Consultation on draft RTS amending Delegated Regulation (EU) 2016 2251 on risk-mitigation techniques for OTC-derivative contracts not cleared by a CCP

The European Supervisory Authorities Authority (ESAs) launched today two joint consultation to amend Regulatory Technical Standards (RTS) on the clearing obligation and risk mitigation techniques for OTC derivatives not cleared. These standards, which implement the European Market Infrastructure Regulation (EMIR), aim to amend the current regulation on the clearing obligation and risk mitigation techniques on OTC derivatives not cleared by a central counterparties (CCPs) in order to provide a specific treatment for simple, transparent and standardised (STS) securitisation and ensure a level playing field with covered bonds. The consultations run until 15 June 2018.
 
The Securitisation Regulation and the amended EMIR provide a specific treatment for STS Securitisation in relation to the  clearing obligation and on risk mitigation techniques on non-cleared OTC derivatives frameworks. 
 
The consultation on the draft RTS on the clearing obligation clarify which arrangements under covered bonds or securitisations adequately mitigate counterparty risk and thus may benefit from an exemption from the clearing obligation. 
 
The consultation on the draft RTS on risk mitigation techniques aims at extending the type of special treatment currently associated with covered bonds to STS securitisations. The proposed treatment, i.e. no exchange of initial margins and collection only of variation margins, is applicable only where a STS securitisation structure meets a specific set of conditions equivalent to the ones required to covered bonds issuers to be able to benefit of that same treatment.

Consultation process

Comments to the consultations can be sent to EBA and ESMA respectively, online by clicking on the "send your comments" button on the consultation pages. All contributions received will be published following the close of the consultation, unless requested otherwise. Please note that the deadline for the submission of comments is 15 June 2018.
 
A public hearing will take place at the EBA premises on 31 May 2018, from 15.00 to 16.00 UK time. 
 

Legal basis

The ESAs have developed these two CPs in accordance with Articles 4 and 11 of EMIR as amended under Article 42 of the Securitisation Regulation, which contains two mandates for the ESAs on the clearing obligation and on risk mitigation techniques for OTC derivatives not cleared. 
 

Consultation on Guidelines on disclosure of non-performing and forborne exposures

The European Banking Authority (EBA) launched today a consultation on its Guidelines on disclosure by credit institutions of information on non-performing and forborne exposures. The Guidelines specify the information related to non-performing (NPE) and forborne exposures and foreclosed assets that banks should disclose and provide uniform disclosure formats. By addressing potential asymmetries of information and providing common disclosure on the quality of banks’ assets, the Guidelines seek to foster transparency and market discipline. The consultation runs until 27 July 2018.
 
The Guidelines apply to credit institutions that are subject to all or part of the disclosure requirements specified in the Capital Requirements Regulation (CRR). These requirements, including the frequency of the disclosure, are applied in a proportionate manner based on the significance of the credit institution and the level of NPEs. 
The Guidelines include ten disclosure templates, of which four are applicable to all credit institutions and six apply only to significant institutions with a high level of NPEs. Overall, this uniform disclosure helps provide meaningful information to market participants on credit institutions’ asset quality. In addition, for those institutions with high level of NPEs, the Guidelines help gain a better insight into the features and distribution of their problematic assets, the quality and value of their collaterals and the efficiency of their recovery function.
 
The content of the uniform templates included in the Guidelines has been developed in parallel with the amendments to the reporting framework on non-performing exposures, which the EBA will consult on. Although the two consultations will be run separately, the EBA will ensure consistency between the disclosure Guidelines and the amended FINREP framework.

Consultation process

Comments to this consultation can be sent to the EBA by clicking on the "send your comments" button on the consultation page. All contributions received will be published following the close of the consultation, unless requested otherwise. Please note that the deadline for the submission of comments is 27 July 2018.
A public hearing will take place at the EBA premises on 27 June 2018 from 10.30 to 12:30 UK time.

Legal basis and background

The EBA has developed these Guidelines in accordance with the EBA Regulation, and following the conclusions reached by the Council in July 2017 to set up an Action Plan to tackle non-performing loans (NPLs) in Europe, where the EBA was asked to contribute with a number of initiatives. In particular, the Council underlined that a comprehensive approach combining a mix of complementing policy actions, at national and European level, is needed to address the existing stock of NPLs as well as to prevent the emergence and accumulation of new NPEs on banks' balance sheets. The enhanced disclosure requirements developed in these draft Guidelines are one of these initiatives.
 

