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Topic: Capital adequacy

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EBA flags to the EU Commission elements of the definition of credit institution and aspects of the scope of authorisation

On 18 September 2020, the European Banking Authority (EBA) published an opinion addressed to the European Commission to raise awareness as to the opportunity to clarify certain issues relating to the definition of credit institution in the upcoming review of the Capital Requirements Regulation (CRR) and the Capital Requirements Directive IV. The opinion illustrates that … Continue Reading

ECB finalises guide to assessing how banks calculate counterparty credit risk

On 18 September 2020, the European Central Bank (ECB) published its finalised guide outlining the methodology it uses to assess how euro area banks under its supervision calculate their exposure to counterparty credit risk (CCR) and advanced credit valuation adjustment (CVA) risk, following a public consultation which ended on 18 March 2020. The Capital Requirements … Continue Reading

COVID-19: PRA ends temporary approach to value-at-risk back-testing exceptions

On 27 August 2020, the Prudential Regulation Authority (PRA) published a statement setting out its decision to terminate its temporary approach to value-at-risk (VAR) back-testing exceptions from 30 September 2020. This statement follows the PRA’s review of the temporary approach that allowed firms to offset increases due to new back-testing exceptions through a commensurate reduction … Continue Reading

EBA consults on guidelines on criteria for the use of data inputs in the risk-measurement model referred to in Article 325bc under Article 325bh(3) of the CRR

 On 12 August 2020, the European Banking Authority (EBA) published a consultation paper on draft guidelines that clarify the conditions to be met by the data related to modellable risk factors, which institutions should use in their expected shortfall (ES) calculations. The guidelines clarify that the data used to compute the ES risk measure should … Continue Reading

FCA announces proposals to update Dual-regulated firms Remuneration Code

On 3 August 2020, the FCA published Consultation Paper 20/14: Updating the Dual regulated firms Remuneration Code to reflect CRD V (CP20/14). The following types of regulated firm need to read CP20/14: Credit institutions (banks and building societies). Designated investment firms (those designated for prudential regulation by the PRA). Firms from outside the European Economic … Continue Reading

EBA publishes final draft technical standards on disclosure and reporting on MREL and TLAC

On 3 August 2020, the European Banking Authority (EBA) published final draft Implementing Technical Standards (ITS) on disclosure and reporting on the global systemically important institution (G-SII) requirement for own funds and eligible liabilities (TLAC) and the minimum requirements for own funds and eligible liabilities (MREL). This is the first time that the EBA has … Continue Reading

PRA consults on implementation of CRD V

On 31 July 2020, the PRA published Consultation Paper 12/20: Capital Requirements Directive V (CP12/20). In CP12/20 the PRA sets out proposed changes to its rules, supervisory statements (SS) and statements of policy (SoP) in order to implement elements of the Capital Requirements Directive V (CRD V). CP12/20 covers: The PRA’s proposed implementation of changes … Continue Reading

PRA Policy Statement: Asset encumbrance

On 27 July 2020, the PRA published Policy Statement 18/20 ‘Asset encumbrance’ (PS18/20). In PS18/20 the PRA provides feedback to responses to Consultation Paper 24/19 ‘Asset encumbrance’ (CP24/19). It also contains updated versions of: Supervisory Statement (SS) 24/15 ‘The PRA’s approach to supervising liquidity and funding risks’. SS9/17 ‘Recovery planning’. SS20/15 ‘Supervising building societies’ treasury … Continue Reading

EBA consults on technical standards on indirect subscription of MREL instruments within groups

On 27 July 2020, the European Banking Authority (EBA) issued a public consultation on draft Regulatory Technical Standards (RTS)  specifying the methods to avoid that instruments indirectly subscribed by the resolution entity for the purpose of meeting the minimum requirement for own funds and eligible liabilities (MREL), applicable to entities that are not themselves resolution … Continue Reading

EBA consults on draft RTS on the determination of indirect exposures to underlying clients of derivatives and credit default derivatives under Article 390(9) CRR2

On 23 July 2020, the European Banking Authority (EBA) issued a consultation paper on draft regulatory technical standards (RTS) specifying how institutions should determine exposures arising from derivative and credit derivative contracts not entered directly into with a client but whose underlying debt or equity instrument was issued by a client. Article 390(5) of the … Continue Reading

The EBA observes an increase in high earners in 2018 and the persistence of differences in remuneration practices across the EU

On 22 July 2020, the European Banking Authority published its report on benchmarking of remuneration practices in EU banks for the financial years 2017 and 2018 and high earners data for 2018. The data shows that in 2018, the number of high earners in EU banks receiving a remuneration of more than EUR 1 million … Continue Reading

