Tracker, Financial Services Regulation & Compliance - Banking
Credit Guarantee Scheme 2017 (S.I. No. 70 of 2017) is published
The Scheme which came into effect on 3 March 2017 encourages additional lending to commercially viable small and medium enterprises (SMEs) by providing participating banks with a Government-backed guarantee when lending to qualifying SMEs.
Central Bank publishes Update Report on the Central Bank of Ireland's Examination of Tracker Related Mortgage Issues
The Report, which was published on 23 March 2017, addresses:
- the scope and framework of the Examination;
- the progress of the Examination to date;
- redress and compensation provided by lenders in respect of tracker mortgage issues;
- enhancements to the regulatory framework to protect tracker mortgage holders;
- supervisory activity undertaken by the Central Bank in respect of tracker mortgages;
- information on the Central Bank’s supervisory and enforcement powers that are relevant to the Examination; and
- an update of the Central Bank’s enforcement activity in respect of tracker mortgages.
European Banking Authority publishes an Opinion on improving the decision-making framework for supervisory reporting requirements under the Capital Requirements Regulation (EU) No 575/2013
The Opinion proposed that the decision-making framework for supervisory reporting requirements under the Capital Requirements Regulation could be made more effective by replacing the Commission's Implementing Technical Standards (ITS) with decisions adopted directly by the EBA through its own implementing technical decisions. The Opinion also proposed ways of maintaining accountability such as consultation and cost-benefit analysis, a streamlined scrutiny right for the Commission, a regular report on the reporting compliance burden, and the possibility of extending the scope of the Board of Appeal review to cover such decisions.
European Banking Authority publishes Guidelines on liquidity coverage ratio disclosure to complement the disclosure of liquidity risk management under Article 435 of the Capital Requirements Regulation (EU) No 575/2013
The Guidelines, which apply to credit institutions, include (i) a qualitative and quantitative harmonised table for the disclosure of key information, primarily on liquidity risk management, as laid down by the CRR and (ii) quantitative and qualitative harmonised templates, with their instructions for use, for the disclosure of the liquidity coverage ratio composition and levels. The Guidelines will apply from 31 December 2017.
European Banking Authority issues Opinion on transitional arrangements and credit risk adjustments due to the introduction of IFRS 9
The Opinion concerns transitional arrangements and credit risk adjustments to mitigate the effect of the accounting standard IFRS 9 on prudential ratios. The EBA stated that it believes that all IFRS 9 provisions should be considered specific credit risk adjustments and that the current RTS on Credit Risk Adjustments should be read accordingly. The EBA was also of the view that no neutralisation of the initial impact of IFRS 9 should be allowed during the phase-in regime, starting as of 1 January 2018 and supports a ‘static' approach for amortising over 4 years the one-off impact of IFRS 9.
European Banking Authority publishes Report on the results from the 2016 high default portfolios (HDP) exercise
The Report presents the results of the supervisory benchmarking exercise for residential mortgage, SME retail, SME corporate and corporate-other portfolios. The Report stated that for the majority of the banks, the risk weight deviations from the EU benchmarks were deemed by the competent authorities to be justified and not significant. The Report also stated that if the risk-weighted assets were replaced by higher risk-weighted assets driven by both probability of default and observed default rates, rather than estimated probability of defaults alone, the average Common Equity Tier 1 ratio would decrease only slightly, by 17 bps.
European Banking Authority publishes Report on the results from the 2016 market risk benchmarking exercise
The Report found that in the initial market valuation results, interest rate portfolios show a lower variability than other asset classes due to a more homogeneity across banks for modelling interest rate risk. In line with the previous exercises on market risk weighted assets variability, a significant dispersion for all the risk measures provided by banks is observed. The also Report highlighted some areas that may require further investigations by Competent Authorities, such as accentuated pricing variability for equity derivatives, commodities trades and credit spreads products.
European Banking Authority publishes its final draft Regulatory Technical Standards on the disclosure of encumbered and unencumbered assets for the provision of transparent and harmonised information on this topic, as laid down in the Capital Requirements Regulation
The draft RTS set out the data which is required to be disclosed on encumbered and unencumbered assets by providing three disclosure templates to be completed and published, along with line-by-line instructions for completing them. The draft RTS substantially enhance the level of disclosure compared to the EBA Guidelines currently in place. However, smaller institutions which do not have material levels of asset encumbrance, as well as investment firms, are exempt from disclosing information on the quality of encumbered and unencumbered assets.
European Banking Authority adds a Q&A to the Capital Requirements Directive Single Rulebook Q&A
The question relates to discount rates in Economic Value of Equity calculations. The EMA stated that IRRBB institutions are encouraged but not obligated to use different types of yield curves but the set of calculations should always include a measurement of IRRBB using a risk-free yield curve that does not include instrument-specific or entity-specific credit or liquidity spreads.
