ECB Publishes Decision Revising Format of MIB and Repealing Decision Establishing T2S Board


On February 4, the Decision (EU) 2019/166 of the European Central Bank (“ECB“) on the Market Infrastructure Board (“MIB“) and repealing Decision ECB/2012/6 on the establishment of the TARGET2-Securities (“T2S“) Board (ECB/2019/3) was published in the Official Journal of the EU (“OJ“). READ MORE

ECA Publishes a Communication on Access to ECB Banking Supervision Documents and Information


On January 14, the European Court of Auditors (“ECA“) published a communication to the European Parliament on the European Central Bank’s (“ECB“) position on the ECA’s access to audit documents and information relating to its banking supervision role under the single supervisory mechanism (“SSM“). READ MORE

ECB Publishes Letter on Variable Remuneration Policies of Credit Institutions


On January 10, the European Central Bank (“ECB“) published a letter (SSM/2019/010) (dated January 9, 2019) from Andrea Enria, ECB Supervisory Board Chair, on the variable remuneration policies of credit institutions in the single supervisory mechanism (“SSM“).

The letter states that the ECB pays close attention to the dividend and remuneration policies of the financial institutions under its supervision. In particular, the ECB will focus on any impact that these policies may have on the maintenance of a sound capital base. READ MORE

ECB Finalizes Guide to On-Site Inspections and Internal Model Investigations


On September 21, the European Central Bank (the “ECB“) finalized its guide to on-site inspections and internal model investigations under the single supervisory mechanism (the “SSM“).

Under the SSM Regulation (Regulation 1024/2013), the aim of ECB Banking Supervision is ensuring a detailed and thorough analysis of the supervised entities’ business and can be exercised on and off-site. On-site supervision is performed through on-site investigations or internal model investigations, as specified under Article 12 of the SSM Regulation. On-site investigations are in-depth investigations of risk, risk controls and governance. Internal model investigations are in-depth assessments of internal models used for the calculation of own fund requirements, in particular with regard to methodologies, economic appropriateness, risks, risk controls and governance.

The guide aims to provide a reference document for supervised entities and other legal entities for which an on-site inspection has been launched by the ECB. It provides a general overview of the legal and supervisory framework for the investigations, describes the process and sets out applicable principles for inspections, covering the powers of inspection teams and the rights of inspected legal entities. The guide applies to inspections conducted in significant institutions, less significant institutions and other legal entities referred to in Article 10(1) of the SSM Regulation, including third parties to whom credit institutions have outsourced functions.

ECB Issues Opinion on Proposed Regulation Amending Regulation on Cross-Border Payments


On August 31, the European Central Bank (“ECB“) has published an opinion on the European Commission’s legislative proposal for a Regulation amending the Regulation on cross-border payments.

The ECB outlined the proposed Regulation, which is to provide all citizens and companies in the EU transferring euros cross-border (whether between euro area and non-euro area member states or between non-euro area member states) with the low levels of fees that are currently available in respect of domestic payments made in the official currency of a member state. This is intended to improve transparency and consumer protection, enhance the internal market for payment services in euros and reinforce the euro as the currency of choice for intra-EU payments.

The ECB also outlined specific observations in relation to the scope of the provisions and provided additional definitions. The ECB has set out its specific drafting proposals in a technical working document that is appended to its opinion.

European Parliament Votes to Adopt Report on Decision on Increased Regulatory Powers for ECB over Clearing Systems


On July 4, 2018, the European Parliament published the minutes of its plenary session, which confirms that it has voted (in plenary) to adopt a report on a draft decision amending Article 22 of the Statute of the European System of Central Banks and of the European Central Bank (“ECB“) (2017/0810(COD)).

The text of the amendments to the decision adopted by the Parliament has also been published.

The decision is in relation to the ECB’s recommendation for the decision made in June 2017, in which it asked for a greater role in regulating clearing systems for financial instruments, including central counterparties (“CCPs“), by amending Article 22 of the Statute

This amendment would enable the Eurosystem (i.e. the ECB and the national central banks of member states in the Eurozone) to monitor and assess risks posed by CCPs clearing significant amounts of euro-denominated transactions, and enable the ECB to adopt additional requirements for those CCPs.

