The European Banking Authority (EBA) has published final draft regulatory technical standards (RTS) on the method for the identification of the geographical location of relevant credit exposures. The purpose of the draft RTS is to ensure a consistent EU wide implementation of the countercyclical buffer to protect against excess credit growth.
The countercyclical buffer was introduced by the CRD IV reforms so that national authorities could protect the banking system against potential losses when excess credit growth is associated with an increase in system wide risk.
In order to establish their exact institution-specific buffer rate, banks with relevant exposures to different jurisdictions have to assess the proportion of their exposures in each jurisdiction and identify the geographical location of their relevant credit exposures. The draft RTS specify in detail how the geographical location of credit, trading and securisation exposures will be determined.
The draft RTS also include proportionality and materiality considerations for institutions with limited foreign exposures. This is intended to alleviate the regulatory burden for smaller institutions, which tend to have more limited foreign trading activity.
View Final draft regulatory technical standards on the method for the identification of the geographical location of the relevant credit exposures under article 140(7) of the Capital Requirements Directive, 20 December 2013