EBA is looking into ways to reduce reporting costs

On 22 July 2020, the European Banking Authority (EBA) issued a questionnaire addressed to all European banks and a call for case studies to collect evidence on reporting costs as well as industry views on ways to reduce such costs and make supervisory reporting more efficient. The EBA is mandated by Article 430(8) of the … Continue Reading

EBA consults on guidelines specifying the conditions for the substitution approach in the context of “tri-party transactions” for large exposures purposes

On 22 July 2020, the European Banking Authority (EBA) issued a consultation paper detailing on the three conditions institutions should comply with when they decide to make use of the alternative treatment with regard to tri-party repurchase agreements facilitated by a tri-party agent. Article 403(3) of the Capital Requirements Regulation (CRR) provides that an institution … Continue Reading

EBA consults on draft technical standards on default probabilities and loss given default for default risk model under the internal approach for market risk

On 22 July 2020, the European Banking Authority (EBA) issued a consultation paper on draft regulatory technical standards on default probabilities (PDs) and loss given default (LGD) for default risk model for institutions using the new Internal Model Approach (IMA) under the Fundamental Review of the Trading Book (FRTB). Institutions using an alternative internal model … Continue Reading

HMT consults on updating the UK’s prudential regime before the end of the transition period

On 16 July 2020, HM Treasury (HMT) issued a consultation document on updating the UK’s prudential regime before the end of the transition period. Key points in the consultation document include: The Government will transpose EU legislation which applies before 23:00 GMT on 31 December 2020 and this includes the CRD V which must be … Continue Reading

ECB guideline on definition of default for banks directly supervised by national supervisors

On 8 July 2020, the European Central Bank (ECB) issued guidance on the definition of the materiality threshold for banks that are directly supervised by Member State national competent authorities (NCAs). The guidance specifies how NCAs shall exercise the discretion conferred on competent authorities under Article178(2)(d) of the Capital Requirements Regulation in relation to less … Continue Reading

Corrigendum to CRD V

On 3 July 2020, there was published in the Official Journal of the EU a Corrigendum to the Capital Requirements Directive V (CRD V). The Corrigendum makes amendments to the following articles of the CRD V: 21a (approval of financial holding companies and mixed financial holding companies), 21b (intermediate EU parent undertaking), 104a (additional own … Continue Reading

Basel Committee reports on Basel III implementation

On 6 July 2020, the Basel Committee on Banking Supervision (Basel Committee) published a report setting out the adoption status of the Basel III standards in member jurisdictions as of end-May 2020. The report notes that as of end-May 2020, all 27 member jurisdictions have risk-based capital rules, liquidity coverage ratio regulations and capital conservation … Continue Reading

PRA policy statement reconciling capital requirements and macro-prudential buffers under Pillar 2A

On 6 July 2020, the PRA published Policy Statement 15/20 ‘Pillar 2A: Reconciling capital requirements and macroprudential buffers’ (PS15/20). PS15/20 is relevant to PRA-authorised UK banks, building societies and PRA regulated investment firms. In PS15/20 the PRA provides feedback to responses to Consultation Paper 2/20 ‘Pillar 2A: Reconciling capital requirements and macroprudential buffers’ (CP2/20). It … Continue Reading

EBA guidelines on treatment of structural FX under the CRR

On 1 July 2020, the European Banking Authority (EBA) issued final guidelines concerning the treatment of structural foreign exchange (FX) under the Capital Requirements Regulation (CRR). The purpose of the guidelines is to ensure harmonised EU interpretation and implementation of Article 352(2) of the CRR which deals with the concept and specific application of structural … Continue Reading

Corrigendum to CRD IV

On 26 June 2020, there was published in the Official Journal of the EU, a Corrigendum to the CRD IV. The Corrigendum amends: Point (d)(iv) of Article 141(8) CRD IV so that it reads: ‘(iv) the payment of variable remuneration or discretionary pension benefits, whether by creation of a new obligation to pay, or payment … Continue Reading

FCA discussion paper on IFR and IFD

On 23 June 2020, the FCA published Discussion Paper 20/2: Prudential requirements for MiFID investment firms (DP20/2). The UK Government supported the overall goals of the EU prudential regime for investment firms (Investment Firm Directive / Investment Firm Regulation) (IFR/IFD) and in the Chancellor’s statement in the budget the Government confirmed its intention to legislate … Continue Reading

Basel Committee proposes amendment to capital rules for non-performing loan securitisations

On 23 June 2020, the Basel Committee on Banking Supervision (Basel Committee) published a technical amendment, ‘Capital treatment of securitisations of non-performing loans’. The technical amendment establishes a 100% risk weight for certain senior tranches of non-performing loan securitisations. The risk weight applicable to the other positions are determined by the existing hierarchy of approaches, … Continue Reading
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