regulatory technical standards (RTS)

Joint Committee of ESAs Final RTS on Key Information Documents for PRIIPs

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The Joint Committee of the European Supervisory Authorities (ESAs) published its final draft regulatory technical standards (RTS) on key information documents (KIDs) for packaged retail and insurance-based investment products (PRIIPs). The draft RTS include a mandatory template, which includes certain mandatory texts and details of the layout to use, a methodology for the assignment of each PRIIP to one of the seven classes in the summary risk indicator, and the requirements relating to the presentation of costs.

An accompanying press release states that the proposed KIDs provide retail investors, for the first time across the EU, with simple and comparable information on PRIIPs. It is intended that the three page document will increase the transparency and comparability of information about the risks, performance and costs of PRIIPs.

The draft RTS have been submitted to the European Commission for endorsement and will enter into force on December 31, 2016.

EBA Publishes Reports, Guidelines and Draft RTS in Relation to the CRR

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The European Banking Authority (“EBA”) has published the following documents in connection with the Capital Requirements Regulation (Regulation 575/2013) (“CRR”):

  1. Final guidelines on limits on exposures to shadow banking entities that carry out banking activities outside a regulated framework under Article 395. The guidelines introduce an approach that will allow EU institutions to set limits for their exposures to shadow banking entities as part of their internal processes. They are informed by a report on the exposures of a sample of EU institutions to shadow banking entities and the impact of setting limits. The guidelines will apply from 1 January 2017. Together with the report, they will assist the European Commission in its work on its upcoming report on the appropriateness and impact of imposing limits on exposures to shadow banking entities;
  2. A consultation paper on draft regulatory technical standards (“RTS”) specifying the assessment methodology on the use of internal models for market risk, under Article 363(4)(c) of the CRR;
  3. A legislative proposal to extend certain exemptions for commodity dealers (COM(2015) 648);
  4. A report on the impact assessment and calibration of the net stable funding ratio (“NSFR”) required under the CRR. The EBA recommends the introduction of an NSFR in the EU to ensure an appropriate stable funding structure relating to the degree of asset illiquidity, as the way of properly mitigating funding risk in banks.

Meanwhile, the text of the European Commission Implementing Regulation ((EU) 2015/2344) laying down implementing technical standards with regard to currencies with constraints on the availability of liquid assets in accordance with the CRR was published in the Official Journal of the EU.

EBA Publishes Draft RTS in Relation to the BRRD

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The EBA has published the following draft RTS in connection with the Bank Recovery and Resolution Directive (2014/59/EU) (BRRD):

  1. Final draft RTS on the valuation of derivatives under Article 49(4);
  2. A document setting out final draft RTS and guidelines on the business reorganization plans to be submitted where a resolution authority decides to apply the bail-in tool under the BRRD; and
  3. Final draft RTS on the information that should be contained in the detailed records of financial contracts required in support of the power to impose a stay on claims by creditors under Article 71. The final draft RTS also specify the circumstances in which the requirement to maintain detailed records will be imposed.

EBA Final Draft RTS on Prudential Requirements for CSDS

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On December 16, the EBA published its final report setting out draft RTS on prudential requirements for central securities depositories (“CSDs”) under the Regulation on improving securities settlement and regulating CSDs (Regulation 909/2014) (“CSDR”). The final draft RTS relate to:

  1. The capital requirements for CSDs (required under Article 47);
  2. The additional risk-based capital surcharge reflecting the risks resulting from ancillary banking services (required under Article 54); and
  3. Details of the frameworks and tools for the monitoring, the measuring and management, the reporting and the public disclosure of credit and liquidity risks (required under Article 59).

EBA Opinion on Mortgage Lending Value

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On October 5, 2015, the European Banking Authority (EBA) published an opinion on mortgage lending value (MLV). The EBA has the mandate to develop the draft Regulatory Technical Standards (RTS) to specify criterial for assessment of MLV, and is currently of the opinion that the Commission should initiate legislative steps to clarify the scope of the draft RTS empowerment to exclude any implications on covered bonds.

The EBA notes that harmonizing the valuation practices in covered bond markets should be considered as part of a comprehensive review of EU covered bond frameworks.

EBA Issues Guidelines and Standards Under BRRD

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Over the last week the EBA has published final draft regulatory technical standards (RTS), implementing standards (ITS) and guidelines on a number of Articles of the Bank Recovery and Resolution Directive (2014/59/EU) (BRRD). The materials published by the EBA include:

  • final draft regulatory technical standards, implementing standards and guidelines relating to group financial support under Article 23;
  • final draft implementing standards and guidelines relating to the application of simplified obligations under Article 4;
  • final draft implementing technical standards on procedures, forms and templates for the provision of information for resolution plans under Article 11(3);
  • final draft regulatory technical standards on the contractual recognition of write-down and conversion powers under Article 55(3);
  • final draft regulatory technical standards on resolution colleges under Article 88(7);
  • final draft regulatory technical standards on independent valuers under Article 36(14); and
  • final draft regulatory technical standards on criteria to set the minimum requirement for own funds and eligible liabilities under Article 45.

The EBA has submitted the RTS and the ITS to the European Commission for endorsement. The guidelines will be translated into all EU languages and apply two months and one day after their publication in all EU languages.

EBA Consults on Draft RTS on Specialized Lending Exposures

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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.

Delegated Regulation on RTS for Specification of Margin Periods of Risk Published in Official Journal

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On April 16, 2015, the Commission Delegated Regulation (Regulation 2015/585) on regulatory technical standards (RTS) on the margin periods of risk (being the time period from the last exchange of collateral covering a netting set of transactions with a defaulting counterparty until that counterparty is closed out and the resulting market risk is re-hedged) used for the treatment of clearing members’ exposures to clients under the Capital Requirements Regulation (Regulation 575/2013) (CRR) (dated April 15, 2015), was published in the Official Journal of the EU (OJ).