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.
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.
A public hearing will take place via conference call on 3 March 2022 at 9:30 CET.
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.
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:
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.
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.
A 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.
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.
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:
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.
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.
A 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.
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.
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.
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.
A 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.
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.
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.
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.
The European Banking Authority (EBA) launched today a public consultation on new Guidelines on the role, tasks and responsibilities of anti-money laundering and countering the financing of terrorism (AML/CFT) compliance officers. The Guidelines also include provisions on the wider AML/CFT governance set-up, including at the level of the group. Once adopted, these Guidelines will apply to all financial sector operators that are within the scope of the AML Directive. This consultation runs until 2 November 2021.
The draft Guidelines comprehensively address, for the first time at the level of the EU, the whole AML/CFT governance set-up. They set clear expectations of the role, tasks and responsibilities of the AML/CFT compliance officer and the management body and how they interact, including at group level. AML/CFT compliance officers need to have a sufficient level of seniority, which entails the powers to propose, on their own initiative, all necessary or appropriate measures to ensure the compliance and effectiveness of the internal AML/CFT measures to the management body in its supervisory and management function.
Without prejudice to the overall and collective responsibility of the management body, the draft Guidelines also specify the tasks and role of the member of the management board, or the senior manager where no management board exists, who are in charge of AML/CFT overall, and on the role of group AML/CFT compliance officers. As information reaching the management body needs to be sufficiently comprehensive to enable informed decision-making, the draft Guidelines set out which information should be at least included in the activity report of the AML/CFT compliance officer to the management body.
Where a financial services operator is part of a group, the draft Guidelines provide that a Group AML/CFT compliance officer in the parent company should be appointed to ensure the establishment and implementation of effective group-wide AML/CFT policies and procedures and to ensure that any shortcomings in the AML/CFT framework affecting the entire group or a large part of the group are addressed effectively.
Provisions in the draft Guidelines are designed to be applied in a proportionate manner, taking into account the diversity of financial sector operators that are within the scope of the AML Directive. They are also in line with existing ESA guidelines, in particular: the revised Guidelines on internal governance under the capital requirements Directive (CRD); the revised Joint ESMA and EBA Guidelines on the assessment of the suitability of members of the management body; the draft Guidelines on the authorisation of credit institutions; and the draft Guidelines for common procedures and methodologies for the supervisory review and evaluation process (SREP) and supervisory stress testing.
Comments to the draft Guidelines can be sent by clicking on the "send your comments" button on the EBA's consultation page. The deadline for the submission of comments is 2 November 2021.
All contributions received will be published following the close of the consultation, unless requested otherwise.
The EBA will hold a virtual public hearing on the draft Guidelines on 28 September 2021 from 10:00 to 12:00 Paris time. The dial-in details will be communicated to those who have registered for the meeting.
The EBA drafted these Guidelines in line with its legal mandate to lead, coordinate and monitor the EU financial sector’s fight against ML/TF.
In drafting these guidelines, the EBA fulfills a request by the Commission’s request in its Supra-National Risk Assessment (SNRA) of 2019 to develop guidance that ‘clarifies the role of AML/CFT compliance officers in credit and financial institutions’.
The European Banking Authority (EBA) launched today a public consultation on draft regulatory technical standards (RTS) setting out criteria for the identification of shadow banking entities for the purposes of reporting large exposures. The consultation runs until 26 October 2021.
Entities that offer banking services and perform banking activities as defined in the draft RTS but are not regulated and are not being supervised in accordance with any of the acts that form the regulated framework are identified as shadow banking entities.
Considering the characteristics of funds regulated under the Undertakings for the Collective Investment in Transferable Securities (UCITS) Directive and the Alternative Investment Fund Managers (AIFM) Directive, special provisions are included in the draft RTS. In view of the severe liquidity issues that affected money market funds (MMFs) during the COVID-19 crisis and the ongoing discussions at EU and international level to strengthen their regulation, MMFs are identified as shadow banking entities.
