle non-performing loans (NPLs) in Europe, where the EBA was asked to contribute with a number of initiatives. In particular, the Council underlined that a comprehensive approach combining a mix of complementing policy actions, at national and European level, is needed to address the existing stock of NPLs as well as to prevent the emergence and accumulation of new NPEs on banks' balance sheets. The enhanced disclosure requirements developed in these draft Guidelines are one of these initiatives.
 

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EBA launches call for papers for its 2018 annual research workshop

24 April 2018

The European Banking Authority (EBA) launched today a call for research papers in view of its seventh policy research workshop taking place in London on 28-29 November 2018 on the topic ‘Reaping the benefits of an integrated EU banking market '.

The workshop aims at bringing together economists from national supervisory authorities and leading academics to stimulate the discussion on how to assess and discuss concrete measures to better promote the single and more efficient EU banking market.

In preparation for the workshop, the EBA invites the submission of policy-oriented, preferably empirical, research papers on the benefits and challenges of cross-border integration of the banking market. Researchers from supervisory authorities and central banks are particularly encouraged to submit their papers.

Interested parties can download the call for papers, which includes details on the proposed topics, the programme committee and contact details for the submission of papers. The submission deadline is 27 July 2018 and contributors will be notified by early September 2018.

Participation in the workshop is by invitation only.