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Financial Regulatory Developments Focus
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The following posts provide a snapshot of the principal U.S., European and global financial regulatory developments of interest to banks, investment firms, broker-dealers, market infrastructures, asset managers and corporates.

  • European Banking Authority Phases Out COVID-19 Guidelines on Loan Repayments Moratoria
    09/21/2020

    The European Banking Authority has confirmed that it will phase out its Guidelines on legislative and non-legislative payment moratoria in accordance with its September 30, 2020 deadline. The EBA originally published the Guidelines in April 2020, stipulating that, for a period of three months, banks should not class payment moratoria that were based on national law or private-sector initiatives as forbearance or distressed restructuring practices, in light of the COVID-19 pandemic. The Guidelines were extended for a further three months on June 30, 2020 but the EBA now intends to comply with the September 30, 2020 phase out deadline in light of the success of the temporary moratoria and the need to return to the usual rescheduling of loans on a case-by-case approach.  The treatment described in the Guidelines will continue to apply to payment holidays granted prior to September 30, 2020.

    View the EBA's statement on the phase-out of its Guidelines.

    View details of the EBA's Guidelines.
  • UK Prudential Regulation Authority Publishes Proprietary Trading Review
    09/21/2020

    The U.K. Prudential Regulation Authority has published a report on the extent of proprietary trading by PRA-authorized deposit takers and investment firms incorporated in the U.K. Restrictions on proprietary trading (being the trading of financial instruments or commodities as principal by banks or investment firms) were introduced for ring-fenced retail banks in the wake of the 2008 financial crisis and came into force in January 2019. However, the U.K. decided not to impose a complete ban on proprietary trading for all banks, as had been seen in other countries, such as the U.S. under the Volcker Rule. Instead, the PRA was mandated to produce a report under the Financial Services (Banking Reform) Act 2013, with a view to informing the U.K. Parliament of the need for any further restrictions on proprietary trading.

    Read more.
  • European Central Bank Decision Excluding Eurozone Central Bank Exposures from Total Exposure Measures
    09/21/2020

    The European Central Bank has published a Decision in the Official Journal of the European Union temporarily excluding certain central bank exposures from significant Eurozone banks' leverage ratio calculations for the purposes of the EU Capital Requirements Regulation. The Decision will enter into force on September 26, 2020 and the exclusion will apply until June 27, 2021.

    Read more.
  • European Central Bank Publishes Guide to Assessment Methodology for Counterparty Credit Risk and Credit Valuation Adjustment Risk Calculations
    09/18/2020

    The European Central Bank has published its final Guide on the assessment methodology it will use to examine: (i) the internal model methods banks use to calculate exposures to counterparty credit risk; and (ii) the advanced methods banks use to calculate own funds requirements for credit valuation adjustment risk. The EU Capital Requirements Regulation requires the ECB to permit banks to use internal models for counterparty credit risk purposes if those models comply with relevant CRR provisions. The ECB's Guide sets out how the ECB will determine banks' compliance.

    Read more.
  • European Banking Authority Publishes Survey on Banks' Environmental, Social and Governance Risk Disclosure Frameworks
    09/17/2020

    The European Banking Authority has published a survey designed to collect information on large banks' disclosure practices on environmental, social and governance risks. The EU Capital Requirements Regulation implements the Basel Committee on Banking Supervision's Pillar 3 disclosure requirements, which require banks to disclose information about their risks and risk management procedures and policies. In 2018, the Basel Committee published updated Pillar 3 requirements. The revised CRR, published in June 2019, incorporates the revised Basel Committee disclosure standards and mandates the EBA to produce draft Implementing Technical Standards to ensure comparability of the disclosures made with international non-EU active banks.

    Read more.
  • EU Technical Standards Supplementing the Securitization Regulation
    09/03/2020

    Several EU Technical Standards supplementing the EU Securitization Regulation have been published in the Official Journal of the European Union. The Securitization Regulation has applied directly across the EU since January 1, 2019. It provides the criteria for identifying which securitizations will be designated as "simple, transparent and standardized" (STS) securitizations, a system to monitor the application of those criteria as well as common requirements on risk retention, due diligence and disclosure. Related amendments to the EU Capital Requirements Regulation set out the regulatory treatment of exposures to securitizations that are deemed to be STS securitizations.

