Tracker, Financial Services Regulation & Compliance - Banking


EBA publishes results of the Basel III monitoring exercise

The EBA published its eight report of the Basel III monitoring exercise as of 31 December 2014 on the European banking system. This exercise allows the gathering of aggregate results on capital ratios and leverage ratio (LR), as well as on liquidity ratios - liquidity coverage ratio (LCR) and net stable funding ratio (NSFR) - for banks in the European Union (EU).

EBA consults on harmonised definition of default

The EBA launched a consultation on its draft Guidelines specifying the application of the definition of default. The EBA Guidelines harmonise the definition of default across the EU prudential framework, which will in turn improve consistency in the way EU banks apply regulatory requirements to their capital positions. The consultation runs until 22 January 2016 and the EBA is also asking the public for feedback on a Quantitative Impact Assessment (QIS) of the Guidelines.

ECB publishes guidelines amending the General Documentation on monetary policy implementation

The new guidelines introduce some changes to the monetary policy implementation framework. The provisions on counterparty eligibility have been revised such that the Eurosystem may take into account in its eligibility assessment information on capital, leverage and liquidity ratios of individual institutions. A new class of eligible assets, namely the 'non‑marketable debt instruments backed by eligible credit claims (DECCs)', has been introduced in the Eurosystem collateral framework. DECCs are debt instruments that: (a) are backed by credit claims that are also eligible as collateral with the Eurosystem on an individual basis; and (b) that have a dual recourse against the originating credit institution and against the underlying credit claims themselves. In the initial stage, only the domestic use of DECCs is envisaged. This restriction will remain in place until the Eurosystem fully develops the procedures for the cross-border use of DECCs.

ECB clarifies terms of purchases of guaranteed ABS mezzanine tranches

The ECB published its Decision (EU) 2015/1613 which sets out the conditions for its purchase of guaranteed mezzanine tranches of asset backed securities under its Asset-Backed Securities Purchase Programme. The ECB had initially indicated that purchases of mezzanine tranches would be limited to EU state-guaranteed tranches. The decision by the ECB not to limit such purchases will mean that a greater proportion of mezzanine tranches are available for purchase.

Eurosystem adjusts purchase process in ABS programme

The Governing Council of the ECB decided to increase the proportion of purchases by national central banks rather than external managers in the Asset-Backed Securities Purchase Programme, as announced when the programme was first launched. As of 27 October 2015, the French and Belgian Central Banks will both act as Eurosystem asset managers executing purchases. In addition, the ECB has decided to extend the contracts of two of its external executing asset managers. The executing asset managers will continue to conduct eligible ABS purchase transactions on explicit instructions from, and on behalf of the Eurosystem. The Eurosystem will maintain its role in undertaking price checks and due diligence prior to approving transactions.

Bank of England announces the timetable for publication of the 2015 UK stress testing results

The 2015 stress test assesses the resilience of the UK banking system to deterioration in global economic conditions. The Bank of England has received firms’ initial stress testing submissions and is in the process of analysing the results. The FPC and the PRA Board will discuss that analysis over the autumn. Final decisions on the results of the stress tests will be made by both committees on 30 November and will be fed back to the firms involved on the same day. The UK stress test results will be published alongside the Financial Stability Report at 07:00 hrs (GMT) on 1 December.

ESMA publishes opinion on accounting for cash contributions to the Deposit Guarantee Schemes

ESMA published its opinion on the application of the IFRS requirements in relation to the recognition of cash contributions to the Deposit Guarantee Scheme (DGS) in IFRS accounts. This opinion is limited to the accounting treatment of ex-ante non-refundable cash contributions to the DGS for which the obligating event is identified at a single point in time. Based on the analysis of the existing IFRS requirements, ESMA concluded that as soon as the obligating event of a non-refundable cash contribution to a DGS is identified, the contribution must be recognised as an expense in full. ESMA expects the national competent authorities to take corrective actions whenever they identify material misstatements in the application of these requirements.

EBA recommends retention of maturity ladder in the ITS on additional liquidity monitoring metrics

The EBA issued an opinion to the Commission dissenting to its proposed amendment to remove the maturity ladder from the EBA final draft Implementing Technical Standard (ITS) on additional liquidity monitoring metrics. The Commission considers that the maturity ladder needs to be adapted to the detailed definitions of liquid assets set by Commission Delegated Regulation (EU) 2015/61 (Delegated Act on the LCR). For this reason, the Commission suggests removing the maturity ladder from the ITS also because, in its view, it would avoid unnecessary regulatory burden and the duplication of implementation costs for the industry. The EBA deems it essential to keep the maturity ladder in the ITS considering the relevance of the metric in the liquidity risk assessment by supervisors and the need to have a harmonised metric for this purpose.

ECB Decision on the prohibition of monetary financing and the remuneration of government deposits by national central banks

The ECB has amended Decision ECB/2014/8 (specifying the market rates that will operate as ceilings for the remuneration of deposits held by governments and public authorities with their national central bank (NCB)) to reflect the fact that the Eurepo index was identified in Article 1(d) of Decision ECB/2014/8 as the secured market rate with regard to fixed term deposits in euro. The Eurepo index was discontinued on 2 January 2015. The secured market rate with regard to fixed term deposits in euro will now be the STOXX EUR GC Pooling term indices with a comparable maturity.

EBA publishes new DPM and XBRL taxonomy for remittance of supervisory reporting

The EBA published an update to the XBRL taxonomy that Competent Authorities should use for the remittance of data under the EBA Implementing Technical Standards (ITS) on supervisory reporting. Many authorities have been using the EBA XBRL taxonomy for the collection of supervisory reporting from the credit institutions and investment firms they supervise. The taxonomy defines a representation for data collection under the reporting requirements related to, amongst other things, own funds, leverage ratio, liquidity ratios, asset encumbrance, and funding plans. Uniform data formats are necessary to enable comparable data on credit institutions and investment firms across the EU. The taxonomy proposed by the EBA will lead to greater efficiency and convergence of supervisory practices across Members States. In addition, it will facilitate the supervisory process, allowing supervisors to identify and assess risks consistently across the EU and to compare EU banks in an effective manner.

Commission passes amending regulation concerning countercyclical capital buffer information disclosures

The Commission passed Regulation 2015/1555 supplementing CRR with regard to regulatory technical standards for the disclosure of information in relation to the compliance of institutions with the requirement for a countercyclical capital buffer.

Commission passes amending regulation concerning regulatory technical standards for the transitional treatment of equity exposures under the IRB approach

The Commission passed Regulation 2015/1556 supplementing Regulation (EU) No 575/2013 with regard to regulatory technical standards for the transitional treatment of equity exposures under the IRB approach.

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

Date published: 02 October 2015