Finally, the draft RTS consider the situation of entities established in third countries and provide for a treatment that distinguishes between banks and other entities.
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 26 October 2021.
A public hearing will take place via conference call on 29 September 2021 from 10:00 to 12:00 CEST.
Article 394(2) of the CRR, as amended by Regulation (EU) 2019/876, “institutions shall report the following information to their competent authorities in relation to their 10 largest exposures to institutions on a consolidated basis, as well as their 10 largest exposures to shadow banking entities which carry out banking activities outside the regulated framework on a consolidated basis, including large exposures exempted from the application of Article 395(1) […]”
Article 394(4) of the CRR mandates the EBA “to develop draft regulatory technical standards to specify the criteria for the identification of shadow banking entities referred to in paragraph 2. In developing those draft regulatory technical standards, EBA shall take into account international developments and internationally agreed standards on shadow banking and shall consider whether (a) the relation with an individual entity or a group of entities may carry risks to the institution's solvency or liquidity position; (b) entities that are subject to solvency or liquidity requirements similar to those imposed by this Regulation and Directive 2013/36/EU should be entirely or partially excluded from the obligation to be reported referred to in paragraph 2 on shadow banking entities.”
While developing the draft RTS, the EBA has relied as far as possible on the guidelines on limits on exposures to shadow banking (EBA/GL/2015/20), yet having due regard to international developments in shadow banking and taking into account the lack of third-country equivalence for institutions in certain jurisdictions.
The European Banking Authority (EBA) launched today a public consultation on amendments to its Implementing Technical Standards (ITS) on currencies with constraints on the availability of liquid assets in the context of the liquidity coverage ratio (LCR). The proposed amendments remove the Norwegian Krone (NOK) from the list, with the result that no currency will be recognised as having constraints on the availability of liquid assets. The consultation runs until 16 October 2021.
Article 419 of the Capital Requirements Regulation (CRR) specifies a number of derogations applicable to currencies with constraints on the availability of liquid assets for the purpose of the calculation of the LCR. An additional derogation was added as part of the Risk Reduction Measures (RRM) package adopted by the European legislators.
The EBA has been tasked to amend the existing Regulatory Technical Standards (RTS) specifying the use of derogations and the conditions of their application following the addition of a new derogation, with a concomitant need to update the corresponding ITS on the effective list of currencies with constraints, which currently consists of one single currency, the NOK.
Based on the updated data analysis, which demonstrates that there is no longer a shortage in the supply of liquid assets in the NOK currency, the EBA proposes to amend the ITS by removing NOK from the list. Since this amendment will lead to an empty list, in order to keep its regulatory efforts proportionate to their impact, the EBA will not update the corresponding RTS. Such an update will be proposed if during a future assessment the EBA observes that a currency will have to be added to the list.
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 16 October 2021. All contributions received will be published following the end of the consultation, unless requested otherwise.
These draft ITS have been developed on the basis of Article 419 of Regulation (EU) No 575/2013 of the European Parliament and of the Council), as amended by Regulation (EU) 2019/876 of the European Parliament and of the Council of 20 May 2019, which mandates the Authority to list the currencies with constraints on the availability of liquid assets and specify the derogations and conditions of their application.
The European Banking Authority (EBA) launched today a public consultation on draft Guidelines providing clarity on the application of the limited network exclusion requirements, which certain payment instruments might benefit from, as laid down in the revised Payment Services Directive (PSD2). Such payment instruments include store cards, fuel cards, public transport cards, and meal vouchers. Given the significant inconsistencies the EBA has identified on how this exclusion is applied across the EU, the proposed Guidelines aim at clarifying specific aspects of its application, including on how a network of service providers or a range of goods and services should be assessed in order to qualify as ‘limited’, the use of payment instruments within limited networks, the provision of excluded services by regulated financial institutions and the submission of notification to competent authorities (CAs). The consultation runs until 15 October 2021.
In line with its statutory objective of contributing to the convergence of supervisory practices, the EBA arrived at the view that it should issue own-initiative Guidelines aimed at bringing about convergence on a number of issues related to the application of this exclusion.
