EBA consults on Guidelines specifying the conditions for the substitution approach in the context of “tri-party transactions” for large exposures purposes

22 July 2020

The European Banking Authority (EBA) launched today a consultation detailing on the three conditions institutions should comply with when they decide to make use of the alternative treatment with regard to tri-party repurchase agreements facilitated by a tri-party agent. The consultation runs until 22 October 2020.

Under the alternative treatment, institutions can replace the total amount of the institution’s exposure to a collateral issuer due to tri-party repurchase agreements facilitated by a tri-party agent, with the full amount of the limits that the institution would instruct the tri-party agent to apply to securities issued by the collateral issuer.

To conduct such a replacement, institutions must verify that the tri-party agent has in place appropriate safeguards to prevent breaches of the limits instructed by the institution. Furthermore, the competent authority must not have expressed to the institution any material concerns. Another condition is that the sum of the limit instructed by the institution to the tri-party agent, and any other exposures of the institution to the collateral issuer does not exceed the limit set out in the Capital Requirements Regulation (CRR).

Finally, the Guidelines specify the conditions and frequency for determining, monitoring and revising the limits that the institution would instruct the tri-party agent to observe. The Guidelines will apply from June 2021.

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 22 October 2020. A public hearing will take place on 08 October 2020 from 10:00 CET to 12:00 CET. 

Legal basis and background

The EBA has developed the draft Guidelines pursuant to the mandate in Article 403(4) 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 ESFS, and to ensuring the common, uniform and consistent application of Union law.

 

Documents

links

EBA consults on draft technical standards on default probabilities and loss given default for default risk model under the internal approach for market risk

22 July 2020

The European Banking Authority (EBA) launched a consultation on draft Regulatory Technical Standards (RTS) on default probabilities (PDs) and losses given default (LGDs) for default risk model for institutions using the new Internal Model Approach (IMA) under the Fundamental Review of the Trading Book (FRTB). These draft RTS are part of the deliverables included in the roadmap for the new market and counterparty credit risk approaches published on 27 June 2019. The consultation runs until 22 October 2020.

Institutions using the IMA to compute own funds requirements for market risk are required to compute additional own funds requirement using an internal default risk model for their positions in traded debt and equity instruments included in IMA trading desks.

These draft RTS clarify the requirements to be met for the estimation of PDs and LGDs under the default risk model. In particular, the draft RTS specify that any internal methodology used to calculate PDs and LGDs under the default risk model should meet all requirements applied for the Internal ratings‐based (IRB) approach. In addition, these RTS specify the requirements that external sources are to fulfil for their use under the default risk model, thus reflecting similar qualitative requirements as those applicable to an internal methodology.

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 22 October 2020. 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 17 September 2020 from 15.30 to 17.30 CET. The dial in details will be communicated in due course.

Legal basis

These draft RTS have been developed according to Article 325bp(12) of Regulation (EU) No 575/2013 (Capital Requirements Regulation – CRR), which mandates the EBA to “specify the requirements that an institution's internal methodology or external sources are to fulfil for estimating default probabilities and losses given default in accordance with point (e) of Article 325bp(5) and point (d) of Article 325bp(6)”.

Documents

links

ESAs notify the European Commission about the outcome of the review of the PRIIPs key information document

21 July 2020

The European Supervisory Authorities (ESAs) have informed the European Commission of the outcome of the review conducted by the ESAs of the key information document (KID) for packaged retail and insurance-based investment products (PRIIPs). This follows the ESAs’ consultation paper published on 16 October 2019 on draft regulatory technical standards (RTS) to amend the technical rules on the presentation, content, review and revision of KID (Delegated Regulation (EU) 2017/653).

EBA publishes phase 2 of its technical package on reporting framework 2.10

10 July 2020

The European Banking Authority (EBA) published today a new release of the reporting framework 2.10, providing the technical tools and specifications for the implementation of EBA reporting requirements. The package includes the validation rules, the Data Point Model (DPM) dictionary and XBRL taxonomies.

