This page presents the policy work undertaken by the EBA to promote transparency and enhanced public disclosures by financial institutions in order to reinforce market discipline.Following the recent updates to the regulatory frameworks for credit institutions and investment firms, and the publication in 2018 of the European Commission’s action plan on sustainable finance, the EBA is implementing a new policy strategy on institutions’ Pillar 3 disclosures that seeks to increase efficiency of […]
The EBA cooperates regularly and closely with the other two European Supervisory Authorities (ESAs), EIOPA and ESMA, through the ESAs' Joint Committee. The aim of this cooperation is to ensure cross-sectoral consistency of work and to reach joint positions in the area of supervision of financial conglomerates, under the Financial Conglomerates Directive (FICOD, 2002/87/EC). In this respect, the ESAs tasks include, in particular, contribution to the European Commission's fundamental review of […]
EU legislation requires that institutions have robust governance arrangements, including a clear organisational structure with well defined, transparent and consistent lines of responsibility, effective risk management processes, control mechanisms and gender neutral remuneration policies. The internal governance should be appropriate to the nature, scale and complexity of the institution. The main responsibility for internal governance lies with the management body, which is subject to […]
Investment firms authorised under the Markets in Financial Instruments Directive (MiFID) provide a range of services and activities to investors in financial markets. These services are essential for the functioning of the financial markets and include, among others, the reception and transmission of orders, the provision of investment advice, discretionary portfolio management and trading on own account.The population of investment firms across the EU is diverse and firms vary greatly in […]
The core aim of the large exposures regime is to act as a backstop to prevent an institution from incurring disproportionately large losses as a result of the failure of an individual client or group of connected clients due to the occurrence of unforeseen events. The objective of ensuring that risks arising from large exposures to individual clients or groups of connected clients are kept to an acceptable level is part of the overarching principles of prudential supervision, which are to […]
The leverage ratio is a measure which allows for the assessment of institutions’ exposure to the risk of excessive leverage. In accordance with the CRR, institutions have to report to their supervisors all necessary information on the leverage ratio and its components. In addition, institutions have to disclose information on the leverage ratio to the market. When necessary, the EBA updates its implementing technical standards providing uniform formats and modalities on reporting and […]
The EBA has a number of mandates on liquidity coverage ratio (LCR) and net stable funding ratio (NSFR) stemming from the Capital Requirements Regulation (CRR) and the LCR Delegated Regulation. The EBA's deliverables in the area of liquidity are mainly binding technical standards (BTS) and reports. The EBA also scrutinises the ways in which institutions and competent authorities have implemented the CRR and RTS provisions, mainly on the LCR using ongoing monitoring tools. Where necessary, the […]
The access to the market of regulated financial services is a critical 'gate keeping function' to ensure that only entities that are able to assure the safety and soundness of the business and the integrity of the market may provide such activities. For this reason, access to the market is subject to licensing by the competent authority. It includes authorisation, passporting notification, assessment of qualifying holdings and monitoring of regulatory perimeter also in light […]
Market risk can be defined as the risk of losses in on and off-balance sheet positions arising from adverse movements in market prices. From a regulatory perspective, market risk stems from all the positions included in banks' trading book as well as from commodity and foreign exchange risk positions in the whole balance sheet. Counterparty credit risk can be defined as the risk that the counterparty to a transaction could default before the final settlement of the transaction cash flows. […]
The EBA is mandated to develop Binding Technical Standards (BTS), Guidelines and Reports to assess internal models with the aim of ensuring a harmonised implementation of the rules for Internal Rating Based (IRB) Approaches for credit risk, Internal Model Methods (IMM) for counterparty credit risk, Advanced Measurement Approaches (AMA) for operational risk and Internal Models Approaches (IMA) for market risk. The common denominator of this mandate is to harmonise the fundamentals of internal […]
Operational resilience is defined as the ability of an institution to deliver critical operations through disruption. This builds on the prudential operational risk framework, encompassing internal governance, outsourcing, business continuity and relevant risk management-related aspects. Such ability enables an institution to identify and protect itself from threats and potential failures, respond and adapt to, as well as recover and learn from disruptive events in order to minimise their […]
EU legislation requires that institutions adequately manage and mitigate operational risk, which is defined as the risk of losses stemming from inadequate or failed internal processes, people and systems or from external events. Operational risk includes legal risks but excludes reputational risk and is embedded in all banking products and activities. It has always existed in banking, and non banking, organizations but it has acquired a greater relevance given the increased complexity and […]
To be able to absorb losses in a going or in a gone concern situation, institutions need own funds in sufficient quantity and quality in accordance with applicable European legislation. The Capital Requirements Regulation (CRR) sets out the characteristics and conditions for own funds and specifies a series of mandates for the EBA. These include the development of Regulatory Technical Standards to further specify the quality criteria applying to institutions' regulatory own funds, as well the […]
In accordance with the principle of single authorisation, the decision to issue an authorisation valid for the entire EU shall be the sole responsibility of the competent authorities of the home Member State. A financial institution may then provide the services, or perform the activities, for which it has been authorised, throughout the Single Market, either through the establishment of a branch or the free provision of services.This section covers the EBA's requirements for passport […]
The EBA contributes to making retail payments in the EU secure, convenient, innovative and competitive. To that end, the EBA develops requirements aimed at reducing payment fraud and brings about a level playing field in the EU for the authorization and supervision of payment services providers. The EBA also promotes competition and facilitates innovation in the retail payments market. linksEBA's Consumer cornerConsumer protection and financial innovationAnti-money launderingEBA working […]
Under the Bank Recovery and Resolution Directive (BRRD) on crisis prevention, management and resolution, the EBA is mandated to develop a wide range of Technical Standards, Guidelines and Reports with the aim of ensuring effective and consistent procedures across the Union, in particular with respect to cross-border financial institutions. The ultimate objective of the BRRD framework is to enhance financial stability, reduce moral hazard, protect depositors and critical financial services, […]
Institutions' remuneration policies for staff members whose professional activities have material impact on the institutions' risk profile shall ensure that remuneration is consistent with sound and effective risk management and provides an incentive for prudent and sustainable risk taking. The requirements set out in the Capital Requirements Directive (CRD) are complemented by more detailed Guidelines on Remuneration Policies. The EBA is also mandated by the CRD to submit draft regulatory […]
In line with the mandates laid down in the Capital Requirements Directive (CRDIV) and Capital Requirements Regulation (CRR), and the calls for advice from the European Commission, the EBA has developed a number of draft Technical Standards, Opinions, Guidelines and Reports covering the areas of securitisation and covered bonds.In particular, the EBA has developed Technical Standards on securitisation retention rules, due diligence and disclosure requirements, as well as an Opinion and a […]
