Tracker, Financial Services Regulation & Compliance - Banking

DOMESTIC

Central Bank of Ireland issues statement following the Banking Inquiry

The Central Bank of Ireland has issued a statement noting the recommendations made in the report of the Committee of Inquiry into the Banking Crisis. The Central Bank of Ireland acknowledged the report describes the failure to identify risks to financial stability but Governor Lane also pointed to the institutional reforms introduced since the banking crisis, including the Central Bank's implementation of the current assertive risk-based approach to regulation. Deputy Governor Cyril Roux said "Banking regulation and supervision today have little in common with the previous decade" pointing to significant increases in capital requirements for banks and the introduction of increased regulatory requirements.  The Deputy Governor also pointed to the fact that the supervisory responsibility for the larger banks in Ireland has been transferred to the ECB, and that banking resolution powers have been transferred to the Single Resolution Board from 1 January 2016.  He said "daily banking supervision is now conducted according to a detailed ECB supervisory manual, including frequent and intrusive onsite inspections".

Central Bank of Ireland publishes Feedback Statement following consultation on a Central Credit Register

The Central Bank has published a Feedback Statement on responses to their proposed regulations to introduce a Central Credit Register (CRR), as envisaged by the Credit Reporting Act 2013. The Central Bank will now pass regulations to establish the Register which will include details on loans with asset finance houses, banks, credit unions, local authorities and money lenders. These institutions and individuals will be required to report loans of or in excess of €500 to the CRR. In addition, the CRR must be consulted by lenders considering credit applications for €2,000 or more. The CRR will be introduced on a phased basis, with the initial phase commencing on 30 September 2016 which will include banks, credit unions and finance houses. Lenders are required to have reported new and existing credit agreements (back dated to 30 September 2016) by 31 March 2017. Under the new regulations lenders will be required to check the CRR as part of its lending process from the end of December 2017. Later phases of the implementation relate to business credit information and the credit arrangements of local authorities and moneylenders.

Credit Guarantee (Amendment) Act 2016 adopted

The Credit Guarantee (Amendment) Act, which allows businesses refused conventional bank credit facilities to access a state-backed guarantee, has been adopted. The Act extends the loan guarantee for these individuals from 75% to 80%, in an attempt to re-balance the risk between the State and extended service providers. Pursuant to this Act, the Government will be permitted to give counter-guarantees meaning the Strategic Banking Corporation of Ireland will be eligible to apply for matching EU guarantee facilities. There are also some changes to the definitions under the Act, with the term ‘lender’ now covering additional financial product providers such as lessors, invoice discounters and other non-bank financiers and with 'loan agreements’ now including non-credit products.

EUROPEAN

EBA publishes final Guidelines on cooperation agreements between deposit guarantee schemes

The EBA has published its final Guidelines on cooperation agreements between deposit guarantee schemes (DGS) in line with the EU's Deposit Guarantee Schemes Directive. Article 14(5) of the Directive requires EU DGSs to have written cooperation agreements in place in order to facilitate effective cooperation between each other. The final EBA Guidelines set out how and when one DGS may pay out to depositors on behalf of a DGS in another Member State. In addition, the Guidelines set out a multilateral cooperation framework agreement with objectives and minimum contents, including details in relation to the transfer of contributions from one DGS to another where a credit institution changes location, and on mutual lending between DGSs.

EBA publishes Final Draft Implementing Technical Standards on the mapping of External Credit Assessment Institutions' credit assessments for securitisation positions

As part of the Single Rulebook for banking, the EBA has published its final draft ITS which sets out how credit ratings on securitisations assigned by registered credit rating agencies can be used for the calculation of capital requirements. The draft ITS allows for the current mapping for all ECAIs to remain in place in the short term and investors are required to undertake due diligence in relation to securitisation positions. The EBA proposes to continue to assess the appropriateness of mapping for any particular ECAI and to review how securitisation ratings are mapped.

