Financial Services Regulation & Compliance - Banking Feb 2018

DOMESTIC

Research on the impact of repossession risk on mortgage default

Terry O’Malley published an economic letter considering whether reducing the risk of repossession resulted in more Irish borrowers defaulting on their mortgages. The letter considers the impact of the ''Dunne judgment'' in 2011 which temporarily removed a bank's ability to lawfully repossess a home. One of the key findings was that borrowers defaulted on mortgages at a higher rate than if the repossession regime at the time was legally upheld.

EUROPEAN

Introductory statements at the annual press conference on ECB Banking Supervision

Danièle Nouy, Chair of the Supervisory Board of the ECB, and Sabine Lautenschläger, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, gave an introductory statement at the annual press conference on ECB Banking Supervision. The speech looked at the challenges facing the banks and how they will tackle them in 2018. Ms Nouy concluded her speech by stating that ''conditions are as good as they are going to get. Banks should seize the moment and tackle all the challenges they face.''

EBA updates its methodological guide on risk indicators and detailed risk analysis tools

The EBA published an updated methodological guide on how to compile risk indicators and detailed risk analysis tools. The guidance will help competent authorities and other relevant stakeholders to follow a consistent approach in their risk assessments.

ECB amends guidelines relating to the Eurosystem's monetary policy implementation

The ECB published three new guidelines which amend the Guideline on the implementation of the Eurosystem monetary policy, the Guideline on the valuation haircuts and the Guideline on additional temporary measures relating to Eurosystem refinancing operations and eligibility of collateral.  The new guidelines introduce changes to the monetary policy implementation framework. The changes include implementing previously announced changes to the eligibility criteria of unsecured bank bonds, adjusting haircuts for floating rate assets.

Research bulletin no. 43: Bank lending under negative policy rates

This article discusses how the pass-through of negative policy rates via bank lending is dependent on a bank's funding structure. The article shows that negative policy rates lead to more risk-taking and less lending by high-deposit banks, as compared to low-deposit banks, in the market for syndicated loans.

ECB publishes consolidated banking data for end-September 2017

The ECB has published the consolidated banking data with reference to end-September 2017.  The consolidated banking data covers relevant information required for the analysis of the EU banking sector, a subset of the information available in the end-year dataset. The data shows that total assets of credit institutions headquartered in the EU decreased year on year by 2.8%, from €34tn in September 2016 to €33tn in September 2017. It also shows that the non-performing loans (NPL) ratio of these credit institutions dropped year on year by 1.14 percentage points, from 5.58% in September 2016 to 4.44% in September 2017.

EBA issues Opinion on measures to address macroprudential risk

The EBA published an Opinion following the notification by the National Bank of Belgium (NBB) of its intention to modify capital requirements in order to address an increase in macroprudential risk. The EBA does not object to the adoption of the proposed measure which is based on Article 458(2) of the Capital Requirements Regulation. The measure aims at enhancing the resilience of Belgian banks to potential severe downward corrections in residential real estate markets.

Cross-border banking in the EU since the crisis: what is driving the great retrenchment?

This paper examines the drivers of the cutback in cross-border banking in the European Union since the global financial crisis.  Examining a wide range of possible determinants, the ECB identified high non-performing loans as an important impediment to cross-border lending after the crisis. They also found evidence that prudential policies can entail spillovers via cross-border banking in the EU.

For more information please contact a member of the Financial Regulation team.

Date published: 15 March 2018