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Topic: Capital adequacy

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Basel Committee consults on an amendment to the process for reviewing the G-SIB methodology

On 20 July 2021, the Basel Committee of Banking Supervision published a consultation document setting out a technical amendment to the Basel framework. The amendment sets out a new process that will be used by the Committee to review the assessment methodology for global systemically important banks (G-SIBs). The Committee plans to replace the existing … Continue Reading

EBA consults to amend its technical standards on currencies with constraints on the availability of liquid assets

On 16 July 2021, the European Banking Authority launched a public consultation on amendments to its Implementing Technical Standards on currencies with constraints on the availability of liquid assets in the context of the liquidity coverage ratio. The proposed amendments remove the Norwegian Krone from the list, with the result that no currency will be … Continue Reading

FSB interim report on lessons learnt from the COVID-19 pandemic from a financial stability perspective

On 13 July 2021, the Financial Stability Board (FSB) published an interim report on the lessons learnt from the COVID-19 pandemic from a financial stability perspective. Among other things the interim report notes that: So far, the global financial system has weathered the COVID-19 pandemic thanks to greater resilience, supported by the G20 reforms, and … Continue Reading

EBA publishes final guidelines for the use of data inputs in the expected shortfall risk measure under the IMA

On 13 July 2021, the European Banking Authority (EBA) published final guidelines that clarify the requirements that the data inputs used to determine the scenarios of future shocks applied to modellable risk factors should meet. The guidelines, which have been developed in accordance with Article 325bh(3) of the Capital Requirements Regulation (CRR), become applicable from … Continue Reading

Draft SI – The Capital Requirements Regulation (Amendment) Regulations 2021

On 12 July 2021, there was published on the legislation.gov.uk website a draft of The Capital Requirements Regulation (Amendment) Regulations 2021. The Financial Services Act 2021 (FS Act) empowers HM Treasury to revoke provisions in the onshored Capital Requirements Regulation (CRR) in order to allow the PRA to introduce updated prudential rules for credit institutions … Continue Reading

PRA PS17/21 | CP5/21 – Implementation of Basel standards

On 9 July 2021, the PRA published Policy Statement 17/21: Implementation of the Basel Standards (PS17/21).   In PS17/21 the PRA provides feedback on comments received on Consultation Paper 5/21: Implementation of Basel Standards and sets out near final rules. The proposals in CP5/21 sought to address some of the remaining weaknesses in banks’ risk … Continue Reading

PRA PS16/21| CP14/20 – Internal Rating Based UK mortgage risk weights: Managing deficiencies in model risk capture

On 6 July 2021, the PRA published Policy Statement 16/21 ‘Internal Rating Based UK mortgage risk weights: Managing deficiencies in model risk capture’ (PS16/21). In PS16/21 the PRA provides feedback on Consultation Paper 14/20 ‘Internal Ratings Based UK mortgage risk weights: Managing deficiencies in model risk capture’ (CP14/20) and sets out its final policy in … Continue Reading

Basel Committee – technical amendments to the calculation of minimum haircut floors for securities financing transactions

On 1 July 2021, the Basel Committee on Banking Supervision published two technical amendments to the standard on minimum haircut floors for securities financing transactions (SFTs). The first technical amendment addresses an interpretative issue relating to collateral upgrade transactions and the second corrects for a misstatement of the formula used to calculate haircut floors for … Continue Reading

Consultations by the FPC and PRA on changes to the UK leverage ratio framework

On 29 June 2021, the PRA and Financial Policy Committee (FPC) co-published a consultation paper on proposed changes to the UK leverage ratio framework. In the document the FPC proposes to make changes to the UK leverage ratio framework and the PRA sets out its proposed approach to implementing the changes. A summary of the … Continue Reading

EBA consults to review its guidelines on common procedures and methodologies for the supervisory review and evaluation process

On 28 June 2021, the European Banking Authority (EBA) issued a consultation on revised guidelines on common procedures and methodologies for the supervisory review and evaluation process (SREP) and supervisory stress testing. The purpose of the revisions is to implement recent changes introduced by the Capital Requirements Directive V and the Capital Requirements Regulation II, … Continue Reading

Commission adopts final one-year extension of the transitional regime for capital requirements for non-EU CCPs

On 24 June 2021, the European Commission extended by an additional year the current transitional regime regarding the capital requirements that EU banks and investment firms must maintain when exposed to non-EU central counterparties. The transitional regime will now continue to apply until 28 June 2022. However, this is the last and final extension possible … Continue Reading

EBA launches consultation to amend technical standards on credit risk adjustments

On 24 June 2021, the European Banking Authority (EBA) issued a consultation regarding amendments to the Regulatory Technical Standards (RTS) on credit risk adjustments in the context of the calculation of the risk weight (RW) of defaulted exposures under the Standardised Approach (SA). The proposed amendments follow up on the European Commission’s Action Plan to … Continue Reading

