Consultation on draft RTS on the specific liquidity measurement for investment firms

The European Banking Authority (EBA) launched today a public consultation on its draft Regulatory Technical Standards (RTS) on specific liquidity measurement requirements for investment firms and draft Guidelines on liquidity requirements exemptions for small and non-interconnected investment firms. The draft RTS and draft Guidelines aim to ensure consistent supervisory practices with regards to the application of liquidity requirements for investment firms across all EU Member States. The consultations run until 10 March 2022.

The draft RTS on specific liquidity measurement set out liquidity risk elements that may raise major concern for investment firms and that competent authorities will be required to consider when setting specific liquidity requirements as a result of an investment firm’s supervisory review and evaluation process (SREP). The draft RTS specify that those elements shall be considered under normal and severe, but plausible, conditions. In addition, to ensure proportionality, competent authorities should assess only a smaller set of elements for small and non-interconnected investment firms.

The draft Guidelines set out the criteria that competent authorities should take into account when exempting small and non-interconnected investment firms from liquidity requirements set out in the Investment firms Regulation. These Guidelines specify that an exemption should be based on the assessment of the financial resource needed for an orderly wind-down of the investment firm.

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 10 March 2022.

A public hearing will take place via conference call on 18 January 2022 from 12:30 to 13:30 CET.

All contributions received will be published following the end of the consultation, unless requested otherwise.

Legal basis

The draft RTS has been developed in accordance with Article 42(6) of the Directive (EU) 2019/2034, which mandates the Authority to specify how liquidity risk and elements of liquidity risk are to be measured for the purpose of specific liquidity requirements.

The draft Guidelines have been developed in accordance with Article 43(4) of the Regulation (EU) 2019/2033 which mandates the Authority to specify further the criteria which the competent authorities may take into account when exempting investment firms that meet the conditions for qualifying as small and non‐interconnected investment firms set out in Article 12(1) from the liquidity requirement.

Directive (EU) 2019/2034 (IFD) and the Regulation (EU) 2019/2033 (IFR) were published in the Official Journal on 5 December 2019 and represent the new prudential framework for investment firms authorised under the Markets in Financial Instruments Directive (MIFID).

Consultation on draft Guidelines on the use of remote customer onboarding solutions

The European Banking Authority (EBA) launched today a public consultation on its draft Guidelines on the use of remote customer onboarding solutions. These Guidelines set out a common understanding by competent authorities of the steps financial sector operators should take to ensure safe and effective remote customer onboarding practices in line with applicable anti-money laundering and countering the financing of terrorism (AML/CFT) legislation and the EU’s data protection framework. Once adopted, these Guidelines will apply to all financial sector operators that are within the scope of the Anti-money Laundering Directive (AMLD). This consultation runs until 10 March 2022.

 Financial Institutions have seen a growing demand for remote customer onboarding solutions. This trend was exacerbated by restrictions on movement caused by the COVID-19 pandemic. As a result, the EBA considers it important for competent authorities and financial sector operators to understand the capabilities of these new remote solutions to make the most of the opportunities they offer, and at the same time, to support their sound and responsible use, as well as to be aware of ML/TF risks arising from the use of such tools and taking steps to mitigate those risks effectively.

These draft Guidelines set common EU standards on the development and implementation of sound, risk-sensitive initial customer due diligence (CDD) policies and processes in the remote customer onboarding context. They set out the steps financial institutions should take when choosing remote customer onboarding tools and when assessing the adequacy and reliability of such tools, in order to comply effectively with their AML/CFT obligations.

Consultation process

Comments to the two consultations can be sent to the EBA by clicking on the "send your comments" button on the respective consultation pages. Please note that the deadline for the submission of comments is 10 March 2022.

A public hearing will take place via conference call on 24 February 2022 from 11:00 to 12:30.

All contributions received will be published following the end of the consultation, unless requested otherwise.

Legal basis and background

These Guidelines have been developed in response to the European Commission’s request in the context of its Digital Finance Strategy, published in 2020. They are also in line with the EBA’s legal mandate to lead, coordinate and monitor the EU financial sector’s fight against ML/TF.

Consultation on draft RTS on credit scoring and loan pricing disclosure, credit risk assessment and risk management requirements for Crowdfunding Service Providers

The European Banking Authority (EBA) launched today a consultation  on draft Regulatory Technical Standards (RTS) specifying the information that crowdfunding service providers shall provide to investors. The proposed requirements cover the method used for the calculation of credit scores and loan prices, the factors that the providers need to consider when carrying out a credit risk assessment and conducting a valuation of a loan, and the underlying policies and governance arrangements. The consultation runs until 8 March 2022.

