Consultation on Guidelines on the authorisation of credit institutions

The European Banking Authority (EBA) published today a Consultation Paper on its Guidelines on a common assessment methodology for granting authorisation as a credit institution. The draft Guidelines are addressed to all competent authorities across the EU in charge of granting authorisation as a credit institution, and cover the authorisation requirements set out in the Capital Requirements Directive (CRD). The draft Guidelines complement the Regulatory Technical Standards (RTS) on authorization of credit institutions and contribute to the convergence of supervisory practices around market access for credit institutions across the single market. The consultation runs until 10 June 2021.

The draft Guidelines advocate for a risk-based approach and insist on the importance of consistency with the supervisory approaches applied in going concern situations. In addition, they consider the proportionality principle for all relevant assessment criteria and apply to both traditional and innovative business models and/or delivery mechanisms, as they are technology neutral.

In the context of the assessment of the application for granting an authorisation, the draft Guidelines also include guidance on money laundering or terrorist financing (ML/TF) risks and highlight the importance of cooperation with the anti-money laundering (AML) supervisor and other public bodies, in accordance the CRD.

Consultation process

Responses 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 after the consultation closes, unless requested otherwise. The deadline for the submission of comments is 10 June 2021.

A public hearing will be held on 22 April 2021 from 10:00 to 12:00 CET via conference call.

Legal basis

The draft Guidelines have been drafted in accordance with Article 8(5) CRD, which mandates the Authority to specify a common assessment methodology for granting authorisations in accordance with the CRD.

Consultation on draft ITS on Pillar disclosures on ESG risk

  • The draft technical standards provide a framework for ESG disclosures to ensure stakeholders are informed about ESG exposures and strategies and can make informed decisions and exercise market discipline.
  • The standards put forward comparable disclosures and KPIs, including a green asset ratio, as a tool to show how institutions are embedding sustainability considerations in their risk management, business models and strategy and their pathway towards the Paris agreement goals
  • The EBA has developed the Consultation paper in parallel and consistently with its advice to the EU Commission on ESG disclosures under the EU taxonomy, including a proposal for a Green Asset ratio (GAR).

The European Banking Authority (EBA) published today a consultation paper on draft implementing technical standards (ITS) on Pillar 3 disclosures on Environmental, Social and Governance (ESG) risks. The draft ITS put forward comparable disclosures that show how climate change may exacerbate other risks within institutions’ balance sheets, how institutions are mitigating those risks, and their green asset ratio on exposures financing taxonomy-aligned activities, such as those consistent with the Paris agreement goals.

Disclosure of information on ESG risks is a vital tool to promote market discipline, allowing stakeholders to assess banks’ ESG related risks and sustainable finance strategy.

In line with the requirements laid down in the Capital Requirements Regulation (CRR), the draft ITS proposes comparable quantitative disclosures on climate-change related transition and physical risks, including information on exposures towards carbon related assets and assets subject to chronic and acute climate change events. They also include quantitative disclosures on institutions’ mitigating actions supporting their counterparties in the transition to a carbon neutral economy and in the adaptation to climate change. In addition, they include a GAR, which identifies the institutions’ assets financing activities that are environmentally sustainable according to the EU taxonomy, such as those consistent with the European Green Deal and the Paris agreement goals. Finally, the draft ITS provide qualitative information on how institutions are embedding ESG considerations in their governance, business model and strategy and risk management framework.

The EBA has integrated proportionality measures that should facilitate institutions’ disclosures, including transitional periods where disclosures in terms of estimates and proxies are allowed.

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 1 June 2021. 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 29 March from 14:00 to 16:00 CET. The EBA invites interested stakeholders to register using this link.

The dial in details will be communicated in due course.

Legal basis and background

Article 434a of the Capital Requirements Regulation (CRR) mandates the EBA to develop draft implementing technical standards specifying uniform disclosure formats, and associated instructions in accordance with which the disclosures required in Part eight of the CRR shall be made. Those uniform formats shall convey sufficiently comprehensive and comparable information for users of that information to assess the risk profiles of institutions.