Sabine Lautenschläger, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB addresses the LSE German Symposium, London, on 2 March 2017
The speech, titled 'the European banking sector - growing together and growing apart', focused on the approach to banking regulation following the Eurozone crises and banking regulation following Brexit. Mr. Lautenschläger stated that that the ECB is neutral in relation to where UK banks set up however, the ECB will not issue banking licences to empty shell companies and will not accept banks’ booking all exposures with the euro area entity while having their risk management and internal control systems outside the euro area.
European Banking Authority launches a consultation on its draft Recommendation on the coverage of entities in banking group recovery plans
The draft Recommendation aims to define common criteria to identify entities (subsidiaries and branches) that need to be covered in group recovery plans, and the extent of such coverage (which would depend on the relevance of the entities in a group to the group or member state). The consultation closes on 2 June 2017.
European Banking Authority publishes the fourth thematic comparative Report on recovery planning
The Report found that overall recovery plans provided a good overview of recovery options. However, the Report also found that there was room for improvements whereby recovery plans could benefit from a more detailed analysis of the links between recovery options and governance arrangements, and of the feasibility of options under each scenario.
European Banking Authority launches a consultation on its draft Regulatory Technical Standards (RTS) on the specification of the nature, severity and duration of an economic downturn
The RTS (which are mandated by the Capital Requirements Regulation) specify a methodological approach to identify the economic downturn conditions according to which institutions must estimate the downturn loss given default and conversion factor. The deadline for the submissions is 29 May 2017.
European Systemic Risk Board publishes Summary Compliance Report in relation to the funding of credit institutions
The Report provides an assessment of the implementation of the ESRB Recommendation on funding of credit institutions. The Report found that overall a high degree of compliance has been achieved.
European Banking Authority publishes 'CRD IV – CRR / Basel III Monitoring Exercise –Results Based on Data as of 30 June 2016'
The Report found that European banks largely fulfil the future regulatory capital requirements of the CRD IV–CRR. In relation to the liquidity coverage ratio (which in accordance with the CRR was set at 60% from 1 October 2015 and will be gradually increased, reaching 100% in January 2018) 95.4% of the banks show an LCR above 100% and the overall shortfall in relation to the 100% threshold is EUR 2.5 billion.
European Central Bank publishes guidance to banks on non-performing loans (NPLs)
The Guidelines outline measures, processes and best practices which banks should incorporate when tackling NPLs. The Guidelines also call on banks to implement realistic strategies to reduce NPLs such as incentivizing managers to carry out NPL reduction strategies and addressing areas such as governance and risk management. The Guidelines are non-binding in nature, however, banks should explain and substantiate any deviations upon supervisory request. The Guidelines are applicable from 20 March 2017. The expected enhanced disclosures on NPLs should start from 2018 reference dates.
European Central Bank publishes FAQs on non-performing loans (NPLs)
The FAQs addresses issues such as the purpose of the guidance to banks on NPLs, next steps, individual NPL reduction strategies, the speed with which Banks should reduce their NPLs, follow-up actions for banks and the applicability of the guidance to less significant institutions.
European Central Bank publishes 'Feedback statement - Responses to the public consultation on the draft ECB guidance to banks on non-performing loans' (NPLs)
Part 2 of the Feedback Statement summarises the key comments received in response to the public consultation of 12 September 2016 (on ECB draft guidance to banks on non-performing loans) and the resulting amendments to the guidance, by chapter.
Ignazio Angeloni, Member of the Supervisory Board of the European Central Bank speaks at the Conference on 'Banks, Systemic Risk, Measurement and Mitigation'
Mr. Angeloni speech addressed the Panel on: “Systemic risk mitigation; is capital enough? The crucial role of corporate governance”. His speech reviewed the main lessons that can, from a supervisory perspective, be drawn from the recent research on the roles of capital and corporate governance, and described the ECB’s supervisory process, in particular the set of analyses used to assess bank risks and to quantify capital requirements.
Commission Implementing Regulation (EU) 2017/461 of 16 March 2017 supplementing the Capital Requirements Directive is published
The Regulation lays down implementing technical standards with regard to common procedures, forms and templates for the consultation process between the relevant competent authorities for proposed acquisitions of qualifying holdings in credit institutions as referred to in Article 24 of the Capital Requirements Directive (2013/36/EU).