Investors using crowdfunding platforms may frequently be exposed to the risk of having less information compared to project owners, and/or an incomplete understanding of the viability of a crowdfunding project or of the due diligence conducted by the crowdfunding service providers.

Therefore, it is important that adequate information is disclosed to investors on how credit scores are calculated and loans are priced. Moreover, investors need to be sure  that crowdfunding service providers are subject to a minimum set of common standards in terms of credit risk assessment, governance, and risk management structures.

Against this backdrop, these draft RTS propose to require crowdfunding service providers to disclose the elements to be included in the information to investors with respect to the description of the method to calculate credit scores assigned to crowdfunding projects. The draft RTS also specify which are the elements of the pricing strategy that need to be provided to investors, and how to ensure that such pricing is indeed fair and appropriate. The draft RTS also require crowdfunding service providers to consider adequate amount of information when conducting the creditworthiness assessment of project owners and crowdfunding projects.

Finally, the draft RTS propose what policies and procedures crowdfunding service providers are required to have in place to ensure that investors are adequately informed, and that credit risk assessment and loan valuation are conducted in a sound and consistent manner.

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 8 March 2022. All contributions received will be published following the end of the consultation, unless requested otherwise.

A public hearing will be organised in the form of a webinar on 25 January 2022 from 11:00 to 12:30 CET. The EBA invites interested stakeholders to register using this link. The dial-in details will be communicated in due course.

Legal basis

These draft RTS have been developed according to Articles 19(7) of Regulation (EU) No 1503/2020 (European Crowdfunding Service Providers Regulation - ECSPR), which mandates the EBA to develop, in close cooperation with the European Securities and Market Authority (ESMA), draft RTS to specify:

  • the elements to be included in the information to investors with respect to the description of the method to calculate credit scores and pricing assigned to crowdfunding projects (Article 19(7)(a));
  • the information and factors that crowdfunding service providers shall consider when carrying out credit risk assessment and when conducting a loan valuation, as referred in Article 4(4) (Article 19(7)(b));
  • the factors that crowdfunding service providers shall take into account to ensure that the price of loans facilitated on its platform are fair and appropriate (Article 19(7)(c));
  • the content and governance of the policies and procedures required for the requirement specified in Article 19 and the risk management framework related to credit risk assessment as referred in Article 4(4)(f).

Consultation on draft RTS on IRRBB supervisory outlier tests

The European Banking Authority (EBA) launched today three consultations specifying technical aspects of the revised framework capturing interest rate risks for banking book (IRRBB) positions. The first on draft Guidelines on IRRBB and credit spread risk arising from non-trading book activities (CSRBB); the second on draft Regulatory Technical Standards (RTS) on the IRRBB standardised approach; and the third on draft Regulatory Technical Standards (RTS) on the IRRBB supervisory outlier test. The consultations run until 4 April 2022.

The Guidelines on IRRBB and CSRBB will replace the current Guidelines on technical aspects of the management of interest rate risk arising from non-trading activities under the supervisory review process published in 2018. The updated Guidelines provide continuity to the current ones and include new aspects of the mandate. In particular, they specify the criteria to identify non-satisfactory internal models for IRRBB management and identify specific criteria to assess and monitor CSRBB.

The RTS on the IRRBB standardised approach specify the criteria for the evaluation of IRRBB in case a competent authority decides its application in view of a non-satisfactory IRRBB internal system. They will also provide a simplified approach for smaller and non-complex institutions.

The RTS on IRRBB supervisory outlier tests specify the supervisory shock scenarios as well as the criteria to evaluate if there is a large decline in the net interest income or in the economic value of equity that could trigger supervisory measures.

Consultation process

Comments to this consultation can be sent to the EBA by clicking on the "send your comments" button on the respective consultation pages. Considering the concomitant publication of 3 different regulatory products on the same topic, the consultation period will exceptionally be of four months and will run until 4 April 2022. All contributions received will be published following the end of the consultation, unless requested otherwise.

public hearing will take place via conference call on 3 March 2022 at 9:30 CET.

