Financial Services Regulation & Compliance - Banking Jan 2018
Financial Services Regulation & Compliance - Banking Jan 2018
Irish responses to the January 2018 Bank Lending Survey
The January 2018 Bank Lending Survey (BLS) was conducted between 7 December and 2 January and examined changes in credit market conditions during the fourth quarter of 2017 along with expected changes in credit standards and loan demand during the first quarter of 2018. In summary the results were:
Credit standards for loans to enterprise were loosened slightly during 2017 Q4. Demand for credit remained unchanged.
Credit standards on lending to households remained unchanged. Demand for mortgage loans and general consumer credit increased.
Access to retail and wholesale funding remained broadly unchanged.
New regulatory or supervisory requirements increased holdings of liquid assets and capital, while decreasing holdings of risk weighted assets.
Introductory statement by Philip R. Lane at the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach
The Governor of the Central Bank appeared before the Committee on Finance, Public Expenditure and Reform, and Taoiseach to update the Committee on the progress of the Central Bank's Tracker Mortgage Examination. Mr Lane discussed how the end-2017 figures show that lenders have been forced to pay €316m in redress and compensation and more will follow, as the remainder of the 33,700 customers that were denied tracker products or charged the wrong rates receive redress and compensation and as claims submitted to the independent appeals processes are adjudicated.
As a result of a challenge from the Central Bank about the failure to include certain groups of consumers for redress and compensation, a further 13,600 customers have now been included since October. Mr Lane stated that the tracker mortgage scandal is unprecedented in its scale and has required an unprecedented regulatory response. The Central Bank's continued pursuit of lenders continues to ensure that they include all affected customers and discharge their responsibilities under the Framework.
The Central Bank updated its FAQs in relation to the Tracker Mortgage Examination. These FAQs provide general information to consumers who are, or believe they may be, affected by the Tracker Mortgage Examination.
Macroprudential regulation in the European Union in 1995-2014: introducing a new data set on policy actions of a macroprudential nature
This working paper published by the ECB introduces a new comprehensive data set on policies of a macroprudential nature in the banking sectors of the 28 member states of the European Union (EU) between 1995 and 2014. The Macroprudential Policies Evaluation Database (MaPPED) offers a detailed overview of the “life-cycle” of policy instruments which are either genuinely macroprudential or are essentially microprudential but likely to have a significant impact on the whole banking system.
The paper describes the design and structure of this new data set and presents the first descriptive analysis of the use of policy measures with a macroprudential nature in the EU over the last two decades. The results indicate that there has been a remarkable variation in the use of policies of a macroprudential nature both across EU countries and over time. The analysis provides some tentative evidence of an impact of capital buffers, lending restrictions and caps on maturity mismatches on credit to the non-financial private sector in the EU as well as of the relative ineffectiveness of sectoral risk weights in controlling credit growth.
Report on the implementation of the European Banking Authority guidelines on methods for calculating contributions to Deposit Guarantee Schemes (DGS)
The EBA published a report on the implementation of the EBA guidelines on methods for calculating contributions to DGS. The EBA issued guidelines on methods for calculating DGS contributions on 28 May 2015 with Member States required to implement these risk-based calculation methods for contributions was 31 May 2016 at the latest. The EBA then had to review the guidelines by 3 July 2017 in accordance with the Deposit Guarantee Schemes Directive (DGSD).
Due to the tight deadline between the implementation and review of the guidelines, the EBA has interpreted the review as an assessment of the application of the guidelines. It also includes some recommendations on further improvements and amendments of the guidelines to be considered as part of a wider DGSD review in 2019. The report sets out the methodology and results of the review, along with specific recommendations on further improvements to the guidelines, to be implemented in the future.
The analysis shows that the guidelines have broadly met the aim of introducing different contribution levels for institutions according to their riskiness. It also shows, however, that the method outlined in the guidelines, and currently in use, allows too much flexibility, and it may need to be reviewed in the future.
The European Banking Authority Risk Dashboard confirms steady improvements in the EU banking sector but banks profitability and business model sustainability remain key challenges
The EBA published its regular risk dashboard. The EBA's dashboard identified ongoing improvements in the repair of the EU banking sector and also residual risks in NPLs and profitability, using quantitative risk indicators, along with the opinions of banks and market analysts from its Risk Assessment Questionnaire. The results of the Risk Assessment Questionnaire also show that cyber risk and data security are considered as the main drivers for the increase in operational risk. They are also assumed to be the main factors that might negatively influence market sentiment, along with the uncertainties around the UK's decision to leave the EU.