This package reflects the following reporting changes:

  • The new EBA Guidelines on reporting and disclosure COVID-19 measures (published on 4 of June 2020 here), applicable since 30 June 2020;
  • The updated ITS on Supervisory Benchmarking of internal models (published here), applicable from September/December 2020;
  • Minor amendments to the DPM, validation rules and XBRL taxonomies for Resolution planning reporting as well as reporting on Funding Plans, applicable from December 2020.

The documents covering this technical package are available here and include the following:

  • A set of XML files forming the XBRL taxonomy and a description of the architecture of the XBRL taxonomy;
  • A DPM data dictionary database together with a DPM table layout and data point categorisation;
  • A list of validation rules.

The EBA has also updated the DPM query tools.

EBA Banking Stakeholders Group held its first meeting in its new composition

07 July 2020

The EBA Banking Stakeholder Group (BSG) held today its first meeting in its new composition. The renewed BSG, the fifth one since the establishment of the European Banking Authority (EBA) in 2011, was agreed by the EBA Board of Supervisors at its meeting on 17 June 2020. The 30 selected members, who started their four-year mandate on 1 July 2020, will provide advice to the EBA on its policy work and must be consulted on technical standards, guidelines and recommendations.

Welcoming the new BSG members, Jose Manuel Campa, Chairperson of the EBA, said: “Thanks to the variety of perspectives and expertise stemming from the diverse and balanced membership, I am confident that this advisory body will provide valuable input to our policy work and I am looking forward to a fruitful cooperation with each of the selected members”.

Following a call for expression of interest launched on 6 March 2020, the EBA carried out a selection process to ensure an adequate balance between EU Member States, represented entities and members' gender. The renewed BSG represents (i) the financial institutions operating in the Union, with 13 members; (ii) consumers, users of banking services, employees’ representatives of financial institutions operating in the Union and representatives of SME’s, with 13 members; (iii) independent top-ranking academics with 4 members.

Legal basis and background

Following the changes introduced by the ESAs’ Review to the EBA Regulation, Article 37 was amended, with effect on 1 January 2020. The changes, which relate to the composition, length of mandate, and scope of activities of the Stakeholder Groups, required the EBA to re-establish the BSG in a different composition.

EBA launches discussion on further enhancing supervisory powers of competent authorities

26 June 2020

The European Banking Authority (EBA) published today a discussion paper exploring ways on how to enhance the Bank Recovery and Resolution Directive (BRRD) framework on early intervention measures. The objective is to further enhance crisis management tools available for competent authorities in addition to well-established and widely used supervisory powers laid down in the Capital Requirements Directive (CRD) and in the Single Supervisory Mechanism Regulation (SSMR).   

The BRRD introduced early intervention measures (EIMs) to expand the existing set of powers available to supervisors towards institutions in difficulties. While monitoring the application of EIMs in 2015-2018, the EBA observed a limited use of EIMs across the European Union (EU) during that period. Instead of EIMs, the competent authorities often preferred to apply other pre-BRRD supervisory powers available to them.

The EBA investigated the reasons for these supervisory practices. While recognising that EIMs could be successfully implemented under the existing regulatory framework, the EBA identified some challenges in their application, and is now putting for discussion potential solutions aimed at enhancing the framework.

Consultation process

In order to broaden the supervisory discussion on EIMs conducted among the EU competent authorities, the EBA also invites views from external stakeholders. In particular, the EBA welcomes input from legal professionals, academics and supervisors from outside of the EU.

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 25 September 2020. All contributions received will be published following the end of the consultation, unless requested otherwise.

Legal basis

Early intervention measures are available to competent authorities pursuant to Articles 27-29 of Directive 2014/59/EU (BRRD). Other supervisory powers include for instance supervisory measures pursuant to Article 104 and 105 of Directive 2013/36/EU (CRD) and Article 16 of Regulation 1024/2013 (SSM-R).