The ITS will amend the final draft ITS on institutions’ public disclosures with the strategic objective of defining a single, comprehensive Pillar 3 framework under the CRR that should integrate all the relevant Pillar 3 disclosure requirements. This will facilitate institutions’ implementation and enhance clarity for users of such information, as expressed in the EBA Pillar 3 roadmap.

When developing these proposals, the EBA has built on the Financial Stability Board  Task Force on Climate-related Financial Disclosures (FSB-TCFD) recommendations, the Commission’s non-binding guidelines on climate-change reporting, and on the EU Taxonomy. The EBA has developed this consultation paper in parallel and consistently with the Advice to the Commission on disclosures under Article 8 of the Taxonomy Regulation, including a common proposal for a GAR.

 

Consultation on draft RTS on colleges of supervisors for investment firms groups

  • The two sets of standards provide a framework for supervisory cooperation and information exchanges for cross-border investment firms.
  • The requirements cover all forms of cross-border operations and aim at ensuring that supervisory cooperation of cross-border operating investment firms is effective and efficient.

The European Banking Authority (EBA) launched today two public consultations on regulatory technical standards (RTS) and Implementing Technical Standards (ITS) on cooperation and information exchange between competent authorities involved in prudential supervision of investment firms. These draft standards provide a solid framework for (i) cooperation in the supervision of investment firm groups though colleges of supervisors and (ii) for information exchange for investment firms operating through branches or the free provision of services. These draft standards are part of the phase 2 mandates of the EBA roadmap on investment firms, and aim at improving cooperation and information exchanges between the supervisors of investment firms. Both consultations run until 23 April 2021.

The draft RTS on colleges of supervisors for investment firms groups specify the conditions under which colleges of supervisors exercise their tasks. The RTS target the investment firm groups falling under the remit of the Investment Firms Directive (IFD) and are built on the experience gained over the years in the colleges of supervisors of credit institutions and larger and more complex investment firms groups that have been established in accordance with the Capital Requirements Directive (CRD). The draft RTS are structured around four main sections:

  • establishment of colleges,
  • functioning of colleges;
  • planning and coordination of supervisory activities in going concern situations;
  • planning and coordination of supervisory activities in preparation for and during emergency situations.

The draft RTS and ITS on information exchange between the competent authorities of home and host Member States complement the RTS on colleges of supervisors and address situations where investment firms operate in another Member State through branches or the free provision of services, where colleges may not be established. In particular, the draft RTS specify the information that host Member State competent authorities and home Member State competent authorities shall exchange with each other, whereas the draft ITS establish standard forms, templates and procedures for sharing the information specified in the RTS.

Consultation process

Responses to the two consultations 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 23 April 2021.

A public hearing will take place on 7 April 2021.

Legal basis

The draft RTS on colleges of supervisors for investment firms groups have been developed in accordance with Article 48(8) of Directive (EU) 2019/2034, which mandates the Authority to develop, in consultation with ESMA, draft RTS to specify the conditions under which the colleges of supervisors established for investment firms groups exercise their tasks.

The draft RTS and ITS on information exchange have been developed in accordance with Articles 13(7) and Article 13(8) of Directive (EU) 2019/2034, which mandate the Authority to develop regulatory and implementing technical standards on the exchange of information between home and host competent authorities supervising investment firms operating through branches. Both mandates have to be delivered by the EBA in consultation with ESMA.

Consultation on draft RTS and ITS on information exchange between the competent authorities of home and host Member States

  • The two sets of standards provide a framework for supervisory cooperation and information exchanges for cross-border investment firms.
  • The requirements cover all forms of cross-border operations and aim at ensuring that supervisory cooperation of cross-border operating investment firms is effective and efficient.

The European Banking Authority (EBA) launched today two public consultations on regulatory technical standards (RTS) and Implementing Technical Standards (ITS) on cooperation and information exchange between competent authorities involved in prudential supervision of investment firms. These draft standards provide a solid framework for (i) cooperation in the supervision of investment firm groups though colleges of supervisors and (ii) for information exchange for investment firms operating through branches or the free provision of services. These draft standards are part of the phase 2 mandates of the EBA roadmap on investment firms, and aim at improving cooperation and information exchanges between the supervisors of investment firms. Both consultations run until 23 April 2021.