Draft Guidelines on the STS criteria for non-ABCP securitisation

The European Banking Authority (EBA) launched today a public consultation on its draft Guidelines, which will provide a harmonised interpretation of the criteria for the securitisation to be eligible as simple, transparent and standardised (STS). The EBA Guidelines will play a crucial role in the new EU securitisation framework, by providing a single point of consistent interpretation of the STS criteria to originators, sponsors, investors and competent authorities throughout the Union. The consultation runs until 20 July 2018.

The Guidelines, developed for both non asset-backed commercial paper (ABCP) and ABCP securitisation, clarify and ensure common understanding of all the STS criteria, including those related to the expertise of the originator and servicer, the underwriting of standards, exposures in default and credit impaired debtors, and predominant reliance on the sale of assets.

The Guidelines will be applied on a cross-sectoral basis throughout the Union with the aim of facilitating the adoption of the STS criteria, which is one of prerequisites for the application of a more risk-sensitive regulatory treatment under the new EU securitisation framework.

Consultation process

Responses 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 20 July 2018.

A public hearing will take place at the EBA premises on 11 June 2018 from 14:00 to 16:00 UK time.

Legal basis and next steps

The Guidelines have been developed according to Articles 19(2) and 23(3) of the Securitisation Regulation, which mandates the EBA, in close cooperation with ESMA and EIOPA, to adopt guidelines and recommendations on the harmonised interpretation and application of the criteria related to simplicity, transparency and standardisation for the non-ABCP securitisations, and transaction level and programme level criteria for the ABCP securitisations.

Consultation on Guidelines on specification of types of exposures to be associated with high risk

The European Banking Authority (EBA) launched today a consultation on its Guidelines regarding the types of exposures to be associated with high risk under Article 128 (3) of the Capital Requirements Regulation (CRR). The Guidelines specify which types of exposures, other than those mentioned in Article 128 (2) CRR, are to be associated with particularly high risk and under which circumstances. The Guidelines also clarify the notion of investments in venture capital firms and private equity. The consultation runs until 17 July 2018.
 
In line with the mandate for the EBA in Article 128 (3) CRR, this consultation paper is seeking views on the exposure classes that could contain high-risk items. In addition, it specifies the method, which institutions can use in order to inform supervisors about the occurrence of high-risk items in their portfolios, which are considered as structurally different from common exposures of the same asset class.
 
The EBA also included the clarification regarding the notion of investments in venture capital firms and private equity. The aim is to  provide guidance and ensure harmonisation regarding the type of exposures considered as investments in venture capital firms and private equity. 

Consultation process

Responses 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 July 2018. A public hearing will take place at the EBA premises on 4 May 2018 from 11:00 to 12:30 UK time. 

Legal basis and next steps

The EBA has developed these Guidelines in accordance with the EBA Regulation, on the basis of the EBA’s mandate in Article 128 (3) CRR regarding the items associated with particular high risk.
 
The Guidelines should be implemented by 1 January 2019. 
 

Consultation on the extension of the application of the Joint Committee Guidelines on complaints-handling to the new institutions under PSD2 and MCD

The European Banking Authority (EBA) launched today a public consultation to propose extending the scope of application of the existing Joint Committee (JC) Guidelines on complaints-handling to the new institutions established under the revised Payment Service Directive (PSD2) and the Mortgage Credit Directive (MCD). The proposal, which does not envisage any changes to the substance of the existing Guidelines, will ensure that an identical set of requirements for complaints-handling continues to apply to all financial institutions across the banking, investment and insurance sectors. The extension of the scope will provide consumers with the same level of protection, irrespective of which regulated product or service they are purchasing and which regulated institution they are purchasing it from. The consultation runs until 27 May 2018. 
 
The existing JC Guidelines on complaints-handling set out requirements in relation to firms’ complaints management policy and function, their registration of complaints, their reporting to national competent authorities, and their assessment of, and responses to, the complaints. The Guidelines are addressed to authorities competent in their jurisdictions for supervising complaints-handling by firms, which in the banking sector include credit institutions, payment institutions and electronic money institutions, as defined in the Capital Requirements Directive (CRD), the PSD2 and the Electronic Money Directive (EMD) respectively.
 
The consultation paper proposes that the JC Guidelines should also apply to the new payment initiation service providers (PISPs) and account information service providers (AISPs) under the PSD2 and credit intermediaries and non-credit institution creditors under the MCD. In the specific case of AISPs that provide only account information, but no other payment services, the EBA proposes to apply the Guidelines only to security-related, but not to other types of, complaints, in line with related requirements set out in the PSD2 itself.
 
