On 29 April 2022, the European Banking Authority (EBA) issued its response to the European Commission’s call for advice on the review of the macro-prudential framework.
Article 513 of the Capital Requirements Regulation (CRR) requires the Commission to complete a review of the macro-prudential provisions in the CRR and Capital Requirements Directive IV (CRD IV) by June 2022 and, if appropriate, to submit a legislative proposal to the European Parliament and to the Council by December 2022. As part of this review, in June 2021, the Commission issued a request to the EBA, the European Systemic Risk Board and the European Central Bank for advice on four aspects, namely: (1) the overall design and functioning of the buffer framework, (2) missing or obsolete instruments, (3) internal market considerations and (4) global risks.
The EBA’s advice includes the following recommendations to:
- Rebuild regulatory capital buffers to sufficient levels so that they can be released when needed again in the future.
- Undertake a comprehensive evaluation of the interaction of macro-prudential measures with other capital requirements, such as leverage ratio, own funds and eligible liabilities requirements.
- Maintain clear roles and responsibilities of the different authorities involved in micro-prudential and macro-prudential policy as well as close coordination between them.
- Include a legal mandate in the CRD IV to develop methodologies covering both the identification of other systemically important institutions and the setting of buffer rates.
- Simplify the text of the CRD IV and the CRR around governance procedures for some macro-prudential measures.
- Perform further assessments on the ability of current macro-prudential tools to address environmental, crypto assets and cyber security risks.
- Establish an oversight and monitoring system for non-bank lenders and enlarge the scope of the macro-prudential framework to cover non-bank lenders.