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Topic: Capital adequacy

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Commission Implementing Decision on third country equivalence of Argentina for purposes of treatment of exposures under CRR published in OJ

On 1 April 2019, there was published in the Official Journal of the EU (OJ), Commission Implementing Decision (EU) 2019/536 of 29 March 2019 amending Implementing Decision 2014/908/EU as regards the lists of third countries and territories whose supervisory and regulatory requirements are considered equivalent for the purposes of the treatment of exposures in accordance … Continue Reading

Benchmarking exercise – amendments to Commission Implementing Regulation (EU) 2016/2070

Commission Implementing Regulation (EU) 2016/2070 specifies institutions’ reporting requirements to the European Banking Authority (EBA) and to Member State competent authorities in order to enable the EBA and Member State competent authorities to carry out their assessments of internal approaches in accordance with Article 78 of Directive 2013/36/EU (the benchmarking exercise). On 29 March 2019, … Continue Reading

European Commission Communication on progress on developing the CMU

On 15 March 2019, the European Commission published a communication on its progress on developing the Capital Markets Union (CMU). The communication outlines the rationale of the CMU, as well as the progress achieved so far in developing the CMU. The communication makes three conclusions: the European Commission has now delivered the measures it committed … Continue Reading

PRA Policy Statement on credit risk mitigation

On 13 March 2019, the PRA published Policy Statement 8/19: Credit risk mitigation: Eligibility of guarantees as unfunded credit protection (PS8/19). PS8/19 is relevant to all firms bound by the Capital Requirements Regulation (CRR). In PS8/19 the PRA provides feedback on its earlier consultation (Consultation Paper 6/18: Credit risk mitigation: Eligibility of guarantees as unfunded … Continue Reading

EBA guidelines on the estimation of LGD under an economic downturn

On 6 March 2019, the European Banking Authority (EBA) published final guidelines specifying how institutions should quantify the estimation of loss given default (LGD) appropriate for conditions of an economic downturn. In particular, the guidelines focus on requirements for the quantification of the calibration target used for downturn LGD estimation. The guidelines are an addendum … Continue Reading

Investment firms: Presidency and Parliament agree on a new regulatory and supervision framework

On 26 February 2019, the Presidency of the Council of the EU announced that provisional agreement had been reached with the European Parliament on the legislative proposals for a new prudential regime for investment firms. The press release makes the following points: investment firms will be subject to the same key measures in the CRD … Continue Reading

EBA draft guidelines on credit risk mitigation for institutions applying the IRB approach with own estimates of LGD

On 25 February 2019, the European Banking Authority (EBA) issued a consultation on draft guidelines on credit risk mitigation in the context of the advanced internal rating-based (A-IRB) approach. The draft guidelines are intended to clarify the credit risk mitigation (CRM) framework in the context of the A-IRB approach. This is done by focussing on … Continue Reading

ECB conducts sensitivity analysis of liquidity risk as its 2019 stress test

On 6 February 2019, the European Central Bank (ECB) launched a sensitivity analysis of liquidity risk to assess the ability of the banks it directly supervises to handle idiosyncratic liquidity shocks. The exercise will constitute the supervisory stress test of 2019. ECB banking supervision is required to organise annual supervisory stress tests under Article 100 … Continue Reading

EBA final guidelines on high risk exposures under CRR

On 17 January 2019, the European Banking Authority (EBA) published its final report on the guidelines on specification of types of exposures to be associated with high risk under Article 128(3) of the Capital Requirements Regulation (CRR). Article 128(3) CRR provides a mandate to the EBA to draft guidelines that specify which types of exposures, … Continue Reading

Credit risk mitigation: eligibility of financial collateral

On 10 January 2019, the PRA published Consultation Paper 1/19: Credit risk mitigation – eligibility of financial collateral (CP1/19). In CP1/19 the PRA sets out proposed changes to Supervisory Statement 17/13: Credit risk mitigation (SS17/13) to clarify expectations regarding the eligibility of financial collateral as funded credit protection under Part Three, Title II, Chapter 4 … Continue Reading

ECB recommendation on dividend distribution policies

On 10 January 2019, the European Central Bank (ECB) published a recommendation on dividend distribution policies. The ECB has also published a letter that it has sent to credit institutions concerning variable remuneration policy. The letter note that, as with dividend distribution policies in the recommendation, an institution’s variable remuneration policy may have a significant … Continue Reading