Since some of the new actors under the PSD2 and the MCD can be very small, comprising of one or two persons only and, the EBA proposes that competent authorities should apply the JC Guidelines in a proportionate manner, taking into account the nature, scale and complexity of the organisation of the institutions and the nature and range of the services they offer.

Consultation process

Responses 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 27 May 2018.

Legal basis and background

In June 2012, the European Insurance and Occupational Pensions Authority (EIOPA) published its ‘Guidelines on Complaints-Handling by Insurance Undertakings’. In June 2014, the European Securities and Markets Authority (ESMA) and the EBA read across these Guidelines to the investment and banking sectors respectively and issued them as JC Guidelines for complaints-handling for the securities and banking sectors, under Article 16 of Regulation (EU) 1093/2010 (EBA Regulation).
 
In March 2016, Directive 2014/17/EU on credit agreements for consumers relating to residential immovable property (the Mortgage Credit Directive) started to apply and introduced requirements for credit agreements offered by credit institutions and two new types of institutions - credit intermediaries and non-credit institution creditors, which are presently not in the scope of the JC Guidelines. 
 
In January 2018, Directive (EU) 2015/2366 on payment services in the internal market (the revised Payment Services Directive) started to apply and added two new providers of payment services – account information service providers and payment initiation service providers.
 

Consultation on Guidelines on management of non-performing and forborne exposures

The European Banking Authority (EBA) launched today a consultation on its Guidelines for credit institutions on how to effectively manage non-performing exposures (NPEs) and forborne exposures (FBEs). The Guidelines target high NPE banks with the aim of achieving a sustainable reduction of NPEs to strengthen the resilience of their balance sheets and support lending into the real economy. The Guidelines are designed to ensure that consumers, who have taken out loans, are treated fairly at every stage of the loan life cycle. The consultation runs until 8 June 2018.
 
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 paper asks for views on the threshold for assessing high NPE banks noting that credit institutions with elevated levels of NPEs, measured as a NPL ratio of 5% or above, should establish a NPE strategy and related governance and operational arrangements. Effective governance covers all responsibilities that banks have, including treating customers fairly.
 
The Consultation Paper also sets out requirements on processes to recognise NPEs and FBEs, as well as a forbearance granting process with a focus on the viability of forbearance measures. On the latter, the Consultation paper suggests that forbearance measures should be granted only when they aim to restore sustainable repayment by the borrower and are thus in the borrower’s interest. Credit institutions are expected to monitor efficiency and effectiveness of forbearance measures and have in place policies and processes to assess borrowers’ financial difficulties and identification of NPEs.
 
Finally, the Consultation Paper sets out requirements for competent authorities’ assessment of credit institutions’ NPE management activity as part of the Supervisory Review and Evaluation Process (SREP). 

Consultation process

Responses 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 8 June 2018.
 
A public hearing will take place at the EBA premises on 25 April 2018 from 11:00 to 12:30 UK time. 
 

Legal basis and next steps

EBA has developed these Guidelines in accordance with the EBA Regulation, on the basis of EBA’s Pillar 2 mandates in the CRD IV and following the conclusions reached by the Council in July 2017 to set up an Action Plan[1] to tackle non-performing loans (NPLs) in Europe where EBA should contribute in a number of ways. In that respect, the Council has stressed that a comprehensive approach combining a mix of complementing policy actions, at national and European level, is needed to address the existing stock of NPLs as well as to prevent the emergence and accumulation of new NPEs on banks’ balance sheets. 
 
The Guidelines should be implemented by 1 January 2019.
 

Consultation on ITS on Supervisory Benchmarking framework for 2019

The European Banking Authority (EBA) launched today a consultation to amend the Commission Implementing Regulation on benchmarking of internal models to adjust the benchmarking portfolios and reporting requirements in view of the benchmarking exercise the EBA will carry out in 2019. The proposed changes reduce uncertainties in the credit risk portfolios, thus aiming at fostering a common and coherent interpretation and implementation of the reporting requirements across EU institutions. The consultation will run until 31 January 2018.
 
Based on the feedback received from the recent interactions with institutions, the proposals included in this Consultation Paper aim at enhancing the market risk portfolios, as well as at simplifying some hypothetical trades. Minor changes to the reporting templates and instructions have been included to keep the portfolios up to date and the reported data relevant for the 2019 assessment.
 
These revised benchmarking portfolios and reporting requirements are expected to be applicable for the submission of initial market valuation data in Q3 2018 and of other market and credit risk data in 2019 (i.e. with reference date 31 December 2018).

Consultation process

Responses 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 31 January 2018.
 
A public hearing will take place at the EBA premises on 23 January 2018 from 11:00 to 12:30 UK time. 

