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Topic: Capital adequacy

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EBA update on ITS package for 2020 benchmarking exercise

On 16 July 2019, the European Banking Authority (EBA) published an update to its implementing technical standards (ITS) on benchmarking of internal approaches to reflect comments received following an earlier consultation in December 2018 (see previous blog post). The ITS include all benchmarking portfolios that will be used for the 2020 benchmarking exercise. A zip … Continue Reading

EBA report on the monitoring of the LCR implementation in the EU

On 12 July 2019, the European Banking Authority (EBA) published its first report on the monitoring of liquidity coverage ratio (LCR) implementation in the EU. The EBA’s monitoring of the LCR contributes to a consistent application of EU law and promotes common supervisory approaches and practices in this area. In the report, the EBA has … Continue Reading

EBA report on progress made on its roadmap to repair IRB models

On 9 July 2019, the European Banking Authority (EBA) published a progress report on the roadmap set out in 2016 to repair internal models used to calculate own funds requirements for credit risk under the internal ratings based (IRB) approach. The EBA’s IRB roadmap was set up to address concerns about undue variability of own … Continue Reading

ECB guide to internal models

On 8 July 2019, the European Central Bank (ECB) published finalised chapters to its guide to internal models covering credit risk, market risk and counterparty credit risk. These risk type-specific chapters complement earlier chapters on general topics such as internal governance and audit.   Articles 143, 283 and 363 of the Capital Requirements Regulation (CRR) … Continue Reading

FSB publishes review of TLAC Standard

On 3 July 2019, the Financial Stability Board (FSB) published a technical review of the implementation of the total loss-absorbing capacity (TLAC) standard for global systemically important banks (G-SIBs) in resolution. The review finds that: progress has been steady and significant in both the setting of external TLAC requirements by authorities and the issuance of … Continue Reading

Finalisation of Basel III reforms in the EU

The European Commission’s work on the finalisation of the Basel III reforms in the European Union is gathering pace. Following its April 2018 public consultation on an additional set of prudential reforms that will implement in European law the December 2017 Basel Committee on Banking Supervision’s standard (Basel III: Finalising post-crisis reforms), the Commission has … Continue Reading

EBA issues 2020 EU-wide stress test methodology for discussion

On 25 June 2019, the European Banking Authority (EBA) published the 2020 EU-wide stress test draft methodology, templates and template guidance which will be discussed with the industry. The 2020 exercise will assess EU banks’ resilience to an adverse economic shock and inform the 2020 Supervisory Review and Evaluation Process. The final methodology will be … Continue Reading

Basel Committee publishes revisions to leverage ratio disclosure requirements

On 26 June 2019, the Basel Committee on Banking Supervision (Basel Committee) published revisions to leverage ratio disclosure requirements by setting out additional requirements for banks to disclose their leverage ratios based on quarter-end and on daily average values of securities financing transactions. The revisions are applicable to the Pillar 3 disclosure requirements associated with … Continue Reading

Basel Committee publishes leverage ratio treatment of client cleared derivatives

On 26 June 2019, the Basel Committee on Banking Supervision (Basel Committee) published a document setting out revisions to the leverage ratio standard text that will serve to implement the treatment of client cleared derivatives. This revision will apply to the version of the leverage ratio standard that will serve as the Pillar 1 minimum … Continue Reading

SRB updates MREL policy to reflect new Capital Requirements Regulation

On 25 June 2019, the Single Resolution Board (SRB) published an update on its policy on the minimum requirement for own funds and eligible liabilities (MREL) in light of the publication of the Banking Package in the Official Journal of the EU on 7 June 2019. The update is in the form of an addendum … Continue Reading

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

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

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

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

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
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