In particular, the draft Guidelines propose requirements, and where relevant, criteria and indicators, aimed at ensuring that excluded payment instruments are used in a limited way, thus reducing potential risks that may arise for the users of such instruments.
In addition, in order to address potential concerns on any possible circumvention of the PSD2 requirements and to increase transparency for consumers who may not be aware that they do not benefit from the protection the PSD2 provides to regulated services, the draft Guidelines propose requirements on the provision of excluded services by regulated firms.
Finally, to ensure transparency on the provision of excluded services, the draft Guidelines provide clarity on the calculation of the thresholds set out in Article 37(2) of the PSD2, the submission of the related notifications to competent authorities and the information to be covered in the description of the excluded activity on the national and EBA registers.
However, the proposed Guidelines cannot address all the inconsistencies that the EBA has identified, as the EBA is not in a position to change definitions or amend legal requirements set out in the PSD2.
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 October 2021.
All contributions received will be published following the close of the consultation, unless requested otherwise. A public hearing will take place online on 8 September 2021 from 10.00 to 12.00 CEST.
Following the publication of PSD2 in November 2015, the EBA and the European Commission (EC) have received a number of queries on the interpretation and application of the exclusion under Article 3(k) of the PSD2 and the related notification requirements articulated in Article 37 of the PSD2. The EBA assessed these queries and arrived at the view that the implementation and application of the requirements diverges significantly between Member States, thus impeding the Single Market for payment services in the EU and creating opportunities for regulatory arbitrage.
The EBA issued the draft Guidelines under Article 16 of the EBA 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, including, where appropriate, to conduct open public consultations.
Article 3(k) of Directive (EU) 2015/2366 on payment services in the internal market (PSD2) specifies that the ‘Directive does not apply to services based on specific payment instruments that can be used only in a limited way, that meet specified conditions.
Article 37(2) of PSD2 prescribes that ‘Member States shall require that service providers carrying out either of the activities referred to in points (i) and (ii) of point (k) of Article 3 or carrying out both activities, for which the total value of payment transactions executed over the preceding 12 months exceeds the amount of EUR 1 million, send a notification to competent authorities containing a description of the services offered, specifying under which exclusion referred to in point (k)(i) and (ii) of Article 3 the activity is considered to be carried out.’
The European Banking Authority (EBA) launched today a public consultation on draft Regulatory Technical Standards (RTS) specifying the requirements for originators, sponsors, original lenders and servicers related to risk retention, in line with the Securitisation Regulation. The RTS aim to clarify requirements relating to risk retention, thus reducing the risk of moral hazard and aligning interests. The RTS also provide clarity on new topics, including risk retention in traditional securitisation of non-performing exposures (NPE). The consultation runs until 30 September 2021.
The RTS carry over a substantial amount of provisions from the EBA RTS on risk retention submitted to the European Commission in July 2018. The RTS also include a number of new provisions, such as specifying modalities of risk retention in traditional NPE securitisations and specifying requirements for the expertise of servicers acting as a retainers in such NPE securitisations. In addition, the RTS address some specific issues, related, for instance, to the impact of fees payable to the retainer on risk retention, risk retention in re-securitisations or in securitisations of own issued debt instruments. They also provide clarification on the treatment of synthetic excess spread.
By providing additional clarity on risk retention in case of portfolios of NPE, this publication is also part of the EBA comprehensive work on supporting the functioning of the secondary markets for NPE. For more information about the EBA work on NPE you can read here.
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 30 September 2021. All contributions received will be published following the end of the consultation, unless requested otherwise.
A public hearing will take place online on 14 September 2021 from 11:00 to 12:00 Paris time.
These draft RTS have been developed on the basis of Article 6(7) of Securitisation Regulation (Regulation (EU) 2017/2402), as amended by the Capital Market Recovery Package (Regulation (EU) 2021/557), which mandates the EBA to specify in greater detail the risk retention requirement in securitisation.