    Read more.
  • UK Prudential Regulator Announces Termination of Temporary Approach to VAR Back-Testing Exceptions
    08/27/2020

    The U.K. Prudential Regulation Authority has published a statement confirming that, following its review of the temporary approach that allows firms to offset increases in VAR back-testing exceptions through a reduction in risks-not-in-VAR capital requirements, it has decided to terminate the temporary approach from September 30, 2020. The PRA has made this decision because of the changes introduced to the EU Capital Requirements Regulation (known as the CRR Quick Fix package), which has applied directly across the EU since June 27, 2020.

    From October 1, 2020, firms should no longer apply any commensurate reduction in risks-not-in-VAR capital requirements. Firms should apply to the PRA to exclude back-testing options that do not result from deficiencies in their internal model occurring between January 1, 2020 and December 31, 2021.

    View the PRA's statement.

    View details of CRR Quick Fix.
  • UK Prudential Regulator Issues Updated Statement on IFRS 9 and Capital Requirements
    08/26/2020

    The U.K. Prudential Regulation Authority has published a further statement on IFRS 9 and capital requirements in the context of COVID-19. In line with the Financial Conduct Authority's guidance in relation to mortgage payments, firms should consider tailored forbearance arrangements where, at the end of the COVID-19 payment deferral period, a borrower is unable to resume payments in full immediately, with all deferred sums either paid in full or capitalized. The PRA states that the tailored forbearance arrangements may be as good an indicator of significant increases in credit risk, credit impairments or defaults as forbearance before the pandemic. Any loans subject to tailored forbearance should not be automatically treated as having experienced SICR or become credit impaired or in default, and firms will need to exercise judgment where the position is not clear.

    The PRA also states that some of the guidance in its statement on March 26, and June 4, 2020 continues to be relevant, depending on the circumstances.

    View the PRA's statement.

    View details of the PRA's June statement.

    View details of the PRA's March statement.
  • EU Consultation on Draft Guidelines to Implement Alternative Internal Model Approach
    08/12/2020

    The European Banking Authority has opened a consultation on proposed guidelines on criteria for the use of data inputs in the risk measurement model under the Internal Model Approach for market risk, set out in the revised Capital Requirements Regulation, known as CRR2. The consultation closes on November 12, 2020.

    CRR2 implements a revised framework for minimum capital requirements based upon market risk—the Fundamental Review of the Trading Book, published in January 2019 by the Basel Committee on Banking Standards. The revisions include an alternative IMA, one part of which is the expected shortfall risk measure used to determine capital requirements for those risk factors with sufficient available observable market data.

    Read more.
  • European Banking Authority Provides Clarity on Application of CRR Quick Fix Package
    08/11/2020

    The European Banking Authority has published guidance on the impact on supervisory reporting and disclosure of the EU's CRR Quick Fix adjustments, which were made in response to COVID-19. The CRR Quick Fix introduced changes to a broad range of requirements on firms under the Capital Requirements Regulation. It has applied directly across the EU since June 27, 2020. The EBA's guidance consists of:
     
    1. Guidelines on supervisory reporting and disclosure requirements in compliance with the CRR "quick fix" in response to the COVIDÔÇÉ19 pandemic (EBA/GL/2020/11). These Guidelines aim to clarify how firms should report the Implementing Technical Standards on supervisory reporting versions 2.9 and 2.10, and on the existing ITS on disclosure of leverage ratio.

    Read more.
  • Basel Committee on Banking Supervision Proposes Principles for Operational Risk
    08/06/2020

    The Basel Committee on Banking Supervision has opened a consultation on proposed principles for operational resilience and updated Principles for the Sound Management of Operational Risk (PSMOR). The consultation closes on November 6, 2020.

    Read more.
  • UK Prudential Regulator Proceeds with Extension of Coverage under Financial Services Compensation Scheme
    08/04/2020

    The U.K. Prudential Regulation Authority has published a Policy Statement and final rules on the temporary high balances coverage extension under the Financial Services Compensation Scheme. The PRA has decided to implement the proposal, made in July this year and in response to the coronavirus pandemic, to extend coverage under the FSCS for temporary high balances, from six months to 12 months from the date of the deposit or the first date the balance becomes legally transferrable to the depositor. The change will be effected by changes to the PRA's depositor protection rules and the Statement of Policy on the Deposit Guarantee Scheme. The change will take effect from August 6, 2020. The coverage will revert to six months from February 1, 2021.