European Banking Authority updates list of credit institutions subject to an LCR inflow cap derogation
The EBA has published an updated list of credit institutions exempted from or subject to a higher cap on inflows in the calculation of the Liquidity Coverage Ratio (LCR) in accordance with the provisions laid down in the LCR Delegated Act. The list is compiled using the information provided by competent authorities and is updated on a regular basis.
Insights into the digital transformation of the retail payments ecosystem
The ECB published an article providing an overview of some of the key messages which were conveyed at a conference hosted by the ECB and Banca d’Italia entitled “Digital transformation of the retail payments ecosystem”. The conference looked at the dynamic developments that are currently being observed in the retail payments industry on account of new technologies and changes in consumer demand. The topics which were discussed include innovation, virtual currencies, customer choice and behaviour and cybersecurity.
Guidelines on uniform disclosures under Article 473a of Regulation (EU) No 575/2013 as regards transitional arrangements for mitigating the impact of the introduction of IFRS 9 on own funds
The EBA has published its final guidelines on disclosure requirements of IFRS 9 or analogous expected credit losses (ECLs) transitional arrangements. The guidelines specify a uniform disclosure template institutions shall use when disclosing the information on own funds, capital and leverage ratios, with and without the application of transitional arrangements for IFRS 9 or ECLs.
The guidelines, drafted in accordance with Article 473a, paragraph 10 of the CRR, aim to ensure consistency and comparability of the data disclosed by institutions during the transition to the full implementation of the new accounting standard and to foster market discipline. The guidelines apply from 20 March 2018 until the end of the transitional period set out in paragraph 6 of Article 473a of the CRR. In accordance with Article 16(3) of Regulation (EU) No 1093/2010, competent authorities must notify the EBA that they comply or intend to comply with these guidelines, or otherwise give reasons for non-compliance, by 16 March 2018.
European Banking Authority publishes questions and answers in relation to the Capital Requirements Regulation (EU) No 575/2013 in the Single Rulebook Q&A on the following topics:
own funds (Articles 45,59 and 69)
market risk (Articles 274, 340 and 345)
supervisory reporting (Articles 415)
leverage ratio (Article 429a)
transparency and pillar (Articles3, 413 and 455)
European Banking Authority launches 2018 EU-wide stress test exercise
The EBA launched its EU-wide stress test and released the macroeconomic scenarios. The results of the exercise are expected to be published by 2 November 2018. The stress test is designed to provide supervisors, banks and other market participants with a common analytical framework to consistently compare and assess the resilience of EU banks to economic shocks. The EBA also published frequently questions in relation to the exercise.
Opinion of the European Central Bank of 8 November 2017 on revisions to the Union crisis management framework
The revisions to the Union crisis management framework include proposed amending regulations and directive which aim to implement the total loss-absorbing capacity (TLAC) standard of the Financial Stability Board (FSB) for global systemically important institutions (G-SIIs) established in the Union, Amendments to the minimum requirement for own funds and eligible liabilities (MREL), Transitional arrangements for MREL.
Recommendation of the European Central Bank of 28 December 2017 on dividend distribution policies
Recommendation ECB/2016/44 of the European Central Bank on dividend distribution policies has been adopted. The recommendation is addressed to significant supervised entities and significant supervised groups as defined in the SSM Framework Regulation and the national competent authorities and designated authorities with regard to less significant supervised entities and less significant supervised groups.
European Banking Authority updates Single Rulebook Q&A
The EBA has published questions and answers in the Single Rulebook Q&A on the topic of recovery and resolution (Articles 29, 35, 36, 38, 40, 42, 41, 44, and 48).
Banking Union: First Progress Report on the tackling of non-performing loans to support the risk-reduction agenda
The Commission has highlighted the further improvement in non-performing loans (NPLs) ratios and forthcoming measures to bring NPL stocks down further in its first progress report since an Action Plan on reducing NPLs was agreed. The report shows that the positive trend of falling NPL ratios and growing coverage ratios has solidified and continued into the second half of 2017.