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.

EBA issues Opinion on measures to address macroprudential risk following notification by French High Council for Financial Stability (HCSF)

27 May 2020

 

The European Banking Authority (EBA) published today an Opinion following the notification by the French macroprudential authority, the Haut Conseil de Stabilité Financière (HCSF), of its intention to extend a measure introduced in 2018 on the use of Article 458(9) of the Capital Requirements Regulation (CRR) to safeguard institutions from excessive risk-taking and to prevent the build-up of future vulnerabilities. The measure intends to tighten, for French global or other systemically important institutions, the large-exposure limits applicable to large and highly indebted non-financial corporations (NFCs) resident in France or groups of connected NFCs assessed to be highly indebted and based in France. Based on the evidence submitted, the EBA does not object to the extension of the proposed measure, which will be applied from 1 July 2020 to 30 June 2021.

In particular, with the application of this measure, French systemically important institutions will not incur an exposure exceeding 5% of their eligible capital for NFCs or for groups of connected NFCs assessed to be highly indebted. The 5% limit will act as a backstop to safeguard these institutions from excessive risk-taking and prevent the build-up of future vulnerabilities.

In its Opinion, addressed to the Council, the European Commission and the French Authorities, the EBA acknowledges that the objective of limiting indebtedness levels of large and already indebted French NFCs is appropriate with a view to promoting financial stability and preventing future systemic shocks to the French and EU economies. The EBA also encourages the French authorities to monitor closely the developments during the COVID-19 pandemic and to be ready to de-activate the measure promptly if it leads to unintended consequences.

In light of this conclusion, the EBA does not object to the extended deployment, by the HCSF, of the proposed macroprudential measures, which will be applied from 1 July 2020 to 31 June 2021.

Background

Already in its Opinion issued on 13 March 2018, the EBA did not object to the adoption of this measure, taking into consideration the measure’s objectives of resilience (limiting concentration risks) and prevention (intensifying the vigilance about high leverage of NFCs).

 

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EBA Advisory Committee on Proportionality held its first meeting

19 May 2020

The Advisory Committee on Proportionality (ACP) of the European Banking Authority (EBA) held today its first meeting chaired by Helmut Ettl, Executive Director of the Austrian Financial Market Authority and Member of the EBA Board of Supervisors (BoS), and Mario Quagliariello, EBA Director of Economic Analysis and Statistics. The focus of this Committee is to advise the EBA on how its actions and measures should take account of specific differences prevailing in the banking sector related to the nature, scale and complexity of risks, to business models and practice as well as to the size of financial institutions.

While forming an integral part of the EBA, the ACP is an independent Committee established on 22 January to advise the EBA BoS on the Authority’s work programme and, where necessary, to make recommendations on how to improve it, taking into account the specificities of financial institutions.  

EBA consults on technical standards for contractual recognition of stay powers under the BRRD

15 May 2020

The European Banking Authority (EBA) launched today a public consultation on its draft Regulatory Technical Standards (RTS) for contractual recognition of stay powers laid down in the Bank Recovery and Resolution Directive (BRRD). These RTS support the effective application of temporary restrictions on early termination rights (resolution stays) in relation to financial contracts governed by the law of a third country. These standards are the first EBA mandate stemming from the revised BRRD and aim at promoting the effective application of recovery and resolution powers to banks and banking groups and to foster convergence of practices between relevant authorities and institutions across the EU. The consultation runs until 15 August 2020.

The BRRD requires Member States to ensure that their resolution authorities can effectively make use of the stay powers on contracts that an institution or entity has entered into, in case resolution powers or crisis prevention measures are applied.

These draft RTS specify the contents of the contractual term required to be included in relevant financial contracts where no alternative mechanism (i.e. statutory) exists to secure the recognition by the counterparty of the resolution authority’s powers to suspend or restrict rights and obligations. The approach proposed by the EBA is designed to strike a balance between the need to ensure harmonisation and the need for flexibility so as to take into account the specificities of  a given third country law or type of financial contract.

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 15 August 2020.

The EBA will hold a public hearing on the draft RTS, which will take place via conference call on 16 July 2020 from 10:00 to 13:00 CET. The dial in details will be communicated in due course.

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

Legal basis and next steps

The proposed draft RTS are based on Article 71a(5) of the BRRD, which requires the EBA to develop draft RTS to further determine the contents of the terms required in the first paragraph of article 71a BRRD, taking into account institutions' and entities' different business models.

