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Topic: Capital adequacy

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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

ECB finalises guides on ICAAP and ILAAP

On 12 November 2018, the European Central Bank (ECB) published its expectations regarding institutions’ internal capital and liquidity adequacy assessment processes. Two guides were published: ECB guide to the internal capital adequacy assessment process (ICAAP); and ECB guide to the internal liquidity adequacy assessment process (ILAAP). The purpose of both guides are to provide transparency … Continue Reading

Commission Implementing Regulation as regards prudent valuation for supervisory reporting

On 9 November 2018, there was published in the Official Journal of the EU (OJ), Commission Implementing Regulation (EU) 2018/1627 of 9 October 2018 amending Implementing Regulation (EU) No. 680/2014 as regards prudent valuation for supervisory reporting. Commission Implementing Regulation (EU) No. 680/2014 specifies the modalities according to which institutions are required to report information … Continue Reading

EBA final guidance on management of non-performing and forborne exposures

On 31 October 2018, the European Banking Authority (EBA) published final guidelines on management of non-performing and forborne exposures. The guidelines are intended to ensure that EU credit institutions have adequate prudential tools and frameworks in place to manage effectively their non-performing exposures (NPEs) and to achieve a sustainable reduction on their balance sheets. The … Continue Reading

Delegated Regulation amending Commission Delegated Regulation on LCR published in OJ

On 30 October 2018, there was published in the Official Journal of the European Union (OJ) Commission Delegated Regulation (EU) 2018/1620 of 13 July 2018 amending Delegated Regulation (EU) 2015/61 to supplement Regulation (EU) No 575/2013 of the European Parliament and the Council with regard to the liquidity coverage requirement for credit institutions. The Delegated … Continue Reading

ESA joint committee consultation on amending ITS on mapping credit assessments of ECAIs under CRR

On 26 October 2018, the Joint Committee of the European Supervisory Authorities (the Committee) comprised of ESMA, the EBA and EIOPA, published a consultation paper (the Consultation) on the draft  implementing technical standards (ITS) amending the implementing regulation (the Implementing Regulation) on the mapping of external credit assessment institutions (ECAI) under the Capital Requirements Regulation … Continue Reading

Regulation amending CRR Implementing Regulation published in OJ

On 22 October 2018, there was published in the Official Journal of the European Union (OJ) Commission implementing regulation (EU) 2018/1580 of 19 October 2018 amending Implementing Regulation (EU) 2015/2197 laying down implementing technical standards with regard to closely correlated currencies in accordance with Regulation (EU) No 575/2013 of the European Parliament and of the … Continue Reading

Statement on leverage ratio window-dressing behaviour

On 18 October 2018, the Basel Committee on Banking Supervision (Basel Committee) issued a statement on ‘leverage ratio window-dressing behaviour’. This is a form of temporary reductions of transaction volumes in key financial markets around reference dates resulting in the reporting and public disclosure of elevated leverage ratios. The Basel Committee states that window dressing … Continue Reading

Leverage ratio treatment of client cleared derivatives

On 18 October 2018, the Basel Committee on Banking Supervision (Basel Committee) issued a consultative document seeking views on whether a targeted and limited revision of the leverage ratio’s treatment of client cleared derivatives may be warranted. The leverage ratio complements the risk-based capital requirements by providing a safeguard against levels of leverage and by … Continue Reading
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