The Parliament’s Economic and Monetary Affairs Committee (“ECON“) and Committee on Constitutional Affairs (“AFCO“) published the final version of a joint report containing proposed amendments to the decision in June 2018.

Once the Council has decided its own negotiating position, the Parliament will enter into interinstitutional negotiations with the Council of the EU on the decision.

New Pre-Application Process for Significant Institutions to Use Before Submitting Formal Internal Model Requests to ECB


The European Central Bank (“ECB“) published a letter on June 13, 2018 (dated June 7, 2018) relating to internal model requests by significant institutions.

It appears that the letter has been sent to the boards of significant institutions that the ECB supervises under the single supervisory mechanism (“SSM“).

The ECB explains the set of documents and processes that firms are invited to use when communicating any applications for initial internal model approvals, material model changes and extensions, reversions to less sophisticated approaches, and modifications to the scope of assets for which permanent partial use of the standardised approach is permitted. The letter also contains links to the set of documents to be used when communicating any non-material model changes or extensions.

Firms are invited to follow a pre-application process, which aims to increase the efficiency of the assessment of internal model requests. The letter provides detail on the scope, process and timeline for the pre-application process.

The ECB believes that significant institutions that follow the pre-application process will benefit from a more certain and transparent time plan.

Participation in the pre-application process is not a legal requirement, but information that firms provide in the pre-application is key to enabling the ECB to efficiently plan its assessment of internal model requests. If firms do not use this process, the ECB can only carry out its preparation once it has received the formal application. The ECB also points out that the level of information requested after submission of the formal application is at least equivalent to that foreseen in the pre-application process.

Significant institutions are invited to follow the pre-application process for applications from 1 July 2018 onwards, using the forms referred to in the letter. The ECB advises that the pre-application process may be updated and enhanced in the light of post-implementation experience, and changes in the applicable legal framework.

For communicating non-material model changes, institutions are asked to start using the forms referred to as of 1 July 2018.

Separately, the ECB is consulting on a guide to internal models under the SSM.

ECB Revised Assessment Methodology For Payment Systems


The European Central Bank (“ECB“) published a revised assessment methodology for payment systems on June 15, 2018.

The principles for financial market infrastructures (“PFMIs“) developed by the Committee on Payments and Market Infrastructures (“CPMI“) and the Technical Committee of the International Organization of Securities Commissions (“IOSCO“) were adopted in June 2013 as a basis for the conduct of Eurosystem oversight in relation to all types of financial market infrastructures (“FMIs“). For payment systems, the PFMIs are implemented through the ECB Regulation on oversight requirements for systemically important payment systems (Regulation 795/2014) (SIPS Regulation) and the revised oversight framework for retail payment systems.

The updated assessment methodology covers the requirements introduced by the Revised SIPS Regulation, which entered into force in December 2017. It also references the Eurosystem’s cyber resilience oversight expectations, which are based on the CPMI-IOSCO guidance on cyber resilience for financial market infrastructures published in June 2016.

The ECB previously updated the assessment methodology in February 2016.

Draft Report Published by ECON-AFCO on Decision to Increase Regulatory Power for ECB Over Clearing Systems


The European Parliament’s Economic and Monetary Affairs Committee (“ECON“) and Committee on Constitutional Affairs (“AFCO“) have published a joint draft report on a decision to amend article 22 of the Statute of the European System of Central Banks and of the European Central Bank (“ECB“).

The decision relates to an ECB recommendation for a decision made in June 2017, where it sought a greater role in the regulation of clearing systems for financial instruments, including central counterparties (“CCPs“) by amending article 22 of the statute. This amendment would allow the Eurosystem (i.e. the ECB and the national central banks of Eurozone nations) to assess risks posed by CCPs clearing significant amounts of transactions made in Euros and also to enable the ECB to adopt additional requirements for those CCPs.

Two reporters, Gabriel Mato and Danuta Maria Hübner welcomed the ECB’s proposal. In particular, they highlighted:

  • As the ECB’s new powers will interact with those of other EU institutions, nations will be more inclined to respect the laws of other EU institutions by the acts adopted by the ECB under the amended article 22 of the statute.
  • The recitals of the amending decision should contain regulatory powers that can be used over CCPs by the ECB under article 22 of the statute, including allowing monetary concerns to be addressed.