EBA issues revised list of validation rules

08 March 2019

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 consults on Guidelines on credit risk mitigation for institutions applying the IRB approach with own estimates of LGD

25 February 2019

The European Banking Authority (EBA) launched today a consultation on its Guidelines on Credit Risk Mitigation in the context of the advanced internal rating-based (A-IRB) approach, aim to eliminate the remaining significant differences in approaches in the area of credit risk mitigation (CRM), which are either due to different supervisory practices or bank-specific choices. These draft Guidelines complement the EBA Report on CRM, which focused on the standardised approach (SA) and the foundation-IRB approach (F-IRB). The consultation runs until 25 May 2019.

The Guidelines provide guidance on the application of the CRM provisions currently laid down in the Capital Requirements Regulation (CRR) applicable to institutions using the A-IRB Approach. In particular, they clarify the eligibility requirements for different CRM techniques, namely funded and unfunded credit protection (e.g. collateral and guarantees), available to institutions.

For funded credit protection, the Guidelines provide a mapping to the eligibility requirements of legal certainty and collateral valuation applicable to institutions using the SA and the A-IRB approach. The Guidelines also clarify how institutions may recognise the effects of different CRM techniques for capital requirement purposes. In particular, for unfunded credit protection they clarify the set of compliant approaches that are available to institutions to recognise the effects of the credit protection by adjusting their risk parameter estimates, i.e. the probability of default (PD) or the loss given default (LGD). Moreover, the Guidelines clarify whether exposure values or LGD estimates are to be adjusted to recognise different forms of funded credit protection, namely netting and collateral.

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 25 May 2019 2019.

A public hearing will take place at the EBA premises in Paris on 15 April 2019 from 14:00 to 16:00 CET time.

Legal basis and next steps

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.

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EBA opens formal investigation into possible breach of Union law by the Estonian and Danish competent authorities regarding money-laundering activities linked to Danske Bank

19 February 2019

On 18 February 2019, the European Banking Authority (EBA) opened a formal investigation into a possible breach of Union law by the Estonian Financial Services Authority (Finantsinspektsioon) and the Danish Financial Services Authority (Finanstilsynet) in connection with money laundering activities linked to Danske Bank and its Estonian branch in particular. 

The commencement of an investigation follows a letter from the European Commission calling on the EBA to use its powers to examine whether there may have been a failure by the Estonian and Danish competent authorities to comply with their obligations under Union law. Before formally opening the investigation, the EBA conducted preliminary inquiries with both authorities.

The investigation has been opened under Article 17 of the EBA's founding Regulation.  Where an investigation results in a finding of breach of Union law, Article 17 provides that the EBA may address a recommendation to the competent authority concerned setting out the action necessary to comply with Union law.

EBA updates list of correlated currencies

30 January 2019

The European Banking Authority (EBA) updated today the 2018 list of closely correlated currencies that was originally published in December 2013. The list is part of the implementing technical standards (ITS) that were drafted for the purposes of calculating the capital requirements for foreign-exchange risk according to the standardised rules. The list was updated according to the procedure and methodology laid down in the ITS and submitted to the European Commission for endorsement.

Consultation on guidelines on technical aspects of the management of interest rate risk arising from non trading activities (IRRBB)

27 June 2013

The European Banking Authority (EBA) launches today a consultation on amendments and additions to CEBS Guidelines on interest rate risk from non-trading activities (IRRBB) published on 3 October 2006. The proposed changes are aimed at improving the management of IRRBB risks by institutions, and to promote the convergence of supervisory practices in reviewing and evaluating institutions under the Pillar 2 assessment process. The consultation runs until 27 September 2013.

Overall, the proposed changes are intended to ensure that institutions review, and where necessary improve, their identification, measurement, monitoring and control of interest rate risk in the banking book, and that supervisory assessment of interest rate risk is enhanced.

The bulk of the additions are provided under a new technical guidance supplement which is structured into the following thematic areas:

  • Scenarios & Stress Testing
  • Measurement assumptions
  • Methods for measuring interest rate risk
  • Governance of interest rate risk

Consultation process

Comments to the 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 27 September 2013.

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

A public hearing will take place at the EBA premises on 13 September 2013 from 10:00 to 13:00, UK time. To register for the public hearing, click here.

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ESAs announce multilateral agreement on the exchange of information between the ECB and AML CFT competent authorities

15 January 2019

The European Supervisory Authorities (ESAs) approved on 10 January 2019 the content of the Multilateral Agreement on the practical modalities for exchange of information between the European Central Bank (ECB) and all competent authorities (CAs) responsible for supervising compliance of credit and financial institutions with anti-money laundering and countering the financing of terrorism (AML/CFT) obligations under the fourth Anti-Money Laundering Directive (AMLD4). The Agreement will create a clear framework for exchanging information between the ECB and CAs and potentially will enhance the effectiveness of their supervisory practices.

AMLD4 was amended by the AMLD5 in June 2018. These amendments also included a new Article 57a(2), which requires the ESAs to support the conclusion of an agreement on the practical modalities for exchange of information between the ECB and CAs.