    View the Policy Statement, updated rules and Statement of Policy.
  • EU Final Draft Technical Standards on TLAC and MREL Disclosure & Reporting
    08/03/2020

    The European Banking Authority has published a final report and final draft Implementing Technical Standards on disclosure and reporting of Minimum Requirement for Own Funds and Eligible Liabilities and Total Loss Absorbing Capacity. Revisions to the EU's Bank Recovery & Resolution Directive and the Capital Requirements Regulation, which were finalized in 2019, implement the Financial Stability Board's TLAC requirements in the EU as well as amend the EU's existing MREL requirements. The TLAC requirements will apply to all EU global systemically important institutions and the revised MREL requirements to G-SIIs and other relevant firms. The final draft ITS will supplement the Pillar 3 disclosure requirements and supervisory reporting requirements on TLAC and MREL introduced by BRRD2 and CRR2.

    The EBA has submitted the final draft ITS to the Commission for endorsement. The ITS on TLAC disclosures will apply immediately on entry into force. The MREL disclosure requirements will apply either from January 1, 2024 (the expiration date of relevant transitional periods) or from the later deadline set by the relevant resolution authority.

    View the EBA's report, final draft ITS and related annexes.

    View details of BRRD2.

    View details of CRR2.
  • EU Single Resolution Board Publishes Guidance on Bank Operational Continuity and FMI Contingency Plans
    07/29/2020

    The EU Single Resolution Board has published new guidance for Eurozone banks for which it is the resolution authority on: (i) operational continuity in resolution for Eurozone banks; and (ii) financial market infrastructure contingency plans. The guidance applies to "significant" Eurozone banks that are directly prudentially supervised by the European Central Bank and certain other cross-border groups, for whom resolution is their strategy.

    Read more.
  • European Central Bank Publishes Results of Bank COVID-19 Vulnerability Analysis
    07/28/2020

    The European Central Bank Banking Division has published the results of the COVID-19 vulnerability analysis it conducted on Eurozone banks directly prudentially supervised under the Single Supervisory Mechanism. The analysis was designed to establish how 86 Eurozone banks would be impacted by the COVID-19 pandemic and any vulnerabilities that may arise over a three-year horizon.

    Read more.
  • UK Prudential Regulation Authority Announcement on Bank Dividend Payments and Share Buybacks Beyond 2020
    07/28/2020

    The U.K. Prudential Regulation Authority has published an announcement on its approach to dividend payments and share buybacks by large U.K. banks subject to its prudential supervision, in light of COVID-19. The PRA states that it intends to assess firms' plans for distributions beyond 2020 in Q4 2020, taking into account banks' current and projected capital positions and the level of uncertainty around the economy, market conditions and capital trajectories at that time.

    Read more.
  • UK Prudential Regulator Publishes Policy Statement on Asset Encumbrance
    07/27/2020

    The U.K. Prudential Regulation Authority has published a Policy Statement on asset encumbrance, relevant to all PRA-regulated firms other than credit unions and insurance firms. The Policy Statement takes account of the PRA's consultation on its proposed expectations of how firms manage prudential risks associated with asset encumbrance. "Encumbered assets" are those that are used to secure, collateralize or credit-enhance a transaction and so cannot be freely transferred or liquidated by the pledging party. The PRA's consultation aimed, among other things, to ensure that firms: (i) put in place, and document, adequate risk management processes to monitor the potential impacts of asset incumbrance; (ii) appropriately consider the effects that increased asset encumbrance may have on the restoration of financial viability during a stress scenario; and (iii) ensure that asset encumbrance levels do not unduly impact the amount and cash value of assets that could be lent against in resolution.

    Read more.
  • European Central Bank Publishes Recommendation on Bank Dividend Distributions During COVID-19
    07/27/2020

    The European Central Bank has published an updated Recommendation on dividend distributions by significant institutions that are directly prudentially supervised by the ECB. The Recommendation states that, until January 1, 2021, no dividends should be paid out for the financial years 2019 and 2020, nor should share buy-backs aimed at remunerating shareholders take place. Banks that consider themselves legally required to pay out dividends should explain their underlying reasons to their joint supervisory team. Banks that plan to pay dividends to a non-Eurozone parent institution, parent financial holding company or parent mixed financial holding company should also discuss their intentions with their joint supervisory team.

    Read more.
  • European Banking Authority Consults on Technical Standards for Estimating Default Probabilities and Losses Given Default under CRR 2
    07/22/2020

    The European Banking Authority has published draft Regulatory Technical Standards on the requirements for the internal methodologies or external sources to be used for estimating default probabilities and losses given default for firms subject to the revised Capital Requirements Regulation (CRR 2). Responses to the consultation should be submitted by October 22, 2020.

