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Topic: Capital adequacy

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Commission progress report on reducing NPLs in EU

On 12 June 2019, the European Commission (Commission) published a communication containing its fourth progress report on the reduction of non-performing loans (NPLs) and further risk reduction in the Banking Union.  The report summarises recent efforts in the reduction of NPLs in the EU, providing data on the progress made in each Member State. As … Continue Reading

PRA modification of consent of definition of capital rules

On 10 June 2019, the PRA published a direction for modification by consent, modifying in its Rulebook the Definition of Capital 7.1 and 7.5. In an accompanying press release, the PRA notes that, following amendments to Article 26(3) of the Capital Requirements Regulation (CRR), firms may classify as Common Equity Tier 1 (CET1) instruments subsequent … Continue Reading

Regulation amending ITS on supervisory disclosure under CRD IV published in OJ

On 5 June 2019, there was published in the Official Journal of the EU, Commission Implementing Regulation (EU) 2019/912 of 28 May 2019 amending Implementing Regulation (EU) No 650/2014 laying down implementing technical standards with regard to the format, structure, contents list and annual publication date of the information to be disclosed by Member State … Continue Reading

HM Treasury letter concerning remuneration and CRD V

On 23 May 2019, HM Treasury published a letter from John Glen MP (Economic Secretary to the Treasury) to Lord Boswell (Chair, House of Lords’ European Union Committee) providing further clarification on the remuneration proposals developed in the Capital Requirements Directive V (CRD V). The letter makes the following points: the CRD V builds on … Continue Reading

ESMA consults on indices and recognised exchanges under the CRR

On 24 May 2019, the European Securities and Markets Authority (ESMA) published a consultation paper proposing amendments to the main indices and recognised exchanges under the Capital Requirements Regulation (CRR). Article 197(8) of the CRR mandates ESMA to draft implementing technical standards (ITS) establishing the criteria to identify which are the main indices and recognised … Continue Reading

EBA consultation on RTS for derivative transaction mapping

On 2 May 2019, the European Banking Authority (EBA) published a consultation on the draft Regulatory Technical Standards (RTS) on the mapping of derivative transactions to risk categories, on supervisory delta formula for interest rate options and on determination of long or short positions in the standardised approach for counterparty credit risk under Article 277(5) … Continue Reading

Regulation amending CRR on statutory prudential backstop for NPLs published in OJ

On 25 April 2019, there was published in the Official Journal of the EU (OJ) Regulation (EE) 2019/630 of the European Parliament and of the Council of 17 April 2019 amending Regulation (EU) No 575/2013 as regards minimum loss coverage for non-performing exposures. The rules contained in the Regulation set capital requirements applying to banks … Continue Reading

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
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