Financial Services Regulation & Compliance - Banking March 2018
Credit/Debit Card Return (CDR)
The Central Bank has updated its notes on compilation which set out statistical reporting requirements for credit institutions reporting the Credit/Debit Card Return (CDR). The notes are designed to help reporting agents to complete the return.
"Our culture assessments will analyse the leadership behaviour of management in banks" - Director General Derville Rowland
Mr. Rowland spoke about the behaviour and culture assessments which are currently under way in each of the five main lenders in Ireland. After these assessments the Central Bank may require the lenders to take a range of actions depending on the findings.
The EBA CRDIV-CRR/Basel III monitoring exercise
The EBA published its thirteenth Report of the CRDIV-CRR/Basel III monitoring exercise on the European banking system which presents aggregate data on EU banks' capital, leverage, and liquidity ratios assuming full implementation of the CRD IV-CRR/Basel III framework. The results show a further improvement of EU banks capital leverage and liquidity ratios.
Guidelines on connected clients under Article 4(1) (39) of Regulation (EU) No 575/2013
The EBA published guidelines on connected clients under Article 4(1)(39) of the Capital Requirements Regulation. These guidelines specify the approach institutions should take when applying the requirement to group two or more clients into a ‘group of connected clients’ because they constitute a single risk in accordance with Article 4(1)(39) of the Regulation. The guidelines will apply from 1 January 2019.
EBA issues revised list of ITS validation rules
The EBA has issued a revised list of validation rules in its Implementing Technical Standards (ITS) on supervisory reporting, highlighting those which have been deactivated either for incorrectness or for triggering IT problems.
EBA launches consultation on how to manage non-performing exposures
The EBA launched a consultation on its guidelines for credit institutions on how to effectively manage non-performing exposures (NPEs) and forborne exposures (FBEs). The guidelines specify sound risk management practices for credit institutions for managing NPE and FBE, looking at the governance and operations of a NPE workout framework, the internal control framework and NPE monitoring, as well as early warning processes. The consultation runs until 8 June 2018.
EBA issues opinion on measures to address macroprudential risk
The EBA has published an opinion following the notification by the French High Council for Financial Stability (HCSF) of its intention to tighten the large-exposure limits applicable to large and highly indebted non-financial corporations (NFCs) resident in France or groups of connected NFCs assessed to be highly indebted and based in France. The EBA does not object to the adoption of the proposed measure which the HCSF intends to apply only to global or other systemically important institutions.
EBA published an assessment of the current credit risk mitigation framework
The EBA has published a report, which assesses the current Credit Risk Mitigation (CRM) framework, as part of its work on the review of the Internal Ratings Based (IRB) approach. The report is the last phase of the EBA's roadmap on the IRB approach. It clarifies the application to the different credit risk approaches of the provisions currently laid down in the Capital Requirements Regulation (CRR) regarding CRM.
Feedback statement - Response to the public consultation on the guide to assessments of licence applications and the guide to assessments of fintech credit institution licence application
The ECB has published a feedback statement outlining the response to the public consultation on the guide to assessments of credit institutions licence applications and the guide to assessments of fintech credit institution licence applications. The feedback statement presents an overall assessment of the comments received during the public consultation and aims to address the most relevant issues raised in them. Amendments to the guides have been made in response to these comments.
The ECB has also published its guide to assessments of licence applications and its guide to assessments of fintech credit institution licence applications following the completion of a public consultation. The guide to assessments of licence applications explains the general application process and the assessment requirements regarding governance, risk management, capital etc. The guide to assessments of fintech credit institution licence applications complements the first and is aimed at fintech entities.
EBA advises European Commission on the use of prudential backstops to prevent the building up of new NPLs
The EBA published advice on the Commission's proposal for statutory prudential backstops on banks' provisioning practices for new loans that turn non-performing. In its impact analysis, the EBA provided some considerations about the design of the statutory prudential backstop as well as some quantitative evidence about the different specifications of the backstop.
Communication from the Commission to the European Parliament, the European Council, the Council, the European Central Bank
The Commission issued its Second Progress Report on the Reduction of Non-Performing Loans in Europe. The Commission is proposing an ambitious and comprehensive package of measures to tackle non-performing loans (NPLs) in Europe, capitalising on the significant progress already made in reducing risks in the banking sector.