Legal basis and background

Article 78 of the Capital Requirements Directive (CRD) requires competent authorities to conduct an annual assessment of the quality of internal approaches used for the calculation of own funds requirements. To assist competent authorities in this assessment, the EBA calculates and distributes benchmark values against which individual institutions’ risk parameters can be compared. These benchmark values are based on data submitted by institutions as laid out in the Capital Requirements Regulation (CRR), which specifies the benchmarking portfolios, templates and definitions to be used as part of the annual benchmarking exercises.
 

Consultation on the draft RTS on homogeneity of underlying exposures in securitisation

The European Banking Authority (EBA) launched today a public consultation on draft Regulatory Technical Standards (RTS) specifying a set of criteria for the underlying exposures in securitisation to be deemed homogeneous, as part of the requirements under the new EU securitisation framework. The homogeneity requirement aims to facilitate the assessment of underlying risks by investors and to enable them to perform robust due diligence. Its application is, therefore, one of prerequisites for a more risk sensitive regulatory treatment of the securitisation. The RTS are applicable to both asset-backed commercial paper (ABCP) and non-ABCP securitisations. The consultation runs until 15 March 2018.
 
Homogeneity of the underlying exposures is one of the requirements for simple, transparent and standardised (STS) securitisation, which is eligible for more risk-sensitive risk weights, under the new EU securitisation framework. 
 
These RTS define a set of criteria according to which the underlying exposures are deemed homogeneous. These include: (i) the need to be underwritten according to similar underwriting standards, methods and criteria; (ii) the need to be serviced according to uniform servicing procedures; (iii) the need to fall within the same asset category and (iv) to be further differentiated by the application of relevant risk factors. 
 
In order to provide more clarity and facilitate the assessment of the homogeneity, the RTS provide a non-exhaustive list of asset categories, as well as lists of the risk factors to be generally considered for each of these asset categories. The RTS require that only those risk factor(s) which are relevant for determining the homogeneity of a specific pool of the underlying exposures, should be effectively applied to that particular pool. 
 
The RTS also include an alternative option to determine homogeneity, according to which the risk factors should be reflected in the underwriting standards, with a view to gather a comprehensive feedback on the most appropriate approach for the interpretation of the homogeneity requirement. 

Consultation process

Responses 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 15 March 2018.
A public hearing will take place at the EBA premises on 19 February 2018 from 14:00 to 16:00 UK time. 

Legal basis and next steps

The RTS have been developed according to Articles 20(14) and 24(21) of the STS Securitisation Regulation. Article 20(14), which is applicable to non-ABCP securitisation, mandates the EBA, in close cooperation with ESMA and EIOPA, to develop the RTS further specifying which underlying exposures are deemed to be homogeneous. Art. 24(21), which is applicable to ABCP securitisation, establishes a corresponding mandate for ABCP securitisations.
 

Consultation on RTS on methods of prudential consolidation

The European Banking Authority (EBA) launched today a consultation on draft Regulatory Technical Standards (RTS) specifying the different methods of prudential consolidation, which can be applied when certain conditions and criteria are met. The aim of these draft RTS is to ensure that the appropriate method of prudential consolidation is applied for the calculation of the Capital Requirements Regulation (CRR) requirements on a consolidated basis. The consultation runs until 09 February 2018.
 
According to the CRR, the entities included in the scope of prudential consolidation are institutions (i.e. credit institutions and investment firms), financial institutions and, when consolidated supervision is required, ancillary services undertakings. 
 
As a general rule, institutions shall apply full consolidation to their subsidiaries, or, where relevant, to the subsidiaries of their parent financial holding company or parent mixed financial holding company. However, under certain circumstances, and depending on the links between the entities, the CRR allows the application of other methods of consolidation, such as proportional consolidation. In addition, when consolidation is not appropriate the equity method may also be applied. These draft RTS specify the criteria, indicators and conditions that institutions need to meet for the application of different methods of consolidation or of the equity method.
 
The EBA, in parallel, published an Opinion and a Report on the prudential treatment of other financial intermediaries (OFIs) and regulatory perimeter issues, highlighting the diversity in terms of application of the definition of financial institution and ancillary services undertakings, which currently exists. As these terms are crucial for the purposes of establishing the scope of prudential consolidation, the Consultation Paper on these draft RTS also seeks feedback on this issue.

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 09 February 2018. All contributions received will be published following the end of the consultation, unless requested otherwise. 
A public hearing will take place at the EBA premises on 22 January 2018 from 13.30 to 15.30 UK time. 