EBA releases its annual assessment of the consistency of internal model outcomes

On 10 January 2019, the European Banking Authority (EBA) published two reports on the consistency of risk weighted assets across all EU institutions authorised to use internal approaches for the calculation of capital requirements. The reports cover credit risk for high and low default portfolios, as well as market risk. The results confirm previous findings, … Continue Reading

ECB publishes consolidated guide to assessments of licence applications

On 9 January 2019, the European Central Bank (ECB) has published a consolidated version of its guide to assessments of licence applications. The text, which is not legally binding, combines the content of the first guide published in March 2018 and that of Part 2 (which focuses on capital requirements and programme of operations, including … Continue Reading

PRA Policy Statement – liquidity reporting

On 8 January 2019, the PRA published Policy Statement 1/19: Liquidity reporting – FSA047, FSA048 and PRA110 (PS1/19). In PS1/19 the PRA provides feedback to the responses to Consultation Paper 22/18: Liquidity reporting – FSA047 and FSA048 and the proposal in Consultation Paper 16/18: Regulatory reporting: occasional consultation paper to correct the level of consolidation … Continue Reading

EBA consults on amendments to Regulation on benchmarking of internal models

On 18 December 2018, the European Banking Authority (EBA) issued a consultation paper on proposed amendments to the European Commission’s Implementing Regulation on the benchmarking of internal models. The proposed amendments seek to adjust the benchmarking portfolios and reporting requirements in view of the benchmarking exercise that will be carried out in 2020. The proposed … Continue Reading

EBA final guidelines on disclosure of non-performing and forborne exposures

On 17 December 2018, the European Banking Authority (EBA) published final guidelines on disclosure of non- performing and forborne exposures. The aims of the guidelines are to ensure the provision of meaningful information to market participants on credit institutions’ asset quality and to gain a better insight into the distribution and level of collateralisation of … Continue Reading

PRA Policy Statement 32/18: the systemic risk buffer – updates to the Statement of Policy

On 13 December 2018, the PRA published Policy Statement 32/18: the systemic risk buffer – updates to the Statement of Policy (PS32/18). PS32/18 is relevant to ring-fenced bodies within the meaning of section 142A of the Financial Services and Markets Act 2000 and large building societies that hold more than £25 billion in deposits (where … Continue Reading

Basel Committee consults on revisions to leverage ratio Pillar 3 disclosure requirements

On 13 December 2018, the Basel Committee on Banking Supervision (Basel Committee) issued a consultative document seeking potential revisions to the disclosure requirements for the leverage ratio. The Basel Committee is particularly concerned about “window-dressing”, in the form of temporary reductions of transaction volumes in key financial markets around reference dates resulting in the reporting … Continue Reading

FCA Discussion Paper on patient capital and authorised funds

On 12 December 2018, the FCA published Discussion Paper 18/10: Patient Capital and Authorised Funds (DP18/10). The FCA has published DP18/10 alongside a consultation paper on changes to permitted links rules to facilitate investment in patient capital. In DP18/10 the FCA explores the impact of the regulatory regime on investment in patient capital assets through … Continue Reading

Basel Committee finalises Pillar 3 disclosure framework standards following third phase review

On 11 December 2018, the Basel Committee on Banking Supervision (Basel Committee) published its final standards on the updated framework for Pillar 3 disclosure requirements (the Standards). The Basel Committee has updated the Pillar 3 disclosure requirements following a consultation that took place between 27 February 2018 and 25 May 2018. The updated Pillar 3 … Continue Reading

Basel Committee meeting discusses the challenges ahead

On 29 November 2018, the Basel Committee on Banking Supervision (Basel Committee) issued a press release following its meeting on 26 – 27 November 2018. At this meeting the Basel Committee: agreed to a set of targeted revisions to the market risk framework which will enhance the risk sensitivity of the standardised approach, revise the … Continue Reading

EBA provides overview of Member State competent authorities implementation and transposition of the CRD IV

On 30 November 2018, the European Banking Authority EBA published an updated overview of Member States implementation and transposition of the CRD IV and CRR. It also provides a detailed picture of the use of options and national discretions by each Member State competent authority as well as information on the general criteria and methodologies … Continue Reading

ECB Regulation on materiality threshold for credit obligations past due

On 26 November 2018, there was published in the Official Journal of the EU, Regulation (EU) 2018/1845 of the European Central Bank (ECB) of 21 November 2018 on the exercise of the discretion under Article 178(2)(d) of the Capital Requirements Regulation in relation to the threshold for assessing the materiality of credit obligations past due. … Continue Reading
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