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:
- Minority interests
- Monitoring and evaluation of mortgages in cases of portfolio-wholesale transactions
- Valuation input consisting of a matrix of parameters
- Clarification on the treatment of regular clearing positions of central counterparties (CCPs) in the leverage ratio exposure measure (provided CCPs are subject to leverage ratio regulation)
- Calculation of derecognised fiduciary assets
- Consideration of collateral in the potential future credit exposure
- Application of Article 159 on the level of total own funds
- Eligibility as collateral where securitisation positions are issued by an SSPE belonging to the same group
European Banking Authority publishes questions and answers in relation to the Bank Recovery and Resolution Directive 2014/59/EU in the Single Rulebook Q&A on the following topics:
- Conversion of eligible liabilities into other types of capital instruments
- Eligible liabilities for the purpose of MREL
- Interpretation of points (a) and (b) of Article 45(3)
- Minimum requirements for own funds and eligible liabilities
European Banking Authority publishes questions and answers in relation to the Capital Requirements Directive 2013/36/EU in the Single Rulebook Q&A on the following topics:
- Clarification on Type of Facility to be used for Template C 102.00
- C 1 Clarification on the exclusion of calculation of credit spread portfolio in cases where only approval for general risk of debt instruments is granted 01.00 – Reporting of Rating (c040) - counterparties with multiple ratings
- Interaction between benchmarking and additional capital requirements under Article 458 of CRR
- C 101.00 / C 102.00 – Calculation of exposure weighted CCF (c100)
- Annex VI, template C 108.00, Definition of P&L
- Portfolios where Maturity should be completed
- SBP: Missmatch between predefined values of dimension (ei385) and expected values from EBA
- Annex II, C 102.00, column 020 – Large corporate sample
- Supervisory Benchmarking Exercise, Annex II, C 102.00, Column 100 – Facilities
- Clarification of columns 050 and 060 of template C 101.00, Annex I of the Benchmarking exercise
- Report of Type of Facility
- Use ‘AND’ or ‘OR’ rule to identify the exposure of the individual counterparties?
- Clarification of 'Facility Type', regarding the characteristic values 'Other Facilities' (Annex I) and 'Full Risk' (Annex II)
- RWA Standardised (c180 of C 102.00 and C 103.00)
- Data level for template C 101.00 of Annex III related to Exposure Classes (column 020)
- Supervisory Benchmarking Exercise, Annex II, C 102.00, Columns 150-170 - NACE code, type of exposure, size of exposure
- Level of data to be reported for LEI codes provided in Annex I
- Collateral value
- Clarification of 'Facility Type', regarding the characteristic values 'Undrawn committed credit facility' (Annex I) and 'Undrawn committed other credit facility' (Annex II)
- Correct scope of clusters based on collateralisation status and collateral type
- Definition of low default portfolios for 2017 supervisory benchmarking exercise: Missing Portfolio ID for exposures assigned to both the exposure class ‘institutions’ and to the sector of counterparty ‘general governments’
- Rating grades in Annex I of the draft ITS on benchmarking
- Supervisory Benchmarking Portfolios (SBP) - Z axes on C 101.00 and C 102.00
- EAD Template C 105.01
- Content of templates C 105.01, C 105.02 and C 105.03
- Is portfolio name a result of the portfolio allocation or a pattern column with addition rule semantics?
- Annex I, template C 101.00 – Multiple entities mapped to the same LEI
European Banking Authority publishes an Opinion following the notification by the National Bank of Belgium (NBB) on measures to address macroprudential risk
NBB notified the EBA of its intention to modify capital requirements in order to address an increase in macroprudential risk by introducing a five percentage point risk weight add-on for retail exposures secured by Belgian residential immovable property for Belgian Internal Ratings Based banks and by introducing further increases to the risk weights for the riskier mortgage loan segments on the basis of the indexed loan-to-value (LTV) ratio. The EBA has not objected to the measures based on evidence submitted by the NBB in relation to the vulnerabilities of the residential real estate sector.
European Banking Authority updates list of Other Systemically Important Institutions (O-SIIs) in the EU
The list of O-SIIs is disclosed on an annual basis. These institutions have been deemed systemically important and have been identified by the relevant authorities across the Union according to harmonised criteria provided by the EBA Guidelines.
Sabine Lautenschläger, Member of the Executive Board and Vice-Chair of the Supervisory Board of the European Central Bank addresses the Institute of International and European Affairs
The title of the address was "Walled off? Banking regulation after the crisis". The speech focused on the advanatges of strong rules and regulations in the banking sector. Mr. Lautenschläger concluded that he was in favour of a strong regulatory wall, he was convinced that it has to be global and that he was also in favour of harmonised rules in Europe.
