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Topic: Capital adequacy

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EBA updates its report on liquidity measures and confirms banks’ solid liquidity position

On 17 December 2020, the European Banking Authority (EBA) published a report on liquidity measures. The report monitors and evaluates the liquidity coverage requirements currently in place in the EU. The liquidity coverage ratio (LCR) of EU banks stood at around 166% in June 2020, materially above the minimum threshold of 100%. The report shows … Continue Reading

EBA publishes final draft technical standards on capital requirements of non-modellable risks under the FRTB

On 17 December 2020, the European Banking Authority (EBA) published a final report containing draft Regulatory Technical Standards (RTS) on the capitalisation of non-modellable risk factors (NMRFs) for institutions using the FRTB Internal Model Approach (IMA) implemented in EU as a reporting requirement.  The RTS have been developed in accordance with Article 325bk(3) of the … Continue Reading

Tackling non-performing loans (NPLs) to enable banks to support EU households and businesses

On 16 December 2020, the European Commission published its strategy to prevent a future build-up of non-performing loans (NPLs) across the EU, as a result of the COVID-19 pandemic. The strategy has four main goals: Further developing secondary markets for distressed assets. A key step in this process would be the adoption of the Commission’s … Continue Reading

EBA consults on technical standards to calculate risk weights of collective investment undertakings

On 16 December 2020, the European Banking Authority (EBA) issued a consultation paper on regulatory technical standards (RTS) on the calculation of risk-weighted exposure amounts of collective investment undertakings (CIUs) in line with the Capital Requirements Regulation. The proposed draft RTS, which will contribute to the calculation of own funds requirements for the exposures in … Continue Reading

EBA publish final draft technical standards on the prudential treatment of investment firms

On 16 December 2020, the European Banking Authority (EBA) issued a final report containing seven final draft regulatory technical standards (RTS) on the prudential treatment of investment firms. The first draft RTS included in the final report have been developed for the mandates related to the authorisation of certain credit institutions. Article 8a(6)(a) of the … Continue Reading

EBA updates its Basel III impact study following the EU Commission’s call for advice

On 15 December 2020, the European Banking Authority (EBA) published its updated ad-hoc impact study on the implementation of Basel III in the EU in response to the European Commission’s call for advice. The study is based on a sample of 99 banks and has a reference date of December 2019. Under the full implementation … Continue Reading

Commission adopts Delegated Regulation on specialised lending exposures under CRR

On 14 December 2020, the European Commission adopted a Delegated Regulation supplementing the Capital Requirements Regulation (CRR) with regard to regulatory technical standards (RTS) for assigning risk weights to specialised lending exposures together with an annex. The RTS specify how institutions should take into account the factors of financial strength, political and legal environment, transaction … Continue Reading

EBA formal opinion on Commission amendments to RTS on the assessment methodology for IRB approach

On 14 December 2020, the European Banking Authority (EBA) published a formal opinion on the European Commission’s amendments of the final draft regulatory technical standards (RTS) on the specification of the assessment methodology for competent authorities regarding compliance of an institution with the requirements to use the internal ratings based (IRB) approach in accordance with … Continue Reading

Basel III monitoring results based on end-December 2019 data published by the Basel Committee

On 10 December 2020, the Basel Committee on Banking Supervision issued the results of its latest Basel III monitoring exercise, based on data as of 31 December 2019. The report sets out the impact of the Basel III framework that was agreed in 2010 as well as the effects of the Basel Committee’s finalisation of … Continue Reading

EBA updates impact of the Basel III reforms on EU banks’ capital

On 10 December 2020, the European Banking Authority (EBA) issued a report on the impact of implementing the final Basel III reforms in the EU. The full Basel III implementation, in 2028, would result in an average increase of 15.4% on the current Tier 1 minimum required capital of EU banks. The results do not … Continue Reading

EBA final draft technical standards on the treatment of non-trading book positions subject to foreign-exchange risk or commodity risk under the FRTB framework

On 3 December 2020, the European Banking Authority (EBA) published final draft regulatory technical standards (RTS) on how institutions are to calculate the own funds requirements for foreign-exchange and commodity risk stemming from banking book positions under the Fundamental Review of the Trading Book (FRTB) standardised and internal model approaches. The EBA has prepared the … Continue Reading

Corrigenda to IFR and IFD

On 2 December 2020, there was published in the Official Journal of the EU the following corrigenda to the Investment Firms Regulation and Investment Firms Directive: Corrigendum to Regulation (EU) 2019/2033 of the European Parliament and of the Council of 27 November 2019 on the prudential requirements of investment firms and amending Regulations (EU) No … Continue Reading

