European Banking Authority

EBA Publishes Opinion on Eligibility of Deposits, Coverage Level and Co-Operation Between Deposit Guarantee Schemes Under the DGSD

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On August 8, the European Banking Authority (EBA) published an opinion (EBA-Op-2019-10) on the eligibility of deposits, coverage level and co-operation between deposit guarantee schemes (DGS) under the Deposit Guarantee Schemes Directive (DGSD) (2014/49/EU).

The opinion outlines a number of general and specific proposals for the European Commission to consider when preparing its mandated report on the progress made towards implementing the DGSD and if the Commission prepares a proposal for a revised DGSD.

The opinion sets out the EBA’s proposals on a range of topics, including:

  • Home-host co-operation, and co-operation agreements between DGS
  • DGS’ co-operation with various stakeholders
  • Transfer of contributions
  • Coverage level
  • Current list of exclusions from eligibility and current provisions on eligibility

It includes a report that provides a detailed analysis of each topic, including the background, methodology, data sources, options to address the issues identified and conclusions.

EBA Releases Results of 2018 EU-Wide Stress Test

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A report was recently published by the European Banking Authority (“EBA“) setting out the results of its 2018 EU-wide banking stress test which covered a sample of 48 banks in 15 countries in the EU and the EEA at the highest level of consolidation, representing about 70% of total EU banks’ total assets.

An overview of the key aggregate results and a description of the main drivers of the capital impact is provided by the report. Annex II includes a bank-by-bank summary of the results, while banks’ individual results are accessible on the EBA’s website. READ MORE →

EBA Final Report on Guidelines on Management of Non-Performing and Forborne Exposures

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On October 31, the European Banking Authority (“EBA“) published its final report on guidelines on the management of non-performing and forborne exposures (EBA/GL/2018/06).

The guidelines seek to reduce non-performing exposures (“NPEs“) on banks’ balance sheets. The EBA expects credit institutions with a gross non-performing loan (“NPL“) ratio at 5% or above to establish NPE strategies and to introduce governance and operational requirements to support those strategies. The NPE strategy should set out the credit institution’s approach and objectives regarding effective management to maximize recoveries and ultimately a reduction in NPE stocks in a clear, credible and feasible manner for each relevant portfolio. READ MORE →

EBA Launches 2018 EU-Wide Stress Test

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On February 1, 2018, the European Banking Authority (“EBA“) published a press release announcing that it will be examining 37 euro area banks as part of the 2018 EU-wide stress test, and published the relating methodological note. The note describes the common methodology that defines how banks should calculate the stress impact of the common scenarios, and sets constraints for their bottom-up calculations, as well as provides guidance and support.

The adverse scenario for 2018 implies a deviation of EU GDP from its baseline level by 8.3% in 2020, resulting in the most severe scenario to date (the explanatory press release is available here), the results of which are expected to be published by November 2, 2018.

For the 2018 test, the EBA has also published the adverse macro-financial scenario (which can be found here), the market risk scenario (available here), a set of FAQs on the stress test (available here) and stress test templates.

EBA Opinion on Nonbank Financial Intermediaries and Regulatory Perimeter Issues Under CRD IV and CRR

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On November 9, 2017, the European Banking Authority (“EBA“) published an own-initiative opinion (EBA/Op/2017/13) addressed to the European Parliament, the Council of the EU and the European Commission on nonbank financial intermediaries and regulatory perimeter issues under the Capital Requirements Directive IV (2013/36/EU) (“CRD IV Directive“) and the Capital Requirements Regulation (Regulation 575/2013) (“CRR“).

Publication of the opinion is part of the EBA’s work to regularly monitor credit intermediation activities outside the traditional banking system. This work takes account of other developments, including the emergence of FinTech. The opinion is based on the results of a detailed assessment across the EU of the prudential treatment of “other financial intermediaries” (“OFIs“). (OFIs are entities carrying out credit intermediation activities that are not credit institutions or other specified types of financial entity.) The results of the assessment are set out in a report, which the EBA has published alongside the opinion.

In terms of the overall scope of the CRD IV Directive and the CRR, the EBA observes that Article 2(5) of the CRD IV Directive (which lists entities excluded from the scope) remains valid and requires minor updating. Also, Article 9(2) of the CRD IV Directive (which sets out other exclusions) appears to continue to have relevance in member states, so any amendment should be substantiated by a prior and thorough impact assessment.  READ MORE →

European Commission Adopts Implementing Regulation on Its Own Supervisory Reporting to Reflect IFRS 9 Changes to FINREP

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On July 5, 2017, the European Banking Authority (“EBA“) published a press release announcing that the European Commission (EC) adopted an Implementing Regulation on June 29, 2017, which amends the Implementing Regulation on supervisory reporting of institutions (Regulation 680/2014) under the Capital Requirements Regulation (Regulation 575/2013) (CRR). The text of the Implementing Regulation and its Annexes has been published by the Commission.

The changes relate to the provisions in Regulation 680/2014, which concern financial reporting (“FINREP“) and are intended to align these provisions with International Financial Reporting Standard 9 (IFRS 9). Regulation 680/2014 includes FINREP requirements that are founded on international accounting standards and must be updated in line with any updates made to the relevant accounting standards.

It is now time for the Implementing Regulation to be published in the Official Journal of the EU (OJ). It will apply from March 1, 2018.

EBA Final Guidelines on Disclosure Requirements for EU Banking Sector

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On December 14, 2016, the European Banking Authority (“EBA“) published a final report (EBA/GL/2016/11) containing guidelines on regulatory disclosure requirements following its consultation in June 2016.