Legal basis and background

These draft RTS and Guidelines have been developed on the basis of Article 84(5), 84(6) and 98(5a) of the Capital Requirements Directive CRD V). The updated IRRBB framework for the EU, including some mandates attributed to the EBA, have been developed using as a starting point the 2016 IRRBB Basel standards.

Consultation on draft Guidelines on IRRBB and CSRBB

The European Banking Authority (EBA) launched today three consultations specifying technical aspects of the revised framework capturing interest rate risks for banking book (IRRBB) positions. The first on draft Guidelines on IRRBB and credit spread risk arising from non-trading book activities (CSRBB); the second on draft Regulatory Technical Standards (RTS) on the IRRBB standardised approach; and the third on draft Regulatory Technical Standards (RTS) on the IRRBB supervisory outlier test. The consultations run until 4 April 2022.

The Guidelines on IRRBB and CSRBB will replace the current Guidelines on technical aspects of the management of interest rate risk arising from non-trading activities under the supervisory review process published in 2018. The updated Guidelines provide continuity to the current ones and include new aspects of the mandate. In particular, they specify the criteria to identify non-satisfactory internal models for IRRBB management and identify specific criteria to assess and monitor CSRBB.

The RTS on the IRRBB standardised approach specify the criteria for the evaluation of IRRBB in case a competent authority decides its application in view of a non-satisfactory IRRBB internal system. They will also provide a simplified approach for smaller and non-complex institutions.

The RTS on IRRBB supervisory outlier tests specify the supervisory shock scenarios as well as the criteria to evaluate if there is a large decline in the net interest income or in the economic value of equity that could trigger supervisory measures.

Consultation process

Comments to this consultation can be sent to the EBA by clicking on the "send your comments" button on the respective consultation pages. Considering the concomitant publication of 3 different regulatory products on the same topic, the consultation period will exceptionally be of four months and will run until 4 April 2022. All contributions received will be published following the end of the consultation, unless requested otherwise.

public hearing will take place via conference call on 3 March 2022 at 9:30 CET.

Legal basis and background

These draft RTS and Guidelines have been developed on the basis of Article 84(5), 84(6) and 98(5a) of the Capital Requirements Directive CRD V). The updated IRRBB framework for the EU, including some mandates attributed to the EBA, have been developed using as a starting point the 2016 IRRBB Basel standards.

Consultation on draft RTS on IRRBB standardised approach

The European Banking Authority (EBA) launched today three consultations specifying technical aspects of the revised framework capturing interest rate risks for banking book (IRRBB) positions. The first on draft Guidelines on IRRBB and credit spread risk arising from non-trading book activities (CSRBB); the second on draft Regulatory Technical Standards (RTS) on the IRRBB standardised approach; and the third on draft Regulatory Technical Standards (RTS) on the IRRBB supervisory outlier test. The consultations run until 4 April 2022.

The Guidelines on IRRBB and CSRBB will replace the current Guidelines on technical aspects of the management of interest rate risk arising from non-trading activities under the supervisory review process published in 2018. The updated Guidelines provide continuity to the current ones and include new aspects of the mandate. In particular, they specify the criteria to identify non-satisfactory internal models for IRRBB management and identify specific criteria to assess and monitor CSRBB.

The RTS on the IRRBB standardised approach specify the criteria for the evaluation of IRRBB in case a competent authority decides its application in view of a non-satisfactory IRRBB internal system. They will also provide a simplified approach for smaller and non-complex institutions.

The RTS on IRRBB supervisory outlier tests specify the supervisory shock scenarios as well as the criteria to evaluate if there is a large decline in the net interest income or in the economic value of equity that could trigger supervisory measures.

Consultation process

Comments to this consultation can be sent to the EBA by clicking on the "send your comments" button on the respective consultation pages. Considering the concomitant publication of 3 different regulatory products on the same topic, the consultation period will exceptionally be of four months and will run until 4 April 2022. All contributions received will be published following the end of the consultation, unless requested otherwise.

public hearing will take place via conference call on 3 March 2022 at 9:30 CET.

Legal basis and background

These draft RTS and Guidelines have been developed on the basis of Article 84(5), 84(6) and 98(5a) of the Capital Requirements Directive CRD V). The updated IRRBB framework for the EU, including some mandates attributed to the EBA, have been developed using as a starting point the 2016 IRRBB Basel standards.

