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.

Consultation on ITS amending Commission Implementing Regulation EU 2016-2070 on Benchmarking

18 December 2018

The European Banking Authority (EBA) launched today a consultation to amend the Commission's Implementing Regulation on benchmarking of internal models to adjust the benchmarking portfolios and reporting requirements in view of the benchmarking exercise it will carry out in 2020. The proposed changes aim at simplifying the portfolio's structure for the credit risk part of the exercise, and getting more insights into the model used for pricing for the market risk part of the exercise. The consultation will run until 1 February 2019.

Based on the feedback received from the recent interactions with institutions, the EBA's proposals included in this Consultation Paper aim at facilitating the reporting for the credit risk portfolios. The simplification of the structure of the data collection as well as the reduction of the number of portfolios is expected to enhance the data quality. Furthermore, the objective is to keep the structure of the portfolios stable for the 2021 exercise.

The main changes in the definitions of the credit risk portfolios are (1) a reduction in the number of portfolios to be submitted, (2) a simplification and alignment in the structure of the portfolios to be submitted and (3) a number of technical refinements, such as the inclusion of covered bonds, an update of the ILTV, NACE and CRM split, and the introduction of a sub sample of large corporates with revenue below or above 500m€.

The EBA is also proposing minor consistency updates as well as a data collection of the sensitivities aiming at further improving the data quality.

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 1 February 2019.

 A public hearing will take place at the EBA premises on 25 January 2018 from 14:00 to 15:30 UK time.

Legal basis and background

Article 78 of the Capital Requirements Directive (CRD) requires competent authorities to conduct an annual assessment of the quality of internal approaches used for the calculation of own funds requirements. To assist competent authorities in this assessment, the EBA calculates and distributes benchmark values against which individual institutions' risk parameters can be compared. These benchmark values are based on data submitted by institutions as laid out in the Capital Requirements Regulation (CRR), which specifies the benchmarking portfolios, templates and definitions to be used as part of the annual benchmarking exercises.

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EBA issues a call for expressions of interest to participate in its working group on APIs under PSD2

14 December 2018

The European Banking Authority (EBA) issued today a call for expressions of interest to participate in the its working group on Application Programming Interfaces under PSD2 (WG-API). The group will be composed of EBA staff, national competent authorities and representatives of a variety of external stakeholders, and will be chaired by the EBA.

The aim of the group is to identify issues that will emerge as the industry is preparing for the application date of the Regulatory Technical Standard (RTS) on strong customer authentication and common and secure communication under PSD2 (RTS on SCA&CSC), and for external stakeholders to propose solutions on how these issues could be resolved, which national authorities and the EBA can then consider. Expressions of interest should be submitted to the EBA by 14 January 2019 by completing the application form here.

EBA launches selection procedure to appoint new Chairperson

12 December 2018

The Board of Supervisors of the European Banking Authority (EBA) has launched today an open selection procedure for the appointment of a new Chairperson following the appointment of the EBA's current Chairperson, Andrea Enria, to be the Chair of the Supervisory Board of the Single Supervisory Mechanism from 1 January 2019.
 
The EBA's Chairperson will be selected on the basis of merit, skills, knowledge of financial institutions and markets, and of experience relevant to financial supervision and regulation, following an open selection procedure. The appointment of the successful candidate is subject to approval by the European Parliament.
 
The vacancy notice for the EBA's Chairperson has been published on the EBA's website in the Careers section.
 
EBA issues revised list of validation rules

11 December 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 provides overview of Competent Authorities implementation and transposition of the CRD IV package

30 November 2018

The European Banking Authority (EBA) updated today all the information disclosed by EU Competent Authorities according to its Implementing Technical Standards (ITS) on supervisory disclosure, which was published in the EU Official Journal on 4 June 2014. This information, published in an aggregated format, provides an overview of the implementation and transposition of the Capital Requirements Directive (CRD IV) and Capital Requirements Regulation (CRR) across the EU. It also provides a detailed picture of the use of options and national discretions by each Competent Authority as well as information on the general criteria and methodologies used for the purpose of the supervisory review and evaluation process (SREP). Through such disclosure, the EBA remains committed to providing meaningful comparisons across the EU and to promoting convergence.