Legal basis 

These draft RTS have been developed according to Article 18(7) of Regulation (EU) No 575/2013 (Capital Requirements Regulation – CRR), which mandates the EBA to specify the conditions ac-cording to which consolidation shall be carried out in the cases referred to in paragraphs 2 to 6 of Article 18 of the CRR.
 
The Consultation Paper has taken into consideration the Guidelines on the identification and management of step-in risk, recently published by the Basel Committee on Banking Supervi-sion (BCBS) and, therefore, includes several indicators that should be assessed by institutions to identify the undertakings that can lead to step-in risk. 
 

Consultation on Guidelines on technical aspects of the management of interest rate risk

The European Banking Authority (EBA) in accordance with its Pillar 2 Roadmap, published in April 2017, launched today a public consultation to review three guidelines aimed at further enhancing institutions’ risk management and supervisory convergence in the supervisory review and examination process (SREP). The revisions focus on stress testing, particularly its use in setting Pillar 2 capital guidance (P2G), as well as interest rate risk in the banking book (IRRBB). The consultations on all three guidelines run until 31 January 2018.
 
In particular, the publication includes:
  • an update of the EBA guidelines on common procedures and methodology for Supervisory Review and Evaluation Process (SREP Guidelines);
  • an update of the EBA guidelines on the management of interest rate risk arising from non-trading activities (IRRBB Guidelines); and
  • an update of the EBA guidelines on institutions’ stress testing.
The comprehensive EU SREP framework, which was introduced by the EBA in 2014, is now well established and in use by supervisors across the EU. Following the global regulatory developments, as well as the EBA’s supervisory convergence assessments, specific changes are needed to reinforce the framework as set out in the EBA’s Pillar 2 Roadmap. 
 
The overall SREP framework and the Guidelines remain intact and the consultation is only focused on the elements being updated. In particular, the revisions enhance the requirements for supervisory stress testing and explain how stress testing outcomes will be used in setting P2G. The guidelines have also been updated with assessments of internal governance based on the recently revised EBA Guidelines on internal governance.
 
The revised IRRBB Guidelines reflect developments in the Basel Committee on Banking Supervision (BCBS) and clarify internal governance and supervisory outlier tests requirements during the first phase of the European implementation of the Basel standards. The revisions are, therefore, intended to act as a bridge to the future requirements, which will be incorporated in the CRD V/ CRR2 framework.
 
The revised guidelines on institutions’ stress testing update the EBA’s 2010 guidelines to reflect industry practices and the incorporation of recovery planning. The revised guidelines also feature a common taxonomy on stress testing. 
 
In accordance with the Pillar 2 Roadmap, these three guidelines are being consulted in parallel and are expected to be implemented by 1 January 2019 for the 2019 cycle of SREP and joint decisions on institution-specific prudential requirements.

Consultation process

Responses to the consultations can be sent to the EBA by clicking on the following links:
 
• Click here to respond to the consultation on common procedures and methodologies for SREP
• Click here to respond to the consultation on the management of IRRBB
• Click here to respond to the consultation on institutions’ stress testing
 
All contributions received will be published after the consultation closes, unless requested otherwise. The deadline for the submission of comments is 31 January 2018.
 
A public hearing on all three guidelines will take place at the EBA premises on 16 January 2018 from 10:00 to 13:00 UK time. 

Legal basis 

The EBA guidelines on common procedures and methodology for Supervisory review and Evaluation Process (SREP) have been developed in accordance with Article 107(3) of Directive 2013/36/EU and specify the common procedures and methodologies for the functioning of the supervisory review and evaluation process (SREP) referred to in Articles 97 and 107(1)(a) of Directive 2013/36/EU. In addition, these guidelines aim at providing common methodologies to be used by competent authorities when conducting supervisory stress tests in the context of their SREP as referred to in Article 100(2) of Directive 2013/36/EU. 
 
The EBA guidelines on the management of interest rate risk arising from non-trading activities have been developed in accordance with Article 16 of Regulation (EU) No 1093/2010 and Article 98(5) of Directive 2013/36/EU. These guidelines specify the systems to be implemented by institutions for the identification, evaluation and management  and governance arrangements of IRRBB;  sudden and unexpected changes in the interest rate in accordance with Article 98(5) of Directive 2013/36/EU for the purposes of SREP; and general expectations for the identification and management of credit spread risk in the non-trading book (CSRBB).
 
The EBA guidelines on institutions’ stress testing have been developed in accordance with Article 16 of Regulation (EU) No 1093/2010 and update the existing EBA Guidelines on stress testing form 2010. These guidelines aim at providing common organisational requirements, methodologies and processes for the performance of stress testing by institutions as part of their risk management processes.