The guidelines follow an update of the Pillar 3 requirements by the Basel Committee on Banking Supervision (BCBS) and do not change the substance of the regulatory disclosures regarding the requirements defined in Part Eight of the Capital Requirements Regulation (Regulation 575/2013) (“CRR“).

They provide further guidance and support to institutions in complying with both the CRR and the Pillar 3 requirements. In particular, the guidelines cover the entire content of the Pillar 3 framework, with the exception of:

  • Securitization requirements, which are currently under discussion at the EU level following the finalization of a revised securitization framework at the international level.
  • Other disclosure requirements in Part Eight of the CRR for which there are already EBA delegated or implementing regulations or guidelines, such as own funds and leverage ratio.

The guidelines apply to globally and other systemically important institutions (“G-SIIs” and “O-SIIs“). Competent authorities may still require institutions that are neither G-SIIs nor O-SIIs to apply some or all the guidance provided for in the guidelines when complying with the requirements in Part Eight of the CRR.

The guidelines apply from December 31, 2017. However, an accompanying press release states that G‑SIIs are encouraged to comply with a subset of the guidelines as soon as December 31, 2016.

EBA Provides Final RTS and Guidelines on the Definition of Default under CRR

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On September 28, 2016, the European Banking Authority (“EBA“) published final reports on the documents relating to the definition of default under Article 178 of the Capital Requirements Regulation (Regulation 575/2013) (“CRR“):

  • Guidelines on the application of the definition of default under Article 178 (EBA/GL/2016/07) – the guidelines clarify all aspects related to the application of the definition of default, which is used for the purpose of both the internal ratings based approach (IRB approach) and for the standardized approach. The guidelines apply from January 1, 2021, although the EBA is encouraging firms to implement relevant changes in their internal procedures and IT systems before that date.
  • Draft regulatory technical standards (RTS) on the materiality threshold for credit obligations past due under Article 178 (EBA/RTS/2016/06) – Article 178 specifies that a default shall be considered to have occurred when an obligor has past more than 90 days on any material credit obligation to the firm, the parent undertaking or any of its subsidiaries. The draft RTS, which were mandated by Article 178(6) of the CRR, specify the conditions according to which a competent authority should set the materiality threshold for credit obligations that are past due.

The EBA has also published a report setting out the results of a qualitative and quantitative impact study (“QIS“) that assessed the impact on the regulatory capital requirements of selected policy options to harmonize the definition of default. The EBA states that the results of the QIS are the basis for the impact assessment carried out on the guidelines and the draft RTS.

The EBA consulted on these draft RTS and guidelines in October 2014 and September 2015 respectively (see Legal updates, EBA consults on draft RTS on materiality threshold of credit obligation past due and EBA consults on draft guidelines on application of default definition under CRR). According to an EBA press release, they form part of the EBA’s broader regulatory review of the internal ratings based (IRB) approach announced in February 2016.

 

EBA Consults on Guidelines on Minimum Professional Indemnity Insurance under PSD2

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On September 22, 2016, the European Banking Authority (EBA) published a consultation paper (EBA/CP/2016/12) on draft guidelines in relation to professional indemnity insurance (PII) and the criteria competent authorities should follow when stipulating the minimum monetary amount of the PII or comparable guarantees for undertakings that apply to provide payment initiation services or account information services under PSD2 (the Directive on payment services in the internal market ((EU) 2015/2366)). The EBA was mandated to produce the guidelines under Article 5(4) of PSD2. The consultation on the draft guidelines closes on November 30, 2016.

As well as setting out the proposed criteria, the EBA also:

  • Sets out with explanations its proposal to use a formula for the calculation of the minimum monetary amounts.
  • Provides details on indicators for the criteria set out in PSD2 along with the calculation method proposed for some of those indicators.
  • Provides circumstances in which the lowest tier, or default value, should be used.

The EBA also provided practical examples to assist in the calculation of the minimum amount of PII or comparable guarantee.

EBA Consults on Fee Terminology and Disclosure Documents under Payment Accounts Directive

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Pursuant to the Payment Accounts Directive (2014/92/EU) (PAD), on September 22, 2016, the European Banking Authority (EBA) published a consultation paper on draft technical standards on fee terminology and disclosure documents under the directive.

The EBA will be holding a public hearing at its premises on 21 November 2016 and the consultation process closes on December 22, 2016.

Following the consultation the EBA set out the following three draft technical standards:

  • Draft regulatory technical standards (RTS) setting out the standardized terminology for services that are common to at least a majority of member states (required under Article 3(4) of the PAD).
  • Draft implementing technical standards (ITS) relating to the standardization of presentation format on the fee information document (FID) and its common symbol (required under Article 4(6) of the PAD).
  • Draft ITS relating to a standardized presentation format of the statement of fees (SoF) and its common symbol (required under Article 5(4) of the PAD).

The draft technical standards aim to standardize eight terms for services that are to be used by payment service providers (PSPs), as well as providing consumer-friendly definitions of these terms in all EU official languages. The EBA identified the terminology based on the national provisional lists that member states have developed in line with the EBA’s March 2015 guidelines on standardized fee terminology (see Legal update, EBA final report and guidelines on national provisional lists of the most representative services linked to a payment account and subject to a fee).

PSPs will have to use the proposed standardized terminology in the pre-contractual FID and the post-contractual SoF disclosure documents.