HM Treasury – consultation response to the implementation of the IFPR and Basel 3 standards

On 22 June 2021, HM Treasury issued the response to its February 2021 consultation that outlined how the Government was intending to exercise its powers under the Financial Services Act 2021 (Act) to ensure the effective implementation of the Investment Firms Prudential Regime (IFPR) and the outstanding Basel 3 standards. In the response HM Treasury … Continue Reading

Commission Delegated Regulation supplementing the CRR with regard to RTS specifying the nature, severity and duration of an economic downturn

On 10 June 2021, there was published in the Official Journal of the EU Commission Delegated Regulation (EU) 2021/930 of 1 March 2021 supplementing the Capital Requirements Regulation (CRR) with regard to regulatory technical standards (RTS) specifying the nature, severity and duration of an economic downturn referred to in Article 181(1), point (b) and Article … Continue Reading

Commission Delegated Regulation (supplementing the CRR with regard to RTS on the standardised approach for counterparty credit risk

On 10 June 2021, there was published in the Official Journal of the EU Commission Delegated Regulation (EU) 2021/931 of 1 March 2021 supplementing the Capital Requirements Regulation (CRR) with regard to regulatory technical standards (RTS) on the standardised approach for counterparty credit risk. The RTS specify: The method for identifying derivative transactions with one … Continue Reading

ESAs publish amended technical standards on the mapping of ECAIs

On 10 June 2021, the Joint Committee of the three European Supervisory Authorities (ESAs) published two amended Implementing Technical Standards (ITS) on the mapping of credit assessments of External Credit Assessment Institutions (ECAIs). Since the adoption in 2019 of the ITS on the mapping of credit assessments of ECAIs, two additional credit rating agencies (CRAs) … Continue Reading

Published in OJ – CRD IV RTS on criteria to identify material risk takers for remuneration purposes

On 9 June 2021, there was published in the Official Journal of the EU, Commission Delegated Regulation (EU) 2021/923 of 25 March 2021 supplementing the Capital Requirements Directive IV by setting out regulatory technical standards (RTS) on the criteria to identify all categories of staff whose professional activities have a material impact on the institutions’ … Continue Reading

PRA Policy Statement 13/21 ‘Credit risk: The approach to overseas IRB models’

On 7 June 2021, the PRA published Policy Statement 13/21 ‘Credit risk: The approach to overseas IRB models’ (PS13/21). In PS13/21 the PRA provides feedback to the responses it received on Consultation Paper 16/20 ‘Credit risk: The approach to overseas IRB models’ (CP16/20). It also contains the PRA’s final policy, as follows: An updated Supervisory … Continue Reading

PRA / FCA Dear CRO letter – Pre-settlement counterparty credit exposure management and controls for DvP clients

On 2 June 2021, there was published a letter from David Bailey and Sarah Breeden of the PRA, and Edwin Schooling Latter of the FCA, to Chief Risk Officers of regulated firms to share observations of good practices on risk controls and arrangements for DvP clients. The PRA and FCA report in the letter that … Continue Reading

EBA and ESMA publish provisional list of instruments and funds for the smallest investment firms under the Investment Firms Regulation

On 31 May 2021, the European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) jointly published a provisional list of additional instruments and funds that Member State competent authorities may allow to use as own funds for some of the smallest investment firms. The list has been put together in accordance with … Continue Reading

EBA consults on institutions’ Pillar 3 disclosure of interest rate risk exposures

On 28 May 2021, the European Banking Authority (EBA) issued a consultation on draft implementing technical standards (ITS) on Pillar 3 disclosures regarding exposures to interest rate risk on positions not held in the trading book (IRRBB).  The EBA has developed the draft ITS in accordance with its mandate in Article 434a of the Capital … Continue Reading

EBA publishes final draft technical standards on own funds and eligible liabilities

On 26 May 2021, the European Banking Authority (EBA) published final draft regulatory technical standards (RTS) on own funds and eligible liabilities. The draft RTS align existing provisions to changes introduced in the revised Capital Requirements Regulation in the area of own funds. This is the case, in particular, for provisions relating to the regime … Continue Reading

PRA statement on supervisory benchmarking exercise relating to capital internal models

On 18 May 2021, the PRA issued a statement on its website that addresses the 2022 and 2023 supervisory benchmarking exercise for capital internal models (benchmarking exercise). It is relevant to those credit institutions that have been in scope of the associated reporting requirements. The statement provides that: Relevant firms are required to annually report … Continue Reading

EBA speech – The implementation of Basel III in the post-COVID 19 setting

On 12 May 2021, the European Banking Authority (EBA) published a speech given by its chairperson, Jose Manuel Campa, entitled The implementation of Basel 3 in the post-COVID 19 setting. In his speech Mr Campa covers: The measures taken in relation to the COVID-19 pandemic. In particular, Mr Campa states that on “the return to … Continue Reading
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