EBA makes changes to its Q&A tool

17 June 2020

The European Banking Authority (EBA) has expanded the scope of its Questions and Answers (Q&A) process and tool to enable the submission of questions on the Anti-Money-Laundering Directive and Consumer Protection legislation under the EBA’s scope. Going forward, submitted questions, subject to meeting the prescribed criteria, will be published on the EBA website while their answers are being prepared. The EBA has also made some changes to expand and update its online Interactive Single Rulebook.

Legal basis and background

The changes reflect the new Article 16b) of the EBA founding Regulation on Q&A.

The Q&A tool is an important convergence tool that promotes common supervisory approaches and practices by giving guidance on the application of Union legal acts within the scope of the EBA. 
 

EBA calls for input to understand impact of de-risking on financial institutions and customers

15 June 2020

The European Banking Authority (EBA) issued today a call for input to understand the scale and drivers of ‘de-risking‘ at EU level and its impact on customers. This call, which forms part of the EBA’s work to lead, coordinate and monitor the EU financial sector’s AML/CFT efforts, aims primarily to understand why financial institutions choose to de-risk instead of managing the risks associated with certain sectors or customers. This call for input is of interest to stakeholders across the financial sector and its users, as the EBA wants to hear from all groups affected by de-risking. The call for input runs until 11 September 2020.

To manage customers‘ profiles associated with higher money laundering and terrorist financing (ML/TF) risks, financial institutions may decide not to service a particular customer or category of customers. This is referred to as ‘de-risking‘, and affects both financial institutions and its users. De-risking affects particular sectors and customers across the EU, such as banks engaged in correspondent banking relationships, payment institutions and NGOs.

Given the variety of institutions and customers affected by de-risking and the different degree at which Member States are exposed to this phenomenon, the EBA is reaching out to stakeholders across the financial sector and its users to hear from their experiences.

Responses to this call will inform the EBA 2021 Opinion on ML/TF risks and potentially other policy outputs. 

Process

The contributions to the call for input can be submitted by clicking on the "send your comments" button on the EBA's dedicated webpage. All contributions received will be published, unless requested otherwise. The call for input is open until 6 p.m. CET on 11 September 2020.

Legal Basis 

The EBA is mandated under Art. 6(5) of Directive (EU) 2015/849  to develop a biennial Opinion on the risks of money laundering and terrorist financing affecting the Union's financial sector. The EBA also has a legal mandate to lead, coordinate and monitor the financial sector’s fight against ML/TF across the EU. [For more information, check the factsheet]

EBA proposes enhanced standardisation of disclosure requirements laid down in the Non-Financial Reporting Directive

11 June 2020

The European Banking Authority (EBA) submitted today its response to the European Commission’s public consultation on the review of the Non-Financial Reporting Directive (NFRD). The EBA welcomes this consultation, and agrees with the need to revise the NFRD so as to meet the demand for relevant, reliable and comparable company disclosure on non-financial matters. The EBA also highlights the need to increase standardisation by setting out mandatory rather than voluntary requirements, so as to ensure comparable disclosures. Finally, the EBA supports this review as a good opportunity to expand the scope of companies covered by the NFRD, in a proportionate way.

The European Securities and Markets Authority (ESMA) and the European Insurance and Occupational Pensions Authority (EIOPA) have also provided responses to the consultation. Along with their responses, the three European Supervisory Authorities (ESAs) have submitted a joint letter from their Chairs, highlighting certain key messages, which are of particular importance for the future of Europe’s non-financial reporting regime.
 

EBA issues revised list of validation rules

10 June 2020

The European Banking Authority (EBA) issued today a revised list of validation rules in its Implementing Technical Standards (ITS) on supervisory reporting, highlighting those which have been deactivated either for incorrectness or for triggering IT problems. Competent Authorities throughout the EU are informed that data submitted in accordance with these ITS should not be formally validated against the set of deactivated rules.