EBA Opinion calls for a flexible approach toward the implementation of the regulatory review of internal models

The EBA has published an Opinion clarifying the proposed timeline for the regulatory review of the internal ratings-based approach, stating that it is to be finalised by the end of 2020 at the latest.  The EBA sets out general principles as guidance for the implementation of the regulatory review. The Opinion is supported by a Report, which summarised the concerns outlined in responses to a recent EBA public consultation on this topic, including around the lack of comparability of capital requirements determined under the IRB approach across institutions. In an attempt to address these concerns, the EBA have introduced certain changes to harmonise the credit risk mitigation techniques used, around disclosure, the estimation of risk parameters and the treatment of defaulted assets and definitions, and supervisory practices around default.

EU Commission recognises additional Third Countries as having equivalent CRR arrangements

An EU Commission Implementing Decision 2016/230 of 17 February 2016 has been adopted to update the EU's list of third countries and territories whose supervisory and regulatory arrangements are recognised as being equivalent to the corresponding supervisory and regulatory arrangements in place under the EU's Capital Requirements Regulation. The implementing decision will enter force on 9 March 2016 and lists Australia, Canada, China, Indonesia, Hong Kong, South Korea and the US as countries to which aspects of the equivalencies relate.

EU Commission Implementing Regulation laying down Implementing Technical Standards on disclosure of leverage ratio for institutions under CRR

The Commission Implementing Regulation (EU) 2016/200, which provides for Implementing Technical Standards with regard to disclosure leverage ratios for institutions, has come into force. The standards include a requirement to provide details in relation to the disclosure of leverage ratios, the breakdown of the leverage ratio total exposure measure and the amount of derecognised fiduciary items applicable to respective institutions and details on how the risk of excessive leverage is managed. The standards also set out rules for institutions who wish to change which leverage ratio they wish to disclose.  Pursuant to the Regulation, institutions will now be required to disclose their reconciliation of the leverage ratio total exposure measure in their financial statements.

EBA celebrates 5th Anniversary

Andrea Enria, EBA Chairperson has given a speech on the Authority's 5th Anniversary. Ms Enria said the EBA's legacy thus far has been its capacity to act and take responsibility by shaping coordinated, EU-wide policy responses. The challenges for the EBA going forward were identified by her as: (i) monitoring the functioning of the Single Rulebook and enhancing proportionality; (ii) completing the adjustment in banks' balance sheets; and, (iii) digital banking and consumer protection.

2015 ex-ante contributions transferred to the Single Resolution Fund

Under the Bank Recovery and Resolution Directive (BRRD) national resolution funds were set up to collect banks' required contributions under the BRRD for 2015.  For the Member States that are part of the Banking Union, these national resolution funds are replaced by the Single Resolution Fund (SRF) as of 2016. The SRF will be built up over the transitional period of eight years (2016-2023), and shall reach at least 1% of covered deposits by the end of 2023. It will be fully funded by the banking industry. Following the Agreement on the Transfer and Mutualisation of Contributions to the SRF, €4.3bn of 2015 ex-ante contributions was transferred to the SRF by the deadline of 31 January 2016.

Single Resolution Board (SRB) begins to collect data for resolution planning and the determination of MREL

The SRB, via the National Resolution Authorities (NRAs) of the Banking Union Member States, has started to collect data required for resolution planning and the determination of the minimum requirement for own funds and eligible liabilities (MREL) from all banking groups under its direct responsibility. The data request was announced previously at the SRB's Second Industry Dialogue meeting on 12 January 2016. In an update on its website the SRB has outlined its commitment to preparing resolution plans for all major banks under its remit and in line with this; it is required to set the MREL targets for these banks in 2016. In order to achieve this, the SRB has published its Liability Data Template together with accompanying guidance. Mandatory data requests have been kept to the minimum required by the BRRD.

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

Date published: 02 March 2016