Frequently asked questions: Action Plan on the Reduction of Non-Performing Loans in Europe
The Commission has published frequently asked questions in relation to the Action Plan on the Reduction of Non-Performing Loans in Europe.
Second public consultation on developing a euro unsecured overnight interest rate
The ECB has opened its second consultation on developing a euro unsecured overnight interest rate which will close on 20 April 2018. Through this second public consultation, the ECB aims to collect the views of stakeholders regarding the methodology for the rate as well as key operational and technical parameters.
Feedback statement - Responses to the public consultation on the draft Addendum to the ECB Guidance to banks on non-performing loans
The ECB has published a feedback statement giving an overview of the comments received during the public consultation on the draft Addendum to the ECB Guidance to banks on non-performing loans.
Commission Delegated Regulation supplementing Regulation (EU) No 575/2013
The Commission published the text of a Delegated Regulation to supplement Regulation (EU) No 575/2013 (CRR) with regard to the specification of the assessment methodology under which competent authorities permit institutions to use Advanced Measurement Approaches for operational risk.
ECB sets out its supervisory expectations for new NPLs
The European Central Bank (ECB) has published the addendum to the ECB Guidance to banks on non-performing loans (NPLs). The addendum supplements the qualitative NPL guidance, published on 20 March 2017, and specifies the ECB’s supervisory expectations for prudent levels of provisions for new NPLs. The addendum is non-binding and will serve as the basis for the supervisory dialogue between the significant banks and ECB Banking Supervision.
Guidelines on internal governance
The EBA has issued an update on its guidelines on internal governance pursuant to Article 16 of Regulation (EU) No 1093/2010. These guidelines specify the internal governance arrangements, processes and mechanisms that credit institutions and investment firms must implement in accordance with Article 74(1) of CRD IV to ensure effective and prudent management of the institution.
SSM Supervisory Manual: European banking supervision: functioning of the SSM and supervisory approach
The ECB published a report on the SSM Supervisory Manual. The Supervisory Manual describes the organisational set-up of the Single Supervisory Mechanism (SSM) and defines the methodologies, processes and procedures for banking supervision in the euro area. It also explains how the SSM cooperates with other authorities in the wider institutional framework.
Speech by Sabine Lautenschläger, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, Lecture at the Florence School of Banking and Finance, Florence, 15 March 2018
In her speech, Ms Lautenschläger discussed the global financial crisis which began in 2008 and the reason why. She then touched on the importance of letting banks fail when they often were not allowed to in the past.
Basel Committee discusses its work programme, current policy work, implementation of its standards, and initiatives to promote strong supervision
Four broad themes were focused on in this discussion: (i) finalising existing policy initiatives and initiating targeted policy development; (ii) ensuring full, timely and consistent implementation of the Committee's post-crisis reforms; (iii) promoting strong supervision; and (iv) evaluating and monitoring the impact of post-crisis reforms, as well as assessing emerging risks.
BOJ/ECB joint research project on distributed ledger technology
The joint research project “Stella” of the Bank of Japan (BOJ) and the European Central Bank (ECB) studies the possible use of distributed ledger technology (DLT) for financial market infrastructures. The joint work is being conducted at a conceptual level and through practical experimentation with the technology. The project aims to contribute to the ongoing broader debate around the potential usability of DLT while not being geared towards replacing existing central bank services with DLT-based solutions.
Basel Committee: Revisions to Minimum Capital Requirements for Market Risk for Consultation
The consultative document set out to address issues that the Basel Committee has identified in the course of monitoring the implementation and impact of the market risk standard issued in January 2016.
In particular, the proposed changes include:
- changes to the measurement of the standardised approach to enhance its risk sensitivity, including changes to FX risk
- recalibration of standardised approach risk weights applicable to general interest rate risk, FX risk and equity risk
- revisions to the assessment process to determine whether a bank’s internal risk management models appropriately reflect the risks of individual trading desks
- clarifications on the requirements for identification of risk factors that are eligible for internal modelling
- clarifications on the scope of exposures that are subject to market risk capital requirements
For more information please contact a member of the Financial Regulation team.
Date published: 9 April 2018