The draft RTS on colleges of supervisors for investment firms groups specify the conditions under which colleges of supervisors exercise their tasks. The RTS target the investment firm groups falling under the remit of the Investment Firms Directive (IFD) and are built on the experience gained over the years in the colleges of supervisors of credit institutions and larger and more complex investment firms groups that have been established in accordance with the Capital Requirements Directive (CRD). The draft RTS are structured around four main sections:

  • establishment of colleges,
  • functioning of colleges;
  • planning and coordination of supervisory activities in going concern situations;
  • planning and coordination of supervisory activities in preparation for and during emergency situations.

The draft RTS and ITS on information exchange between the competent authorities of home and host Member States complement the RTS on colleges of supervisors and address situations where investment firms operate in another Member State through branches or the free provision of services, where colleges may not be established. In particular, the draft RTS specify the information that host Member State competent authorities and home Member State competent authorities shall exchange with each other, whereas the draft ITS establish standard forms, templates and procedures for sharing the information specified in the RTS.

Consultation process

Responses to the two consultations 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 23 April 2021.

A public hearing will take place on 7 April 2021.

Legal basis

The draft RTS on colleges of supervisors for investment firms groups have been developed in accordance with Article 48(8) of Directive (EU) 2019/2034, which mandates the Authority to develop, in consultation with ESMA, draft RTS to specify the conditions under which the colleges of supervisors established for investment firms groups exercise their tasks.

The draft RTS and ITS on information exchange have been developed in accordance with Articles 13(7) and Article 13(8) of Directive (EU) 2019/2034, which mandate the Authority to develop regulatory and implementing technical standards on the exchange of information between home and host competent authorities supervising investment firms operating through branches. Both mandates have to be delivered by the EBA in consultation with ESMA.

Consultation on Guidelines on large exposures breaches and time and measures to return to compliance

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.

Consultation on ITS amending Commission Implementing Regulation (EU) 2016/2070 with regard to benchmarking of internal models

The European Banking Authority (EBA) published today a consultation paper proposing to amend the EU Commission’s Implementing Regulation on the benchmarking of credit risk, market risk and IFRS9 models so as to include some new elements for the 2022 exercise. The EBA benchmarking exercise forms the basis for both supervisory assessment and horizontal analysis of internal models. It ensures consistent monitoring of the impact of the several different supervisory and regulatory measures aiming at the harmonising capital requirements in the EU.

For each of the three areas, the EBA is proposing to include the following new elements: i) for credit risk, additional information on the level of conservatism embedded in the IRB risk parameters; iii) for market risk, new sensitivities related to the so-called sensitivities-based method, in line with the new FRTB framework; and iii) for the IFRS9 exercise, updated templates with the collection of additional IFRS 9 parameters.

Consultation process

Responses to the consultations can be sent to the EBA by clicking on the "send your comments" button on the consultation page.

All contributions received will be published after the consultation closes, unless requested otherwise. The deadline for the submission of comments is 15 February 2021.

public hearing on this consultation will take place on the 20 January 2021 from 11:00 to 13:00 CET. Deadline for registration is 18 January 2020 at 16:00 CET.

Legal basis

These draft Implementing Technical Standards (ITS) amending the Commission’s Implementing Regulation on the benchmarking of credit risk, market risk and IFRS9 models, have been developed in accordance with article 78 of the Capital Requirements Directive (CRD), which requires the EBA to specify the benchmarking portfolios, templates and definitions to be used as part of the annual benchmarking exercises. These are used by competent authorities to conduct an annual assessment of the quality of internal approaches used for the calculation of own funds requirements.

Consultation on Guidelines on internal governance for investment firms

The European Banking Authority (EBA) launched today a public consultation on its new Guidelines on internal governance under the Investment Firms Directive (IFD), specifying the governance provisions that Class 2 investment firms should comply with, taking into account the proportionality principle. This governance framework aims at ensuring that investment firms have a clear organisational structure, effectively manage their risks  and have adequate internal control mechanisms in place. The consultation runs until 17 March 2021.

