European Banking Authority

EBA Publishes Amended Standards on Supervisory Reporting for Institutions

Posted on

The European Banking Authority (“EBA“) has published its final draft Implementing Technical Standards (“ITS“) amending the Commission’s Implementing Regulation (EU) No. 680/2014 on supervisory reporting. The EBA is required to develop ITS specifying supervisory reporting in the areas of own funds, financial information, losses stemming from lending collateralized by immovable property, large exposures, leverage ratio, liquidity ratios, asset encumbrance, additional liquidity monitoring metrics and supervisory benchmarking.

The final ITS include minor changes to templates and instructions which reflect some of the answers published in the EBA’s Single Rulebook Q&A, align with disclosure requirements for capital buffers and correct legal references and other clerical errors. The amendments are expected to be applicable for reporting from December 2016.

Bank Recovery and Resolution Directive; Exceptions to “Bail-In” of Liabilities

Posted on

On February 4, 2016, the European Commission adopted a Delegated Regulation (C(2016) 379) which (taking into account advice given by the European Banking Authority in March 2015) specifies where exclusion from the application of write-down or conversion powers is allowed under Article 44(3) of the Bank Recovery and Resolution Directive (2014/59/EU) (BRRD).

The BRRD’s bail-in tool gives a resolution authority the power to bail in all the liabilities of a firm in resolution, subject to exclusions specified in Article 44 of the BRRD. In exceptional circumstances, Article 44(3) permits the resolution authority to exclude certain liabilities from the scope of the bail-in tool, if certain conditions are met. The Commission has the power under Article 44(11) to adopt a delegated act specifying the circumstances in which exclusions from the bail-in tool are necessary under Article 44(3).

The Delegated Regulation:

  • Lays down common rules to be applied whenever a resolution authority considers excluding a liability from the application of the bail-in tool under Article 44(3).
  • Clarifies when a liability can be excluded from bail-in based on the impossibility of bailing-in that liability within a reasonable timeframe.
  • Lays down the elements to determine the reasonable time after which a liability can be excluded from bail-in.
  • Clarifies when a liability can be excluded from bail-in based on the need to preserve certain critical functions and core business lines, to avoid widespread contagion or to avoid value destruction.

The Council of the EU and the European Parliament are now considering the Delegated Regulation. If neither of them objects to it, the Delegated Regulation will enter into force 20 days after its publication in the Official Journal of the EU.

EBA Publishes Results of the CRDIV-CRR/Basel III Monitoring Exercise as of June 30, 2015

Posted on

On March 2, the European Banking Authority (“EBA”) published its report of its ninth Basel III monitoring exercise, particularly on the impact of the fully implemented Capital Requirements Directive and the Capital Requirements Regulation (CRDIV-CRR).

The exercise allowed the gathering of aggregate results on capital and liquidity ratios for banks in the European Union and the report summarizes the results using data as of June 30, 2015.

The results showed a further improvement of European banks’ capital positions with only a small number of banks suffering from potential capital shortfalls.

The exercise monitored the leverage ratio, as defined in EU legislation, for the first time and indicated that the leverage ratio is a binding regulatory constraint for a significant number of institutions in the sample.

The results showed that there has been an increase in banks’ liquidity coverage ratio over time, which the EBA attributed to structural adjustments and a recalibration of the liquidity coverage ratio framework, which was published in January 2013.  Report.

EBA Publishes Final Report on Guidelines on Co-operation Agreements Between DGSs Under Recast DGSD

Posted on

The European Banking Authority (“EBA“) has published a final report on guidelines on cooperation agreements between deposit guarantee schemes (“DGSs“). The guidelines have been developed to promote a common and consistent approach to co-operation agreements between DGSs throughout the EU, as provided under the recast Deposit Guaran-tee Schemes Directive (“DGSD“).

To promote a consistent approach and facilitate entry into co-operation agreements between DGSs across the EU, the guidelines specify the objectives and minimum content of co-operation agreements, and provide further guidance on the sequence and timing of events when the local DGS performs a pay-out of depositors on behalf of the DGS in another member states. The guidelines also include a multilateral framework co-operation agreement to which the DGSs or, where relevant, the designated authorities should adhere, although they allow DGSs or designated authorities to enter into bilateral or multilateral agreements where it is intended that co-operation agreements will go beyond the level of detail required by the guidelines.

Joint Committee Report on Securitization

Posted on

On May 12, 2015, the Joint Committee of the three European Supervisory Authorities (ESAs) published a report detailing its findings and recommendations regarding the disclosure requirements and obligations relating to due diligence, supervisory reporting and retention rules in existing EU law on Structured Finance Instruments (SFIs). The ESAs comprise the European Banking Authority, the European Securities and Markets Authority and the European Insurance and Occupational Pensions Authority.

The report states that its recommendations constitute the Joint Committee’s response to the European Commission’s recent consultation on securitization and should be considered in the light of further work on the transparency requirements for SFIs.

The report focuses on the interplay between investor due diligence requirements and the disclosure requirements that apply to issuers, originators and sponsors. It aims to establish whether investors are effectively protected and whether the supervision framework is appropriate to support the redevelopment of the EU securitization markets. It includes recommendations to:

  • harmonize due diligence requirements across the EU.
  • standardize investor reports and have them stored in a centralized, public space.
  • ensure investors receive loan-by-loan level data.
  • review the use of different definitions and key terms across EU legislative texts.
  • complement a harmonized due diligence and disclosure framework with a comprehensive regime for supervision and enforcement.

EBA’s Recommendations to Non-EU and Review of EU Supervisory Authorities

Posted on

The European Banking Authority has published a recommendation setting out its opinion on the confidentiality regime of several non-EU supervisory authorities to facilitate their participation in supervisory colleges overseeing international banks, led by EU supervisors.

The EBA expects all competent authorities to which the recommendation is addressed to comply with it and incorporate it into their supervisory practices as appropriate. The competent authorities must notify the EBA as to whether they have complied or intend to comply by June 2, 2015.

In a separate report, the EBA has identified that supervisory authorities across the EU have made significant progress towards improving the convergence of their supervisory practices since 2011 though some differences remain. The report covers the findings of an assessment carried out over the past 3 years, and focuses on Supervisory Review and Evaluation Process and assessment of risks, supervisory stress testing, ongoing review of internal models, and supervisory measures and powers.

The EBA Publishes Updates on the Bank Recovery and Resolution Directive

Posted on

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

Posted on

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 Report on Consumer Trends 2014

Posted on

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

ESA Issues ESMA and EBA Consultation for Securities and Banking Complaints Handling

Posted on

On November 6, the Joint Committee of the European Supervisory Authorities (ESAs) issued a consultation paper by the European Securities and Markets Authority (ESMA) and the European Banking Authority (EBA) concerning draft guidance for the handling of complaints in the securities and banking industries. This guidance aims to:

  • clarify expectations on firms’ procedures for complaints handling;
  • give guidance on the provision of information to complainants and the procedures for answering complaints;
  • harmonize the complaint handling arrangements of firms in order to help protect consumers; and
  • set a minimum level of supervision for firms’ complaint handling arrangements on an EU-wide basis.

The guidance applies to investment firms, UCITS management companies and UCITS investment companies that have not designated a management company, AIFMs providing MiFID services, credit institutions and e-money institutions.

The deadline for responses to the consultation is February 7, 2014, with the final report scheduled to be published in the first quarter of 2014.  Consultation Paper.