Capital treatment of securitisations of non-performing loans

On 26 November 2020, the Basel Committee on Banking Supervision published a technical amendment ‘Capital treatment of securitisations of non-performing loans’. The technical amendment closes a gap in the Basel framework by setting out prudent and risk sensitive capital requirements for non-performing loan securitisations. The Basel Committee has agreed to add the following elements to … Continue Reading

EBA analyses effect of the unwind mechanism of the liquidity coverage ratio

On 19 November 2020, the European Banking Authority (EBA) published a report that provides a discussion about the functioning of the unwind mechanism of the liquidity coverage ratio (LCR). It shows the actual effect of this mechanism over a period covering the most recent years. The analysis is based on common reporting (COREP) of larger … Continue Reading

PRA Dear CFO letter regarding remediation of prudential treatment of legacy instruments before the CRR I transition period ends

On 16 November 2020, the PRA published a Dear Chief Financial Officer (CFO) letter concerning remediation of prudential treatment of legacy instruments before the Capital Requirements Regulation I (CRR I) transition period ends. The Dear CFO letter follows an earlier opinion from the European Banking Authority on the prudential treatment of legacy instruments, and communicates … Continue Reading

EBA publishes the methodology for the 2021 EU-wide stress test

On 13 November 2020, the European Banking Authority (EBA) published its final methodology, draft templates and template guidance for the 2021 EU-wide stress test along with the key milestones of the exercise. The methodology and templates include some targeted changes compared to the postponed 2020 exercise, such as the recognition of foreign exchange effects for … Continue Reading

Prudential treatment of software assets – new Commission Delegated Regulation

On 12 November 2020, the European Commission updated its webpage for implementing and delegated acts under the Capital Requirements Regulation (CRR). The update provides that the prudential treatment of certain software assets was revised by Regulation (EU) 2019/876, in order to further support the transition towards a more digitised banking sector. Regulation 2019/876 introduced Article … Continue Reading

EBA publishes revised final draft technical standards and guidelines on methodology and disclosure for global systemically important institutions

On 4 November 2020, the European Banking Authority (EBA) published revised final draft regulatory technical standards (RTS) to specify how to identify the indicators of global systemic importance and revised guidelines on their disclosure. The need for this revision was prompted by the revised framework introduced by the Basel Committee on Banking Supervision (BCBS) in … Continue Reading

Basel Committee reports to G20 Leaders on Basel III implementation

On 3 November 2020, the Basel Committee on Banking Supervision (Basel Committee) published a report for G20 leaders at their summit in Riyadh on 21-22 November 2020. The report provides an update on the implementation of the Basel III regulatory reforms and the Basel framework-related measures taken by the Basel Committee in response to the … Continue Reading

Commission consults on covered bonds amendments to Commission Delegated Regulation on LCR

On 27 October 2020, the European Commission issued a consultation on a draft Commission Delegated Regulation amending Commission Delegated Regulation 2015/61 on the liquidity coverage requirement (LCR) (LCR Delegated Regulation). The LCR Delegated Regulation is applicable to all credit institutions, including those issuing covered bonds. Such credit institutions are currently subject to the LCR applicable … Continue Reading

EBA issues first monitoring report on TLAC-MREL instruments accompanied by recommendations

On 29 October 2020, the European Banking Authority (EBA) published its first monitoring report on the minimum requirement for own funds and eligible liabilities (MREL) and total loss absorbing capacity (TLAC) instruments. The EBA has prepared the report in accordance with Article 80(1) of the Capital Requirements Regulation which specifies that the ‘EBA shall monitor … Continue Reading

EBA issues opinion to address possible infection risk stemming from legacy instruments

On 21 October 2020, the European Banking Authority (EBA) issued an opinion to clarify the prudential treatment of the so-called ‘legacy instruments” in view of the end of the grandfathering period on 31 December 2021. In its opinion, the EBA proposes policy options to address the infection risk when created by such instruments. The EBA’s … Continue Reading

EBA publishes final draft RTS specifying the prudential treatment of software assets

On 14 October 2020, the European Banking Authority (EBA) published a report containing final draft regulatory technical standards (RTS) specifying the prudential treatment of software assets. Article 36(1)(b) of the Capital Requirements Regulation (as amended) (CRR), provides for an exemption from the deduction of intangible assets from Common Equity Tier 1 (CET1) items for ‘prudently … Continue Reading

Corrigendum to Regulation (EU) 2019/630

On 13 October 2020, there was published in the Official Journal of the EU, a corrigendum to Regulation (EU) 2019/630 amending Regulation (EU) No 575/2013 as regards minimum loss coverage for non-performing exposures. The corrigendum amends Article 1(2), second subparagraph of new Article 47a(6), introductory part. The corrigendum changes ‘Full and timely repayment shall not … Continue Reading
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