In line with the proportionality principle and to take account of the specificities of investment firms, the consultation paper specifies a number of governance provisions laid down in the IFD, including the tasks, responsibilities of the management body as well as the organisation of investment firms. The aim of these provisions is to ensure the sound management of risks across all lines of defence as well as the adoption of transparent structures to allow the supervision of all investment firms’ activities.

In addition, the consultation paper provides details on the establishment of a risk culture, a code of conduct and the management of conflicts of interest, also in relation to related parties’ transactions to ensure that firms have appropriate decision management and oversight processes for such transactions.

To ensure that investment firms groups take a holistic approach to their risk management, the draft Guidelines apply at both individual and consolidated level.

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 March 2021.

A public hearing will take place on 17 February 2021 from 14: 00 to 16:00. All contributions received will be published following the end of the consultation, unless requested otherwise. 

Legal basis and next steps

These draft Guidelines have been developed in accordance with Article 26 of Directive 2019/2034/EU, which requires firms to have robust governance arrangements, including a clear organisational structure with well-defined, transparent and consistent lines of responsibility, processes and mechanisms and mandates EBA to develop Guidelines in this area.

The EBA Guidelines will apply to competent authorities across the EU, as well as to investment firms (Class 2) on a solo and consolidated basis.

EBA launches consultation to revise its Guidelines on internal governance

The European Banking Authority (EBA) launched today a public consultation to revise its Guidelines on internal governance This review takes into account the amendments introduced by the fifth Capital Requirements Directive (CRD V)  and the Investment Firms Directive (IFD) in relation to credit institutions’ sound and effective governance arrangements. The consultation runs until 31 October 2020.

Combating money laundering and terrorist financing is crucial for maintaining stability and integrity in the financial system. Therefore, uncovering any involvement of credit institutions and investment firms in money laundering and terrorist financing can have an impact on the viability and trust in the financial system. In this context, these Guidelines clarify that identifying, managing and mitigating money laundering and financing of terrorism risk is part of sound internal governance arrangements and credit institutions’ risk management framework.

These draft Guidelines further specify and reinforce the framework regarding loans to members of the management body and their related parties. Those loans may constitute a specific source of actual or potential conflict of interest and, therefore, specific requirements have been explicitly included in the Directive 2013/36/EU (CRD). In the same way, other transactions with members of the management body and their related parties have the potential to create conflicts of interest and, therefore, the EBA is providing guidance on how to properly manage them.

Finally, in line with the requirement to have a gender-neutral remuneration policy, the consultation paper contains new guidance on the code of conduct to ensure that credit institutions take all necessary measures to avoid discrimination and guarantee equal opportunities to staff of all genders.

Consultation process

The EBA invites comments solely on the amendments to the EBA Guidelines on Internal Governance as shown in the tracked changes version. 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 31 October 2020.

A public hearing will take place via conference call on 1 October 2020 from 14: 00 to 16:00. All contributions received will be published following the end of the consultation, unless requested otherwise.

Legal basis and next steps

These draft Guidelines have been developed on the basis of Article 74 of Directive 2013/36/EU, which mandates the EBA to further harmonise credit institutions’ governance arrangements, processes and mechanisms across the EU.

The EBA Guidelines will apply to Competent Authorities across the EU, as well as to credit institutions on a solo and consolidated basis. Once the revised Guidelines will enter into force, the 2017 Guidelines will be repealed.

EBA and ESMA launch consultation to revise joint guidelines for assessing the suitability of members of the management body and key function holders

The European Banking Authority (EBA) and the European Supervisory Market Authority (ESMA) launched today a public consultation on its revised joint Guidelines on the assessment of the suitability of members of the management body and key function holders. This review reflects the amendments introduced by the fifth Capital Requirements Directive (CRD V) and the Investment Firms Directive (IFD) in relation to the assessment of the suitability of members of the management body. The consultation runs until 31 October 2020.

