The European Banking Authority (“EBA”) has announced details of its plans to harmonize regulatory and supervisory practices to ensure secure, easy and efficient payment services across the EU. The Payment Services Directive (PSD2) is expected to mandate improved operational and security requirements for payment services, in close cooperation between the EBA and the European Central Bank (ECB) through the Forum for the Security of Retail Payments which the ECB and the EBA chair jointly. As the security requirements under PSD2 are not expected to come into force until 2018/9, the final Guidelines issued by the EBA in December 2014 (applicable as of August 1, 2015) will apply until such time.
European Banking Authority (EBA)
EBA Consults on Draft RTS on Specialized Lending Exposures
On May 11, 2015, the European Banking Authority (EBA) published a consultation paper (EBA/CP/2015/09) on draft regulatory technical standards (RTS) on assigning risk weights to specialized lending exposures under Article 153(9) of the Capital Requirements Regulation (Regulation 575/2013).
Specialized lending is a type of exposure towards an entity specifically created to finance or operate physical assets, where the primary source of income and repayment of the obligation lies directly with the assets being financed.
The proposed RTS define four classes of specialized lending:
- project finance;
- real estate;
- object finance; and
- commodities finance.
For each of these classes, the draft RTS specify a list of factors that institutions shall take into account and propose two options on how these factors should be combined to determine the risk weight assigned to the specialized lending exposure. The EBA has invited responses to the consultation before August 11, 2015, and will hold a public hearing for discussion on July 6, 2015.
EBA Final Report on Guidelines on Triggers for Use of Early Intervention Measures Under BRRD
On May 8, 2015, the European Banking Authority (EBA) published its final report (EBA/GL/2015/03) on guidelines on triggers for the use of early intervention measures under Article 27(4) of the Bank Recovery and Resolution Directive (2014/59/EU) (BRRD). The guidelines identify a set of triggers that are closely linked to the outcomes of the common EU supervisory review and evaluation process conducted by national competent authorities, and elaborate on the circumstances prompting the consideration of whether to apply early intervention measures. The guidelines will apply from January 1, 2016.
EBA Updates Single Rulebook Q&As: April 10, 2015
On April 10, 2015, the European Banking Authority (EBA) updated its Q&As on the single rulebook, publishing four new questions relating to issues including credit risk, liquidity risk, transparency and Pillar 3, and large exposures.
EBA Opinion on Regulation of EU Lending-Based Crowdfunding
On February 26, 2015, the European Banking Authority (“EBA“) published an opinion on lending-based crowdfunding. The opinion notes that certain Member States (France, Italy, Spain and the UK) have created specific regulations to address risks arising from crowdfunding. Italy’s regulation only covers investment-based crowdfunding. In Spain, the draft law in the final approval stages. The EBA concludes that the convergence of practices across the EU for the supervision of crowdfunding is desirable in order to avoid regulatory arbitrage, create a level playing field, ensure that market participants can have confidence in crowdfunding, and contribute to the single European market.
The EBA considers that crowdfunding, whilst still at an early stage, should be regulated by existing legislation, the most relevant being the Payment Services Directive (the “Directive“), but acknowledges that the lending aspects of crowdfunding are not regulated by EU law.
The EBA also stated that the business models of lending-based crowdfunding platforms do not fall inside the perimeter of credit institutions with the result that funds provided by lenders to crowdfunding platforms would not qualify as deposits eligible for protection under a deposit guarantee scheme, representing a further risk to lenders. Opinion.
EBA Publishes Risk Dashboard of EU Banking Sector for Q3 2014
On December 11, the European Banking Authority (“EBA“) published its risk dashboard for the third quarter of 2014, summarizing the main risks and vulnerabilities in the EU banking sector.
The data reflected in this version of the dashboard shows that, among other things:
- Capital positions in EU banks reached the highest level since 2009, driven by capital issuances ahead of the stress test and assets quality review exercises;
- Levels of non-performing loans remained stable, but were still high;
- Profitability levels were volatile;
- Shifting of balance sheet structure continued; and
- Loan-to-deposit ration remained fairly unchanged during H1 2014.
The EBA also published an interactive tool.
EBA Publishes Final Guidelines on Public Support Measures under BRRD
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.