EBA

EBA Consults on RTS on Contractual Recognition of Write-Down and Conversion Powers under BRRD

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On November 5, the European Banking Authority (EBA) published a consultation paper on draft regulatory technical standards (RTS) on the contractual recognition of bail-in under the Bank Recovery and Resolution Directive (BRRD).

Under the BRRD, firms and other entities to whom the BRRD applies are required to include in relevant agreements a contractual term by which the creditor or party to the agreement creating a relevant liability recognizes that the liability may be subject to the write-down and conversion powers specified in the BRRD.  In the proposed draft RTS, the EBA seeks to determine the cases in which the requirement to include the contractual term does not apply.

The deadline for responses is February 5, 2015. The EBA is required to submit the draft RTS to the European Commission by July 3, 2015.  Consultation Paper.

EBA Releases Results of 2014 EU-Wide Stress Test

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On October 26, the European Banking Authority (EBA) released the results of its 2014 EU-wide stress test covering more than 70% of total EU banking assets.  The purpose of the test is to address remaining vulnerabilities in the EU banking sector.

The impact of the stress test is assessed in terms of the transitional CRR/CRD IV Common Equity Tier 1 ratio for which defines 8.5% as the ratio for an adverse scenario as of end 2013.  The EBA reported that 24 participating banks fell below the defined thresholds leading to an aggregate maximum capital shortfall of €24.6 billion.

The EBA states that the supervisory actions will be communicated by each competent authority shortly after the publication of the stress test results.  Report.

EBA Updates Single Rulebook Q&As

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On October 17, the European Banking Authority (EBA) updated its Q&As on the single rulebook, publishing two new answers to questions relating to supervisory reporting and credit risk. The question IDs and topics for the new answers published are: (i) question ID: 2013_433: scope of application of FINREP; and (ii) question ID: 2013_374: definition of investments in private equity.

The Q&As relate to the CRD IV package of reforms: the CRD IV Directive (2013/36/EU) and the Capital Requirements Regulation (Regulation 575/2013) (CRR), and the related technical standards and guidelines developed by the EBA.  Q&As.

The EBA Publishes Updates on the Bank Recovery and Resolution Directive

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On October 3, the European Banking Authority (EBA) published a consultation paper on draft regulatory technical standards (RTS), implementing technical standards (ITS) and guidelines relating to group financial support under the Bank Recovery and Resolution Directive (BRRD). Under the BRRD, a number of conditions must be satisfied to permit one group entity to provide financial support to another group entity that meets the conditions for early intervention under the BRRD. The EBA is required to produce draft RTS and guidelines specifying these conditions. The deadline for comments on the consultation is January 4, 2015.

On October 1, the EBA published a consultation paper on draft guidelines on the interrelationship between the sequence of write-down and conversion of liabilities when the bail-in power under the BRRD is used and the hierarchy of capital instruments in the Capital Requirements Regulation. The deadline for comments on the consultation is January 3, 2015. Consultation Paper. Consultation Paper.

EBA Publishes Final Guidelines on Public Support Measures under BRRD

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On September 22, the European Banking Authority (EBA) published final guidelines specifying the types of tests, reviews or exercises that may lead to support measures under Article 32(4)(d)(iii) of the Bank Recovery and Resolution Directive (BRRD).

The BRRD establishes a framework for dealing with unsound or failing credit institutions and investment firms. Article 32(4) of the BRRD stipulates that a firm should be deemed to be failing, or likely to fail, if, among other things, there is a need for extraordinary public support, unless all the conditions listed in Article 32(4)(d) are met.  Under Article 32(4)(d), the EBA is required to issue guidelines on the type of tests, reviews or exercises that may lead to capital shortfalls that may be eligible to be covered by public recapitalization.  Final Guidelines.

EBA Publish Final Draft RTS on Equity Exposures

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On August 5, EBA published its final draft regulatory technical standards (RTS) specifying the treatment of equity exposures according to Article 495(3) of Regulation No 575/2013 Capital Requirements Regulation (CRR).

The CRR, which has the main purpose of implementing the Basel III reforms in the EU, applies directly to credit institutions and investment firms within member states. When operating under the “Internal Ratings Based Approach,” which allows institutions to use their own estimated risk parameters for the purpose of calculating regulatory capital, the RTS provide for regulators to grant financial institutions temporary exemptions and so avoid part of the increase in capital requirement that would otherwise be necessary.

The RTS have been submitted to the European Commission for adoption as directly applicable EU regulations.  RTS.

EBA Publishes Final Draft Technical Standards and Guidelines for G-SIIs

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On June 5, the European Banking Authority (EBA) published final draft regulatory technical standards (RTS) and implementing technical standards (ITS) relating to global systemically important institutions (G-SIIs).

The RTS and ITS relate to the requirements in the CRD IV Directive (2013/36/EU) and the Capital Requirements Regulation (Regulation 575/2013) (CRR) concerning G-SIIs. Broadly, CRD IV requires that institutions designated as G-SIIs meet higher capital standards to reflect the potential impact their failure could have on the global financial system. Designation of GSIIs is expected to take place in January 2015, with the enhanced capital requirements becoming mandatory the following year.  RTS.  ITS.

Responses to ESMA and EBA Consultation on Guidelines for Complaints Handling in the Securities and Banking Sectors

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On March 19, the European Securities and Markets Authority (ESMA) published a list of the responses it received to its November 2013 consultation on draft guidelines for complaints handling in the securities and banking sectors.  The list includes responses from the following bodies:

    • Association for Financial Markets in Europe;
    • British Bankers’ Association;
    • European Banking Federation;
    • European Fund and Asset Management Association.

ESMA and the European Banking Authority (EBA), who carried out the consultation jointly with ESMA, intend to publish a final report and guidelines in the first quarter of 2014.  Competent authorities will be expected to incorporate the guidelines into their supervisory practices as appropriate.  ESMA List of Responses.

EBA Report on Consumer Trends 2014

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On February 28, the European Banking Authority (EBA) published a report on consumer trends in the areas of consumer protection and financial innovation as well as the approaches the EBA will be taking in 2014 to address them.  New trends identified for 2014 include virtual currencies and comparison websites.

As a result of the report, key consumer issues the EBA intends to focus on during 2014 are:

    • household borrowing;
    • bank account switching and fees;
    • traditional payment methods (such as cash, debit and credit cards, checks, and bank transfers) and non-traditional payment methods (such as mobile payments and e-wallets);
    • digital currencies;
    • crowdfunding;
    • misselling of products;
    • comparison websites; and

EBA Updates Single Rulebook Q&As

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On February 14, the European Banking Authority (EBA) updated its questions and answers (Q&As) on the single rulebook with the publication of over 70 answers on the issue of supervisory reporting including common reporting (COREP), financial reporting (FINREP), leverage, liquidity and large exposures.

The Q&As relate to the CRD IV package of reforms: the CRD IV Directive (2013/36/EU) and the Capital Requirements Regulation (Regulation 575/2013) (CRR), and the related technical standards and guidelines developed by the EBA. Q&A.