Combating money laundering and terrorist financing is crucial for maintaining stability and integrity in the financial system. Therefore, uncovering any involvement of credit institutions and investment firms in money laundering and terrorist financing can have an impact on the viability and trust in the financial system. In this context, the draft joint Guidelines clarify that the knowledge, experience and skill requirements are important aspects in the fit and proper assessment of members of the management body and key function holders as they contribute to identifying, managing and mitigating money laundering and financing of terrorism risks.

These draft joint Guidelines also clarify that being a member of affiliated companies or affiliated entities does not in itself represent an obstacle for a member of the management body to acting with independence of mind.

The Guidelines further specify that a gender-balanced composition of the management body is of particular importance. Institutions should respect the principle of equal opportunities for any gender and take measures to improve a more gender-balanced composition of staff in management positions.

The draft joint Guidelines also take into account the recovery and resolution framework introduced by the Bank Recovery and Resolution Directive (BRRD) and provide further guidance in this regard. As part of early intervention measures and during resolution, the suitability of newly appointed members of the management body and of the management body collectively is relevant and requires an assessment.

 

Finally, the draft joint Guidelines take into account the new legislative framework for investment firms adopted in 2019 for the identification of the investment firms subject to the various guidelines.

Consultation process

The EBA and the ESMA invite stakeholders to send comments solely on the amendments to the joint EBA and ESMA Guidelines on the assessment of the suitability of members of the management body and key function holders as shown in the tracked changes version. 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 31 October 2020.

A public hearing will take place on 01 October 2020 from 14: 00 to 16:00. All contributions received will be published following the end of the consultation, unless requested otherwise.

Legal basis and next steps

 

These draft Guidelines have been developed on the basis of according to Article 91 (12) of Directive 2013/36/EU (CRD) and Article 9 of Directive 2014/65/EU.

The joint EBA and ESMA Guidelines will apply to Competent Authorities across the EU, as well as to institutions on a solo and consolidated basis. Once the revised Guidelines will enter into force, the 2017 Guidelines will be repealed.

EBA consults on technical standards on impracticability of contractual recognition of bail-in

The European Banking Authority (EBA) launched today a public consultation on draft Regulatory Technical Standards (RTS) and draft Implementing Technical Standards (ITS) on the impracticability of contractual recognition of write-down and conversion powers and related notifications as laid down in the Bank Recovery and Resolution Directive (BRRD). These standards aim at promoting the effective application of resolution powers to banks and banking groups and to foster convergence of practices between relevant authorities and institutions across the EU. The consultation runs until 24 October 2020.

To facilitate and improve the bail-in process in the event of resolution, the BRRD requires the inclusion of a contractual recognition of the effects of the bail-in tool in contracts or agreements governed by third country law. However, there might be instances where it is impracticable for institutions or entities to include those contractual terms.

The draft RTS define (i) the conditions under which it would be legally or otherwise impracticable for an institution or entity to include the contractual term for the recognition of the bail-in; (ii) the conditions and (iii) the reasonable timeframe for the resolution authority to require the inclusion of the contractual term for the bail-in recognition.

The draft ITS specify uniform formats and templates for the notification to resolution authorities of contracts meeting the conditions of impracticability defined in the draft RTS.

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 24 October 2020.

The EBA will hold a public hearing on the draft RTS and draft ITS, which will take place via conference call on Wednesday 30 September 2020 from 10:00 a.m. CET. The dial in details will be communicated in due course.

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

Legal basis and next steps

The proposed draft RTS are based on Article 55(6) of the BRRD, which requires the EBA to develop draft RTS to further specify:

  • The conditions under which it would be legally or otherwise impracticable for an institution or entity to include the contractual term referred to in paragraph 1 of Article 55 BRRD in certain categories of liabilities;
  • The conditions for the resolution authority to require the inclusion of the contractual term pursuant to the third subparagraph of paragraph 2 of article 55 BRRD;
  • The reasonable timeframe for the resolution authority to require the inclusion of a contractual term pursuant to the third subparagraph of paragraph 2 of article 55 BRRD.

 

The proposed draft ITS are based on Article 55(8) of the BRRD which requires the EBA to develop draft ITS to specify uniform formats and templates for the notification to resolution authorities for the purposes of paragraph 2 of article 55 of the BRRD.