EBA launches updated college collaboration platform

08 May 2020

The European Banking Authority (EBA) launched an updated version of its online collaboration platform enabling the joint work and sharing of information between authorities involved in supervision and resolution of cross-border banking groups. Thanks to its enhanced functionalities, the updated college platform facilitates the operation of the colleges and ensures high security standards.

The main objective of the EBA college platform is to facilitate a secure and user-friendly collaboration and continuous exchange of information between all the relevant authorities within the framework of supervisory, resolution and anti-money laundering and countering terrorist financing (AML/CTF) colleges. 

The EBA has been supporting the colleges’ activity with a secure online collaboration platform already for a number of years.  The current update enhances the functionality of the platform based on the feedback received from the authorities, and introduces a number of technical upgrades aimed at increasing the security of supervisory and resolution information.

While the use of the EBA college platform is not mandatory for the authorities, the EBA invites those colleges that are still relying on secured e-mails for exchanging confidential information to use the EBA college platform.

Legal basis 

The EBA college platform is set up and offered by the EBA to the authorities in accordance with Article 21(2) (a) of Regulation (EU) 1093/2010.

Information is shared among the authorities participating in the colleges in accordance with Commission Delegated Regulation (EU) 2016/98 and (EU) 2016/1075, Commission

Implementing Regulations (EU) 2016/99, as well as Joint Committee Guidelines on AML/CFT colleges (JC/2019/81). 

 

EBA publishes updated calculation tool of liquidity coverage ratio

06 May 2020

The European Banking Authority (EBA) published today its updated calculation tool of the liquidity coverage ratio (LCR) with the aim to provide additional support for reporting institutions. This excel-based tool takes into account the amendments in the liquidity coverage requirement introduced by Commission Delegated Regulation (EU) 2018/1620 that applies from 30 April 2020. This tool is provided for information purposes only and has no legal value.

The LCR calculation tool is based on the revised LCR reporting templates of the framework release v 2.9 applicable from April 2020.
 

EBA issues updated Guidelines on equivalence of non-EU authorities for participation in supervisory colleges

15 April 2020

The European Banking Authority (EBA) updated today its Guidelines on the equivalence of confidentiality and professional secrecy regimes by adding the New York State Department of Financial Services (United States) to the current list of non-EU (third country) supervisory authorities whose confidentiality regimes can be regarded as equivalent. The EBA Guidelines are designed to help EU authorities in their assessment of third country equivalence and to facilitate cooperation with third country supervisory authorities and their participation in supervisory colleges overseeing international banks.

Legal basis

These Guidelines have been drafted in accordance with Article 21(3) of the EBA Founding Regulation, which mandates the Authority to issue guidelines and recommendations to promote convergence in supervisory functioning and best practices adopted by the colleges of supervisors. In addition, Article 33 of the EBA Regulation states that the EBA shall provide assistance on equivalence issues. 

In line with the review of the EBA Founding Regulation, as applicable of 1 January 2020, the amending Recommendations on equivalence of non-EU authorities have been replaced by the relevant Guidelines.
 

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EBA publishes phase 1 of its technical package on reporting framework 2.10

09 April 2020

The European Banking Authority (EBA) published today a new release of the reporting framework 2.10, which includes the validation rules, the Data Point Model (DPM) dictionary and XBRL taxonomies. The technical package reflects the updated EBA Guidelines on Funding Plans, and integrates reporting of remuneration and fraudulent payments into the DPM and XBRL taxonomies.

In particular, this package reflects the following:

  • The technical package for the updated EBA Guidelines on Funding Plans (published on 9 December 2019 here), applicable from 31 December 2020;
  • Integration of the EBA Guidelines on the remuneration benchmarking exercise and the EBA Guidelines on the data collection exercise regarding high earners into the DPM and XBRL taxonomies;
  • Integration of the EBA Guidelines on fraud reporting under PSD2 into the DPM and XBRL taxonomies.

The documents covering this technical package are published here and include the following:

  • A set of XML files forming the XBRL taxonomy and a description of the architecture of the XBRL taxonomy;
  • A DPM data dictionary database together with a DPM table layout and data point categorisation;
  • A list of validation rules.

The EBA has also updated the DPM query tools.