Shearman & Sterling LLP | FinReg | European Banking Authority Issues Statements on Addressing COVID-19 Impact for EU Banking Sector
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  • European Banking Authority Issues Statements on Addressing COVID-19 Impact for EU Banking Sector
    The European Banking Authority has published three statements providing clarity on measures to mitigate the impact of COVID-19 on the EU banking sector. The statements are:
    • Statement on supervisory reporting and Pillar 3 disclosures in light of COVID-19: referring to its statement issued on March 12, 2020, the EBA outlines further details on actions that firms, national regulators and resolution authorities can take to mitigate the impact of COVID-19. The EBA stresses the importance of firms providing reliable data for supervisory purposes, particularly given market fluctuations. However, the EBA reiterates that some leeway can be given to firms for certain areas and asks national regulators to consider the extent to which a delay to submission of data may be justified. In general, the EBA suggests that firms should be given an additional month to submit data (with an additional two months given for remittance of data on funding plans), but national regulators should confirm the precise requirements. The EBA excludes from the forbearance information on the liquidity coverage ratio (LCR) and reporting for resolution planning purposes. The EBA also encourages national regulators to be flexible about the deadline for firms to publish their Pillar 3 data. Firms should contact their regulator if they expect that there will be a delay to their Pillar 3 disclosures.
    • Statement on dividends distribution, share buybacks and variable remuneration: the EBA states that the capital relief resulting from regulatory action should not be used by firms to pay dividends or conduct share buybacks, but should be used for financing the real economy. The EBA also urges all banks to abstain from dividend distribution or share buybacks (noting that some banks have already done so). National regulators are asked to monitor that capital distributions within banking groups are prudent and support the local bank needs and economies. On remuneration, the EBA states that firms should review their policies and, among other things, ensure that variable remuneration levels are conservative. The EBA's view is that a larger part of the variable remuneration could be deferred for a longer period and a larger proportion could be paid out in equity instruments.
    • Statement on actions to mitigate financial crime risks: the EBA reminds banks and other financial institutions that anti-money laundering controls continue to be important in the current environment. It also asks national regulators to share information on emerging AML with the banks and financial institutions that they supervise and to set clear expectations for those firms. Furthermore, the EBA recommends that national regulators consider how they can adjust their approach to AML supervision, temporarily, to ensure ongoing compliance by banks and financial institutions.

    View the statement on supervisory reporting and Pillar 3 disclosures.

    View the statement on dividends distribution, share buybacks and variable remuneration.

    View the statement on actions to mitigate financial crime risks.

    View details of the EBA's statement on March 12, 2020.

    Details of other regulatory responses to COVID-19 are available on our COVID-19 Research Center.

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