Consultation on draft RTS on Pillar 2 add-ons for investment firms

The European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) launched today a public consultation on their Guidelines on common procedures and methodologies for the supervisory review and evaluation process (SREP). The EBA is also consulting on draft Regulatory Technical Standards (RTS) on the additional own funds requirements that could be determined by competent authorities for investment firms. Both regulatory products are based on the Investment Firms Directive (IFD) and aim at consistent supervisory practices with regard to the review and evaluation of investment firms. The consultations run until 18 February 2022.

The Investment Firms Regulation (IFR) and Directive (IFD) introduced a dedicated prudential framework for investment firms which reflects specific risks faced and posed to others by investment firms. This framework specifies the structure of own funds requirements for those investment firms, which are not considered systemic and are not treated as credit institutions.

The draft joint SREP Guidelines set out the process and criteria for the assessment of the main SREP elements such as:

  1. business model;
  2. governance arrangements and firm-wide controls;
  3. risks to capital and capital adequacy; and
  4. liquidity risk and liquidity adequacy.

As part of this assessment, a scoring system is introduced to facilitate the comparability across firms. In addition, the proposed joint Guidelines provide clarifications on the monitoring of key indicators, on the application of SREP in the cross-border context, and on the use of supervisory measures.

While the proposed structure of SREP and the scoring system is similar to those used for credit institutions, the guidance provided is proportionate to the nature, size and activities of investment firms, and in addition, the criteria for the assessment of risks follow the requirements of IFR and IFD.

For the determination of additional own funds requirements for risks not covered or not sufficiently covered by Pillar 1 requirements, the joint SREP Guidelines refer to the draft RTS on the additional own funds requirements also published for consultation today by EBA. These RTS set out more detailed guidance on the measurement of risks to capital, including specific indicative metrics to be used for the assessment of materiality and determination of capital considered adequate to cover specific risks.

Consultation process

Comments to the two consultations can be sent to the EBA by clicking on the "send your comments" button on the respective consultation pages. Please note that the deadline for the submission of comments is 18 February 2022.

public hearing will take place via conference call on 18 January 2022 from 11:00 to 12:30. All contributions received will be published following the end of the consultation, unless requested otherwise.

Legal basis, background and next steps

These draft Guidelines have been developed jointly with ESMA on the basis of Article 45(2) of Directive (EU) 2019/2034, which mandates these Authorities to further specify the common procedures and methodologies for the SREP.

The draft RTS have been developed in consultation with ESMA on the basis of Article 40(6) of Directive (EU) 2019/2034, which mandates the EBA to specify how the risks and elements of risks are to be measured.

Once the Guidelines and the RTS will enter into force, they will apply to competent authorities across the EU.

Consultation on Guidelines on common procedures and methodologies for the supervisory review and evaluation process (SREP)

The European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) launched today a public consultation on their Guidelines on common procedures and methodologies for the supervisory review and evaluation process (SREP). The EBA is also consulting on draft Regulatory Technical Standards (RTS) on the additional own funds requirements that could be determined by competent authorities for investment firms. Both regulatory products are based on the Investment Firms Directive (IFD) and aim at consistent supervisory practices with regard to the review and evaluation of investment firms. The consultations run until 18 February 2022.

The Investment Firms Regulation (IFR) and Directive (IFD) introduced a dedicated prudential framework for investment firms which reflects specific risks faced and posed to others by investment firms. This framework specifies the structure of own funds requirements for those investment firms, which are not considered systemic and are not treated as credit institutions.

The draft joint SREP Guidelines set out the process and criteria for the assessment of the main SREP elements such as:

  1. business model;
  2. governance arrangements and firm-wide controls;
  3. risks to capital and capital adequacy; and
  4. liquidity risk and liquidity adequacy.

As part of this assessment, a scoring system is introduced to facilitate the comparability across firms. In addition, the proposed joint Guidelines provide clarifications on the monitoring of key indicators, on the application of SREP in the cross-border context, and on the use of supervisory measures.

While the proposed structure of SREP and the scoring system is similar to those used for credit institutions, the guidance provided is proportionate to the nature, size and activities of investment firms, and in addition, the criteria for the assessment of risks follow the requirements of IFR and IFD.

For the determination of additional own funds requirements for risks not covered or not sufficiently covered by Pillar 1 requirements, the joint SREP Guidelines refer to the draft RTS on the additional own funds requirements also published for consultation today by EBA. These RTS set out more detailed guidance on the measurement of risks to capital, including specific indicative metrics to be used for the assessment of materiality and determination of capital considered adequate to cover specific risks.

