implementing technical standards

European Commission Adopts Implementing Regulation on ITS for Reporting Results of Internal Approach Calculations under Article 78(2) CRD IV Directive

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On September 19, 2016, the European Commission adopted an Implementing Regulation implementing technical standards (ITS) for templates, definitions and IT solutions to be used by institutions when reporting the results of their internal approach calculations to the European Banking Authority (EBA) and to competent authorities under the CRD IV Directive (2013/36/EU).

The Implementing Regulation is based on the draft ITS submitted by the EBA to the Commission in March 2015 to which the EBA published an opinion agreeing to the Commission’s amendments to the ITS in May 2016. Once the Implementing Regulation has been published in the Official Journal of the EU (OJ) it will enter into force on the 20th day following its publication.

EBA Amends Implementing Technical Standards on Benchmarking of Internal Approaches under CRD IV

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On August 4, 2016, the European Banking Authority (EBA) published and submitted to the EU Commission an amended version of its Implementing Technical Standards (ITS) on benchmarking of internal approaches under Article 78(8) of the CRD IV Directive (which can be found in a zip file on the EBA’s website).

The EBA has amended the ITS for the purposes of running the 2017 benchmarking exercise. The amended ITS will assist competent authorities in their 2017 assessment of internal approaches both for credit risk, and for market risk. In a related press release, the EBA explains that, given the type of changes introduced in the instructions and templates, the relevant annexes are replaced in whole so that there is a consolidated version of the updated ITS package.

The EBA plans to annually update the ITS and to maintain them on a regular basis to ensure the success and quality of future benchmarking exercises.

EBA Publishes Report on Leverage Ratio Requirements under Article 511 of the CRR

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On August 3, 2016, the European Banking Authority (EBA) published a report on the leverage ratio (LR) requirements under the Capital Requirements Regulation (CRR).

The EBA report recommends the introduction of a minimum LR requirement in the EU to mitigate the risk of excessive leverage, which is in line with the discussions held by the Group of Central Bank Governors and Heads of Supervision (GHOS) – the governing body of the Basel Committee on Banking Supervision (BCBS) – in January 2016.

The analysis suggests that the potential impact of introducing a LR requirement of 3 percent on the provision of financing by credit institutions would be relatively moderate, while, overall, it should lead to more stable credit institutions. Similarly, on the basis of econometric analysis, it has been estimated that risk taking should not be strongly affected. The EBA considers that the introduction of a 3 percent LR should lead to more stable credit institutions overall and the combined application of a risk-based ratio and a LR requirement will reduce the overall cyclicality of capital requirements.

The EBA also assessed the exposure of different categories of credit institutions to the risk of excessive leverage (REL) concluding that the results do not give a strong indication of differences in the degree of exposure to REL across different types of credit institutions. However, global systemically important institutions (GSIIs) show a higher exposure to REL and therefore a higher LR requirement may be warranted.

The report also flags that while the Basel LR standard fits well with the EU banking sector, the same cannot be said for all business models covered by other EU prudential regulations. For example, the EBA recommends that central counterparties (CCPs) and central securities depositaries (CSDs) be exempted. The report describes the characteristics of various specialized business models, such as public development banks, concluding that there is little room for differentiating the LR without opening the door to cases of circumvention of the basic principles of the LR. The report did not find evidence to exempt certain credit institutions from being subject to compliance with the LR minimum requirement of 3 percent on the basis of their limited size. However, the EBA will explore in more detail a reduced frequency and granularity of reporting requirements in the case of smaller credit institutions in future updates of the implementing technical standards (ITS) on LR reporting.

The Commission is required to submit a report on the impact and effectiveness of the LR, and potential legislative proposals, to the European Parliament and the Council of the EU by December 31, 2016.

EBA Publishes Amended Standards on Supervisory Reporting for Institutions

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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.

European Commission Implementing Regulation Lays Down ITS on Disclosure of Leverage Ratio for Institutions under CRR

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A European Commission Implementing Regulation laying down implementing technical standards (“ITS“) on disclosure of the leverage ratio for institutions under the CRR has been published in the Official Journal of the EU on February 16.

The Implementing Regulation states that, to ensure the obligation in the CRR to disclose information related to the leverage ratio is carried out by institutions in an effective and harmonised manner across the EU as soon as possible, it is necessary to require institutions to use templates for disclosure at the earliest possible date. The templates and instructions on completing them are set out in the annexes to the Implementing Regulation.

The Implementing Regulation entered into force on February 17.

ESMA Publishes Responses to Consultations on MAR

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On October 17, the European Securities and Markets Authority (ESMA) published responses that it received to consultations published in July 2014 relating to the Market Abuse Regulation (Regulation 596/2014) (MAR) on: (i) draft technical advice on possible delegated acts concerning MAR; and (ii) draft regulatory technical standards (RTS) and implementing technical standards (ITS) on MAR.  Response.

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 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.