EBA publishes final draft technical standards on appropriately diversified indices

The European Banking Authority (EBA) published today final draft Implementing Technical Standards (ITS) on appropriately diversified indices. The standards will be part of the Single Rulebook aimed at enhancing regulatory harmonisation in the banking sector in the European Union (EU).

These ITS list relevant exchange traded and appropriately diversified indices for which specific risk can be ignored on the basis of the following criteria: (i) the index must comprise a minimum number of equities; (ii) none of the equities or concentration of equities must significantly influence the volatility of the index; the index must comprise equities that are diversified both from (iii) a geographical and (iv) economic perspective.

Update: on 21 December 2022, the European Banking Authority (EBA) updated the list of appropriately diversified indices (Annex I), originally published in December 2013 and previously updated in April 2019. The list was updated according to the procedure and methodology laid down in the corresponding implementing technical standards (ITS).

Legal basis and next steps

The EBA has developed these final draft ITS in accordance with Article 344 of Regulation (EU) No 575/2013 (Capital Requirements Regulation – CRR), which mandates the Authority to draft ITS listing the stock indices for which the specific risk can be ignored.

The final draft standards have been sent today to the European Commission for their adoption as EU Regulations that will be directly applicable throughout the EU.