Consultation process

Comments to the two consultations can be sent to the EBA by clicking on the "send your comments" button on the respective consultation pages. Please note that the deadline for the submission of comments is 18 February 2022.

public hearing will take place via conference call on 18 January 2022 from 11:00 to 12:30. All contributions received will be published following the end of the consultation, unless requested otherwise.

Legal basis, background and next steps

These draft Guidelines have been developed jointly with ESMA on the basis of Article 45(2) of Directive (EU) 2019/2034, which mandates these Authorities to further specify the common procedures and methodologies for the SREP.

The draft RTS have been developed in consultation with ESMA on the basis of Article 40(6) of Directive (EU) 2019/2034, which mandates the EBA to specify how the risks and elements of risks are to be measured.

Once the Guidelines and the RTS will enter into force, they will apply to competent authorities across the EU.

Consultation on draft RTS on IMMV under EMIR

The European Banking Authority (EBA) launched today a public consultation on its draft Regulatory Technical Standards (RTS) on Initial Margin Model Validation (IMMV) under the European Markets Infrastructure Regulation (EMIR). The consultation paper sets out the supervisory procedures for initial and ongoing validation of initial margin models, which will be used to determine the level of margin requirements for uncleared over the counter (OTC) derivatives. Supervisory validation will ensure harmonised supervisory procedures and an appropriately prudent approach to the level of initial margins for EU derivatives counterparts. The consultation runs until 4 February 2022.

The consultation paper envisages the application of supervisory procedures to both large and medium-sized counterparties by using a dual approach, proportionate to the size of the counterparty. This entails (i) a standard supervisory procedure to ensure an in-depth validation of the largest banking counterparties, and (ii) a more pragmatic and simplified approach applied to smaller counterparties.

In addition, this consultation paper foresees a phased-in implementation of the supervisory requirements to ensure a smooth model validation process. This phased-in provision allows more time for smaller counterparties to comply with the new requirements.

Finally, to minimise market disruption, competent authorities and counterparties will be supported in the application of the new validation approach for a transitional period of two years since the application of the new rules. This transitional provision will apply for the validation of models already in place at the moment of application of the rule.

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 4 February 2022.

public hearing will take place via conference call on 15 December 2021 from 15:00 to 17:00 CET.

All contributions received will be published after the consultation closes, unless requested otherwise.

Legal basis

This draft RTS has been developed in accordance with Article 11(15)(aa) of Regulation (EU) No 648/2012 (EMIR) on the risk-mitigation techniques for OTC derivative contracts not cleared by a central counterparty which mandates the EBA to specify the supervisory procedures that would ensure initial and ongoing validation of the risk-management procedures in the level of collateral. These draft RTS are being developed in cooperation with ESMA and EIOPA.

ESAs call for evidence on the European Commission mandate regarding the PRIIPs Regulation

The European Supervisory Authorities (ESAs) have opened today a call for evidence regarding the PRIIPs (Packaged retail and insurance-based investment products) Regulation.

The input provided will feed into the ESAs’ technical advice to the European Commission on a review of the key information document (KID) for PRIIPs.

The ESAs are requesting information from stakeholders on a range of topics including the practical application of the existing KID such as its use by financial advisors or the use of digital media, the scope of the PRIIPs Regulation and the degree of complexity and readability of the KID.  

The call for evidence is open until Thursday, December 16, 2021.

The ESAs also plan to hold a stakeholder event in Q1 2022 before finalising the advice. Further details about this event and how to register will be available in due course.

Background

The call for evidence follows the request from the European Commission of 27 July 2021 concerning multiple aspects of the PRIIPs Regulation.

The request is closely connected to the European Commission’s Capital Markets Union Action Plan and its future strategy for retail investments in Europe. The European Commission’s Capital Market Union (CMU) Action Plan aims to boost market-based financing in the European Union to help chart a return to long-term growth and to finance the green and digital transitions of the continent’s economy. With its strategy for retail investors, the European Commission wants to offer consumers increased investment opportunities and stronger investor protection on the capital markets.

PRIIPs cover a range of products marketed to retail investors such as insurance-based investment products, structured products and derivatives. Due to the variety and complexity of PRIIPs, it is important that consumers have access to comprehensive information about them. Key information documents (KIDs) help provide vital consumer-friendly information about the key features of investment products.