Consultation on Guidelines on large exposures breaches and time and measures to return to compliance (EBA/CP/2021/03)

Start Date: 17/02/2021 | Deadline: 17/05/2021 | Status: OPEN | | Send your comments

The European Banking Authority (EBA) launched today a consultation on the criteria that competent authorities should use to assess a breach of the large exposure limits. The consultation paper also details the criteria to determine the period of time and the measures for institutions to return to compliance with those limits. The consultation runs until 17 May 2021.

The guidelines clarify that any breach of the large exposure limits of Article 395(1) of the Capital Requirements Regulation (CRR) should always be considered as an exceptional case. To support competent authorities in their assessment and harmonise the approach across the Single Market, the EBA has developed guidelines with criteria to assess such breaches. Competent authorities should consider at least the following three criteria: whether the breach was a rare event; whether the institution could foresee the event when it had applied a proper and effective risk management; and whether it was caused by reasons beyond the institution’s control. If the breach does not fulfil those criteria, the competent authority should not grant the institution more than three months to restore compliance with the large exposure limit.

Likewise, the guidelines provide competent authorities with a set of criteria to determine the appropriate time that they could grant institutions to return to compliance with the large exposure limits. When an institution is granted more than three months to comply with the limits, it should present a compliance plan to the competent authority with a number of measures as listed in the guidelines.

The Guidelines will apply from 1 March 2022.

Consultation process

Comments to this consultation can be sent to the EBA by clicking on the "send your comments" button on the consultation page. Please note that the deadline for the submission of comments is 17 May 2021.

A public hearing will take place via conference call on Tuesday 30 March from 13:00 to 15:00 CET.

Legal basis and background

The EBA has developed the draft Guidelines pursuant to the mandate in Article 396(3) of Regulation (EU) No 575/2013 and in accordance with Article 16 of its founding Regulation, which mandates the Authority to issue guidelines and recommendations addressed to competent authorities or financial institutions with a view to establishing consistent, efficient and effective supervisory practices within the European System of Financial Supervision, and to ensuring the common, uniform and consistent application of Union law.