17 December 2020
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.
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.
A 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.
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.
17 December 2020
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.
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.
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.
03 August 2020
The European Banking Authority (EBA) published today an erratum of the reporting framework 2.10 phase 2. The package includes the Data Point Model (DPM) dictionary, table layouts and XBRL taxonomies. The correction is mostly on column 0010 of table C 114.00 in the SBP framework, where the EBA has addressed the issue of missing members.
08 November 2019
The European Banking Authority (EBA) published today a new release of reporting framework 2.9.1, which includes the validation rules, the DPM data dictionary, and the XBRL taxonomy. This release fixes some modelling issues on COREP Liquidity and FINREP.
08 November 2019
The European Banking Authority (EBA) published today a Report on trends in asset quality of the EU banking sector, which show it has significantly improved over the last four years. Total non-performing loans (NPLs) decreased from over EUR 1.15 trillion in June 2015 (6% as a percentage of total loans) to EUR 636 billion as of June 2019. The NPL ratio declined to 3%, the lowest ratio since the EBA introduced a harmonised definition of NPLs across European countries. The average coverage ratio slightly increased from 43.6% to 44.9% over the same period.
The Report identifies three pillars that determined the overall reduction in NPLs: supervisory attention and political determination to address the NPL issue effectively, coupled by banks’ efforts to enhance their NPL management capabilities. The reduction was also helped by a positive economic growth, low interest rates and decreasing unemployment. Countries with high NPL ratios have led the de-risking process of banks’ balance sheets.
Despite the significant improvement, dispersion of NPL ratios across countries remains wide. As of June 2019, Greece reported the highest NPL ratio (39.2%), followed by Cyprus (21.5%), while five additional countries had a NPL ratio above 5%. In comparison, in June 2015, 17 countries reported NPL ratio above 5% of which 10 countries had a double-digit ratio. Countries with high NPL ratios have larger share in past-due buckets of 1 year and more. These older NPLs are harder to cure, considerably devalued and pose a significant risk to those banks that have an increased share of assets on their balance sheets.
The differences in the speed of the recovery procedures, also due to less efficient legal frameworks and thin secondary markets for NPLs, remain the most significant impediments to the further offloading of NPLs. There are significant ongoing initiatives that aim to further boost the reduction of legacy assets both at European level and in specific countries. However, in light of weakening economic conditions, all banks should closely monitor the asset quality to identify any possible deterioration, especially in riskier segments, and continue actively managing the NPLs in their balance sheets.
Notes to editors
This is the second thematic Report on NPLs, following the one published in July 2016. This Report is based on supervisory data of asset quality metrics, and aims at updating on the progress made so far in addressing NPLs in Europe. It also takes stock of ongoing initiatives to tackle the NPL issue both at EU level and at member state level, identifies challenges to tackle the remaining NPL stock and indicates possible areas where further action is needed.
The report is accompanied by a data visualisation tool that provides a country-by-country analysis of key asset quality metrics.
07 November 2019
The European Banking Authority (EBA) published today the final methodology and draft templates for the 2020 EU-wide stress test along with the key milestones of the exercise. The methodology and templates cover all relevant risk areas and incorporate the feedback received during the discussion with the industry in the summer of 2019. The stress test exercise will be formally launched in January 2020 and the results published by 31 July 2020.
The Board of Supervisors of the European Banking Authority (EBA) agreed on the publication of the 2020 EU-wide stress test package, which includes the methodology, templates and template guidance. Similar to the 2018 exercise, the 2020 EU-wide stress test is a bottom-up exercise with constraints, including a static balance sheet assumption. The exercise is primarily focused on the assessment of the impact of risk drivers on the solvency of banks. Banks are required to stress a common set of risks (credit risk – including securitisations – market risk and counterparty credit risk, and operational risk – including conduct risk). In addition, banks are requested to project the impact of the scenarios on net interest income and to stress P&L and capital items not covered by other risk types.
A draft version of the stress test templates is also published along with a template guidance that contains instructions on how to populate them. The draft version of the templates can still be subject to minor technical adjustments before its final publication.
Key milestone dates of the 2020 EU-wide stress test exercise
Third submission to the EBA at the end of June 2020
Notes to editors
The aim of the EU-wide stress test is to assess the resilience of EU banks to a common set of adverse economic developments in order to identify potential risks, inform supervisory decisions and increase market discipline.
The EBA's EU-wide stress tests are conducted in a bottom-up fashion, using consistent methodologies, scenarios and key assumptions developed jointly with other authorities.
In particular, the exercise is coordinated by the EBA and carried out in cooperation with the European Central Bank (ECB), the European Systemic Risk Board (ESRB), the European Commission (EC) and the Competent Authorities (CAs) from all relevant national jurisdictions.
To give banks sufficient time to prepare for the exercise, the EBA publishes the methodology and templates well ahead of the formal launch, which will include relevant macroeconomic scenarios.
30 October 2019
The European Banking Authority (EBA) published today its second opinion addressed to the EU Commission on the implementation of the Deposit Guarantee Schemes Directive (DGSD) in the EU. The Opinion focuses on the payouts by deposit guarantee schemes (DGSs) and proposes a number of changes to the EU legal framework, aimed at strengthening depositor protection, improving depositor information, enhancing financial stability and reinforcing operational effectiveness of DGSs.
In its Opinion, the EBA assesses nine different topics related to DGS payouts and sets out 30 proposals on how to improve the current EU legal framework. The proposals include changes in relation to cases where depositors have lost access to their funds but payouts have not started, and cases where there are money laundering and terrorism financing (ML/TF) concerns. The Opinion also proposes improvements to the treatment of specific situations, such as the treatment of beneficiary accounts and depositors temporarily holding deposits above the coverage level or with banks headquartered in another EU Member State.
More specifically, based on recent real-life cases, the Opinion proposes changes aimed at ensuring that depositors are not unduly left without access to their funds when the decision that deposits have become unavailable has not (yet) been made by the authorities. The Opinion proposes that, in such instances, depositors should have access to an appropriate daily amount from their deposits.
Similarly, the EBA proposes that the EU framework could benefit from more clarity on DGS payouts where there are ML/TF concerns, including the introduction of powers necessary to suspend payouts to depositors suspected of ML/TF. The Opinion also proposes how cooperation between DGSs and AML authorities can be improved and highlights the importance of informing depositors in such instances. Given the complexity of such cases, the EBA is of the view that further analysis is needed, both from the DGS and the AML perspective.
Finally, throughout the Opinion, the EBA underlines the importance of enhancing depositor protection, and clearly informing depositors about the most relevant features of such protection, in normal times, as well as during a DGS payout. In this respect, the EBA proposes, for example, that depositors should be clearly informed about their rights in relation to temporary high balances, and the possibility that their deposits would be set-off against their liabilities that have fallen due before their deposits had became unavailable. The EBA also proposes that depositors should have sufficient time to claim their funds after a bank failure.
Article 19(6) DGSD requires the EBA to support the EU Commission in its development of a report on the progress towards the implementation of the DGSD. This Opinion is the second part of the EBA’s fulfilment of this mandate, which should be read alongside two other Opinions – on eligibility of deposits, coverage level and cooperation between DGSs, and on DGS funding and uses of DGS funds.
This Opinion follows the first one on the eligibility of deposits, coverage level and cooperation between DGSs, which was published in August 2019. The third and final EBA opinion on DGS funding and uses of DGS funds, will be published in early 2020.
The EBA invites the Commission to consider the proposals outlined in the Opinion when preparing a report on the implementation of the DGSD to be submitted to the European Parliament and the Council.