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Topic: Capital adequacy

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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

COVID-19: European legislators approve CRR “quick fix”

On 18 June 2020 the European Parliament adopted its legislative report on the targeted amendments to the Capital Requirements Regulation (CRR “quick fix”). The Parliament’s position reflects a compromise agreed with Member States in informal negotiations that preceded the vote. This paves a way for a formal adoption, publication in the EU Official Journal and … Continue Reading

ESRB Recommendation cancelling certain macro-prudential reports

On 19 June 2020, there was published in the Official Journal of the EU the decision of the European Systemic Risk Board (ESRB) of 2 June 2020 on the cancellation of certain reports on actions and measures taken pursuant to Recommendation ESRB/2014/1 and Recommendation ESRB/2015/2 of the ESRB. The decision entered into force on 3 … Continue Reading

EBA launches consultation on technical standards specifying the prudential treatment of software assets

On 9 June 2020, the European Banking Authority (EBA) launched a consultation on draft Regulatory Technical Standards (RTS) specifying the prudential treatment of software assets. As the banking sector is moving towards a more digital environment, the aim of these draft RTS is to achieve an appropriate balance between the need to maintain a certain … Continue Reading

EBA starts delivering on the implementation of the new regulatory framework for investment firms

On 4 June 2020, the European Banking Authority (EBA) outlined its roadmap for the implementation of the new regulatory framework for investment firms and launched a public consultation on its first set of regulatory deliverables on prudential, reporting, disclosures and remuneration requirements. The roadmap outlines the EBA’s work plan for each of the mandates laid … Continue Reading

Basel framework: FAQs

On 5 June 2020, the Basel Committee on Banking Supervision (Basel Committee) issued a frequently asked questions (FAQs) document to promote the consistent interpretation of the Basel framework. The FAQs cover a range of issues relating to the reform of benchmark reference rates and clarifications relating to the standardised approach to operational risk. The FAQs … Continue Reading

EBA consults on technical standards on capital requirements of non-modellable risks under the FRTB

On 4 June 2020, the European Banking Authority (EBA) issued a consultation paper regarding draft regulatory technical standards (RTS) on the calculation of the stress scenario risk measure under Article 325bk(3) of the revised Capital Requirements Regulation (CRR2). The CRR2 implements, among other things, the revised requirements to compute own funds requirements for market risk … Continue Reading

EBA roadmap on investment firms EBA mandates arising from IFR/IFD

On 2 June 2020, the European Banking Authority (EBA) published a roadmap setting out its intentions concerning the mandates given to it under the Investment Firm Directive (IFD) and the Investment Firm Regulation (IFR). The EBA’s mandates under the IFD and IFR cover a broad range of areas including 18 regulatory technical standards, 3 implementing … Continue Reading

EBA consults on draft amended technical standards on own funds and eligible liabilities

On 29 May 2020, the European Banking Authority (EBA) published a consultation paper on the draft amended regulatory technical standards (RTS) on own funds and eligible liabilities. Since their entry into force, the RTS on own funds have significantly enhanced regulatory harmonisation of prudential rules and contributed to strengthening the quality of regulatory capital. With … Continue Reading

SRB publishes MREL policy under the Banking Package

In our April 2020 Banking Reform updater we considered the amendments that the Bank Recovery and Resolution Directive II make focussing in particular on total loss-absorbing capacity, the minimum requirements for own funds and eligible liabilities (MREL) and the changes to contractual recognition of bail-in. We also covered the changes to the single resolution mechanism … Continue Reading

PRA Policy Statement 11//20 ‘Credit risk: Probability of Default and Loss Given Default estimation’

On 14 May 2020, the PRA published Policy Statement 11/20 ‘Credit risk: Probability of Default and Loss Given Default estimation’ (PS11/20). In PS11/20 the PRA provides feedback to Consultation Paper 21/19 ‘Credit risk: Probability of Default and Loss Given Default estimation’ (CP21/19). In CP21/19 the PRA consulted on proposals to implement the European Banking Authority’s … Continue Reading

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

On 6 May 2020, the European Banking Authority (EBA) published final guidelines on credit risk mitigation (CRM) in the context of the advanced internal ratings-based (A-IRB) approach. The guidelines clarify the application of the CRM provisions currently laid down in the Capital Requirements Regulation (CRR) applicable to institutions using the A-IRB approach. In particular, they … Continue Reading

EBA updated ITS package for 2021 benchmarking exercise includes IFRS9 template

On 4 May 2020, the European Banking Authority (EBA) published an update to its implementing technical standards (ITS) on benchmarking of internal approaches. The updated ITS include all benchmarking portfolios that will be used for the 2021 exercise. To analyse potential sources of variability stemming from the implementation of the new accounting standard (IFRS 9), … Continue Reading

EBA publishes final draft technical standards on specific reporting requirements for market risk

On 4 May 2020, the European Banking Authority (EBA) published final draft Implementing Technical Standards (ITS) on specific reporting requirements for market risk. The final ITS introduce the first elements of the Fundamental Review of the Trading Book (FRTB) into the EU prudential framework by means of a reporting requirement. The ITS are expected to … Continue Reading

EBA publishes final guidelines on the methodology to determine the weighted average maturity of contractual payments due under the tranche of a securitisation transaction

On 4 May 2020, the European Banking Authority (EBA) published its final guidelines on the determination of the weighted average maturity (WAM) of the contractual payments due under the tranche of a securitisation transaction, as laid down in the Capital Requirements Regulation (as amended). The guidelines have been developed in accordance with Article 257(4) of … Continue Reading

BCBS progress report on implementation of principles for effective risk data aggregation and risk reporting: April 2020

On 29 April 2020, the Basel Committee on Banking Supervision (Basel Committee) published its latest progress report on banks’ implementation of the Principles for effective risk data aggregation and reporting (the Principles). The progress report is based on the results of a self-assessment survey of authorities with supervisory responsibility for global systemically important banks (G-SIBs). … Continue Reading
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