Ignazio Angeloni, Member of the Supervisory Board of the European Central Bank gives a speech titled '60 years on: promoting European integration in the banking union'
The speech, at the Università Bocconi on 24 March 2017, addressed ECB banking supervision within the banking union as well as challenges arising from economic developments, balance sheet fragilities and regulation. Mr. Angeloni also outlined safeguards with the ECB's supervisory processes that ensure ECB Banking Supervision is not biased against certain banks or countries.
European Central Bank publishes feedback on the input provided by the European Parliament as part of its resolution on the Banking Union - Annual Report 2015
The ECB’s feedback to the EP (which is being published simultaneously with the ECB’s 2016 Annual Report on supervisory activities) addressed the supervisory review and evaluation process, the single rulebook and reporting requirements for banks, comprehensive assessments, transparency, accountability and reporting and institutional and human resources issues.
European Central Bank publishes Annual Report on supervisory activities 2016
The Report covers issues such as supervisory contribution to financial stability; authorisations, enforcement and sanctioning proceedings; the SSM as part of European and global supervisory architecture; organisational set-up of ECB Banking Supervision; reporting on budgetary consumption; legal instruments adopted by the ECB concerning banking supervision and the European banking sector in figures.
Danièle Nouy, Chair of the Supervisory Board of the European Central Bank presents the European Central Bank Annual Report on supervisory activities 2016 to the European Parliament's Economic and Monetary Affairs Committee
The speech addressed first, some key developments in the banking sector; second, the results of the 2016 Supervisory Review and Evaluation Process; third, the progress made in tackling non-performing loans; and fourth, the ECB's work on smaller euro area banks, the less significant institutions. Ms. Nouy also highlighted some key issues regarding the current EU banking reform package from a supervisory perspective and gave an overview of ECB priorities for 2017.
Sabine Lautenschläger, Member of the Executive Board and Vice-Chair of the Supervisory Board of the European Central Bank addresses the Credit Risk 2017 forum
Ms. Lautenschläger focused on the importance of financial regulation to control risk in the financial system and stated that regulation does not keeps banks from their traditional business of financing the economy on the basis that strong rules foster trust and enable banks to finance the economy during downturns.
Sabine Lautenschläger, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB gives a speech titled 'Caution should be the life of banking'
Ms. Lautenschläger stated that sound risk management depends on good data but that many banks do not meet global standards of best practice in relation to how banks aggregate data and report risks. As a result the ECB has launched a targeted review of internal models. Ms. Lautenschläger's speech also addressed Brexit and she stated that the ECB resist any supervisory or regulatory race to the bottom and that all entities who establish in the EU following Brexit must have adequate local risk management, sufficient local staff and operational independence.
European Banking Authority publishes Report on the functioning of supervisory colleges in 2016
The EBA found that overall, the level and quality of engagements in supervisory colleges have been further improved in the course of 2016 compared with 2015. The Report also identified areas for improvement as well as topics for supervisory attention for 2017.
Peter Praet, Member of the Executive Board of the European Central Bank speaks at the 'Symposium on Building the Financial System of the 21st Century: An Agenda for Europe and the United States'
The speech addressed the implementation of unconventional policies by the ECB in response to the financial crisis and the impact this had on the ECB's duty to be accountable and transparent. The speech concluded that unconventional polices had been effective against the series of shocks which have buffeted the euro area economy, but such measures while necessary, have repercussions for the transparency and accountability dimension of central bank independence and the ECB has a responsibility to explain how the measures taken fall within the ambit of its price stability mandate.
Danièle Nouy, Chair of the Supervisory Board of the European Central Bank and Sabine Lautenschläger, Vice-Chair of the Supervisory Board of the European Central Bank gives introductory statement to the press conference on the ECB Annual Report on supervisory activities 2016 (with Q&A)
Ms. Nouy outlined prominent issues for the ECB such as non-performing loans, the targeted review of internal models and the banking union. Ms. Lautenschläger emphasised the importance of a global approach to regulation in the form of Basel III and at a European level she welcomed the current review of the European legislative framework and the Commission's proposals on how to adapt and amend the relevant laws. Ms. Lautenschläger also stated that following Brexit the ECB will not accept empty shell companies. Any new entity must have adequate local risk management, sufficient local staff and operational independence.
Chairperson of the European Banking Authority, Andrea Enria, addresses the European Parliament Committee on Economic and Monetary Affairs (ECON)
Mr. Enria updated ECON on the EBA's work in relation to delivering the Technical Standards on strong customer authentication and common and secure communication under the revised Payment Services Directive. In particular Mr. Enria explained how the EBA had addressed concerns raised by ECON in relation to:
- technological neutrality;
- exemptions to strong customer authentication, in particular regarding threshold levels; public transport networks and car parks; transaction risk analysis; and
- access to payment accounts.
For further information please contact a member of the Financial Regulation team.
Date published: 05 Apr 2017