This amendment is part of the EU legislator's wider efforts to enhance the cooperation and information exchange between prudential and AML/CFT supervisors through a clear legal mandate. To fulfil this mandate, the ESAs, together with the ECB and CAs, have developed this Multilateral Agreement, which contains provisions on the type of information and underlying process for exchanging it; confidentiality and data protection provisions; situations where the request for information can be refused; means of communicaiton and language used in the information exchange; the signing process; and the settlement of disputes procedures.

The Agreement was sent to the ECB and the CAs for signature.

Link to ESAs' Joint Committee

EBA publishes report on cost and performance of structured deposits

10 January 2019

The European Banking Authority (EBA) published today a report on the costs and performance of structured deposits in the European Union (EU). The report is a response to a request the EBA had received from the EU Commission as part of the implementation of it Capital Market Union Action Plan and concludes that the market for structured deposits in the EU appears to be limited in size and that data on costs and performance is not widely available. The report, therefore, also sets out the steps the EBA will take to enhance the data quality in the future.

As part of the implementation of the Capital Markets Union Action Plan, in October 2017, the European Commission sent a formal request to the three European Supervisory Authorities (EBA, ESMA and EIOPA) to issue, by the end of 2018, reports on the cost and past performance of the main categories of retail investment, insurance and pension products.

The request specified that the reports should be based on data reporting that is already required by Union or national law and should include a description of data gaps and other difficulties faced during the development of the report, including any potential recommendations for the future reporting cycles.

The only product category in the EBA's consumer protection remit that is included in the request are structured deposits, which are deposits that are linked to an underlying asset but are repayable at par at maturity. The report includes a mapping of the specific regulatory requirements on pre-contractual disclosure and/or reporting applicable to structured deposits at European and national level and also identifies the data sources that would be required to fulfil the request. The report arrives at the view that the market for structured deposits in the EU is limited in size and that data on costs and performance is not widely available. It concludes by setting out steps that the EBA will take to obtain more accurate and standardised data in the future and, in so doing, enhance the reliability and overall quality of its response.

EBA updates Recommendation on the equivalence of third country confidentiality regimes

08 November 2018

The EBA's equivalence assessment, which is based on the relevant provisions of the Capital Requirements Directive (CRD IV), has considered the following third country authorities as equivalent: 
 

  • The ADGM Financial Services Regulation Authority – the Abu Dhabi Global Market;
  • The Financial Supervisory Service – the Republic of South Korea;
  • The National Bank of Moldova – the Republic of Moldova;
  • The Securities and Futures Commission – Hong Kong.

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ESAs consult on proposed changes to the key information document for PRIIPs

08 November 2018

The European Supervisory Authorities (ESAs) have today issued a consultation paper on targeted amendments to the Delegated Regulation covering the rules for the Key Information Document (KID) for Packaged Retail and Insurance-based Investment Products (PRIIPs).

The ESAs, on 1 October 2018, set out in a letter to the European Commission their intention to make proposals to support legislative changes to avoid the possibility of duplicating information requirements for investment funds from 1 January 2020, and to tackle key issues that have arisen since the implementation of the KID. The consultation paper addresses, in particular, amendments to the information regarding investment products' performance scenarios.

The proposals are made in the context of the ongoing discussions between the European co-legislators on the application of the KID by certain investment funds as well as the timing of a wider and more comprehensive review of PRIIPs, which was due this year. The outcome of this targeted review is without prejudice to that wider review, and it would be beneficial to conduct such a wider review early in the next term of the European Parliament.  

In addition, when deciding upon the nature of their final recommendations following this consultation in January 2019, the ESAs will take into account the feedback from respondents to this consultation and the latest information of these political discussions on the application of the KID by certain investment funds and the timing of the wider review.

The deadline for submission of feedback is by Thursday, 6 December 2018.

Background

The KID for PRIIPs is a mandatory, three-page A4 information document to be provided to consumers before purchasing a PRIIP. PRIIPs include for example funds, structured products, unit-linked and with-profits life insurance contracts, and structured deposits.

The PRIIPs Regulation (No 1286/2014) defines the main rules and principles for KIDs. It is supplemented by a Delegated Regulation (2017/653) specifying the presentation and contents of the KID, which is based on Regulatory Technical Standards that the ESAs were mandated to develop.

Performance scenarios are included in the Section of the KID titled "What are the risks and what could I get in return?" They indicate how the investment could perform under various different scenarios.

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EBA publishes response to letter received on reclassification of grandfathered own funds instruments

21 December 2018

The European Banking Authority (EBA) published today a response to a letter it had received from a law firm regarding the case of a reclassification by an institution of some specific grandfathered own funds instruments. The EBA also addressed this issue through its Q&A process. In particular, Q&A 2018_4417 (Own funds - Reclassification of own funds instruments from a grandfathered category to a fully eligible category and purpose of grandfathering provision ), clarifies in more general terms the appropriate prudential treatment for such cases.