The information disclosed on the implementation and transposition of the CRD IV package covers all EU jurisdictions, including information provided by European Central Bank (Single Supervisory Mechanism – SSM), and Liechtenstein. In this respect, the ECB provides information related to the supervision of significant credit institutions within the SSM while National Competent Authorities (NCAs) of SSM participating Member States disclose information for less significant credit institutions.

Legal basis and next steps

With a view of providing meaningful comparisons, Article 143(1) of the CRD IV requires Competent Authorities to publish information on the texts of laws, regulations, administrative rules and general guidance adopted in their Member State in the field of prudential regulation, on the manner of exercise of the options and discretions available in Union law, on the general criteria and methodologies used for the purpose of the supervisory review and evaluation process (SREP) and finally aggregate statistical data on key aspects of the prudential framework in each Member State.

ESAs consult on guidelines on cooperation and information exchange for AML/CFT supervision purposes

08 November 2018

The Joint Committee of the three European Supervisory Authorities (EBA, EIOPA and ESMA - ESAs) launched today a public consultation on draft Guidelines on the cooperation and information exchange between competent authorities supervising credit and financial institutions for the purposes of Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) supervision. The draft Guidelines are part of the ESAs' wider work on fostering a common approach to AML/CFT within the EU.

Cooperation and exchange of information between competent authorities responsible for overseeing AML/CFT compliance of credit and other financial institutions is an essential part of an effective AML/CFT regime. EU AML/CFT legislation establishes an obligation for competent authorities to cooperate and exchange information, but it does not set out in detail how this should be achieved.

Recent events have illustrated that in the absence of a common framework, cooperation and information exchange between prudential and AML/CFT competent authorities for the purposes of AML/CFT supervision can sometimes be difficult. To address this, the ESAs have agreed to develop these Guidelines, which clarify the practical modalities of this process both domestically and on a cross-border basis.

The Guidelines propose the creation of AML/CFT colleges of supervisors and set out the rules governing their establishment and operation. In particular, AML/CFT colleges should be set up whenever three or more competent authorities from different Member States are responsible for the AML/CFT supervision of the same credit or financial institution and its establishments, and the frequency and intensity of each AML/CFT college should be determined on a risk-sensitive basis.

As information available to AML/CFT supervisors may also be relevant for prudential supervisors and vice versa, the Guidelines propose gateways to ensure that prudential supervisors can participate as observers in AML/CFT colleges, and that information from AML/CFT college meetings is available to colleges of prudential supervisors. 

Where the conditions for setting up an AML/CFT college are not met, the Guidelines propose that supervisors will continue their cooperation and information exchange on a bilateral basis and formalise this process. 

Consultation process

Comments to the draft Guidelines can be sent by clicking on the "send your comments" button on the EBA's consultation page. The deadline for the submission of comments is 08 February 2019.

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

The ESAs will hold a public hearing on the draft Guidelines, which will take place at the EBA premises in London on 18 December 2018 from 14:00 to 16:30 UK time.

Legal Basis and background

Article 16 of Regulation (EU) No 1093/2010, Article 16 of Regulation (EU) No 1094/2010 and Article 16 of Regulation (EU) No 1095/2010, mandate the ESAs to issue guidelines in order to foster consistent, efficient and effective supervisory practices. Furthermore, Article 57(2) of the aforementioned regulations provides that the Joint Committee of the three ESAs should ensure cross-sectoral consistency, in particular regarding measures combating money laundering.

The supervisory concept of colleges is not new. In the prudential context, colleges already provide a permanent structure for cooperation and information exchange between supervisors from different Member States supervising the same credit or financial institution. The concept has been adapted to the needs of AML/CFT supervision.

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