    Read more.
  • UK Prudential Regulator Consults on Supervision of New and Growing Non-Systemic Banks
    07/22/2020

    The U.K. Prudential Regulation Authority has published a consultation on proposed changes to its supervision of new and growing non-systemic U.K. banks. The consultation will primarily be relevant to banks in their first few years of authorization as a PRA deposit-taker and prospective banks interested in, or currently, applying for deposit taker authorization. The PRA notes that some new and growing banks may have sufficient experience and resources to quickly move to the standard expected of established banks. In deciding which banks should be subject to its new policy, the PRA would consider each banks' case on its merits and apply supervisory judgement. Responses to the consultation should be submitted by October 14, 2020. The PRA expects the amendments set out in the consultation to take effect in the first half of 2021.

    Read more.
  • HM Treasury Provides Guidance on Application of EU CRR Quick Fix Package During Brexit Transitional Period
    07/16/2020

    HM Treasury has published a statement on the application of the EU CRR Quick Fix package during the Brexit transitional period. The EU CRR Quick Fix package consists of a Regulation amending the Capital Requirements Regulation (and also amending the Regulation amending the CRR, known as CRR2) and it was published in the Official Journal of the European Union on June 26, 2020. The Regulation forms part of the EU's response to the coronavirus pandemic.

    Read more.
  • Basel Committee on Banking Supervision Finalizes Credit Valuation Adjustment Risk Framework
    07/09/2020

    The Basel Committee on Banking Supervision has published final revisions to the credit valuation adjustment risk framework under the Basel III standards. The updated international standard sets out the proposed regulatory capital treatment of CVA risk for derivatives and securities financing transactions. The CVA risk framework is designed to manage the risk of banks incurring mark-to-market losses from deterioration in the creditworthiness of counterparties in derivatives or SFTs. The framework was last revised in December 2017, partly to align it with the Basel Committee's market risk framework. The latest revisions include:
     
    1. The reduction of certain risk weights;
    2. The introduction of new index buckets and revised aggregation of CVA capital requirements;
    3. An amendment to the scope of portfolios subject to CVA risk capital requirements. SFTs, where the CVA risks stemming from such positions are not material, are excluded and certain client-cleared derivatives are exempt; and
    4. Revision of the overall calibration of the CVA risk framework, covering both the standardized and the basic approach.

    View the updated CVA standard.
  • UK Prudential Regulator Proposals to Extend Coverage under the Financial Services Compensation Scheme
    07/09/2020

    The U.K. Prudential Regulation Authority has opened a consultation on proposals for extending coverage of the Financial Services Compensation Scheme for temporary high balances. Responses to the consultation may be submitted until July 23, 2020. The PRA is proposing to extend coverage under the FSCS for temporary high balances, from six months to 12 months from the date of the deposit or the first date the balance becomes legally transferrable to the depositor. The coverage would revert to six months from February 1, 2021. The proposal is made because of the impact of COVID-19 on consumers.

    View the consultation paper.
  • European Banking Authority Report on Implementation of EU Prudential Framework During COVID-19
    07/07/2020

    The European Banking Authority has published a report on the implementation of certain prudential policies introduced by the EBA to deal with the effects of the COVID-19 pandemic. The report focuses on two areas in particular: implementation issues around the EBA's Guidelines on legislative and non-legislative moratoria on loan repayments and the criteria that institutions should follow for the identification and treatment of operational risk events and losses.

    Read more.
  • European Central Bank Publishes Guideline on Default Definition for Less Significant Eurozone Institutions
    07/07/2020

    The European Central Bank, Banking Supervision division has published a guideline harmonizing the threshold for assessing the materiality of credit obligations past due for the purposes of default assessments under the EU Capital Requirements Regulation. CRR defines the circumstances in which an obligor under a credit obligation will be deemed to be in default. The materiality of the credit obligation is relevant for these purposes, and CRR grants competent authorities the discretion to determine, according to their view of a reasonable level of risk, the threshold against which materiality should be measured.

    Read more.
  • Basel Committee on Banking Supervision Publishes Final Updated AML Guidelines
    07/02/2020

    The Basel Committee on Banking Supervision has published final updated guidelines on the "Sound management of risks related to money laundering and financing of terrorism". The updated guidelines apply to all banks, banking groups and relevant regulators.

    The updated guidelines include detailed guidance on the interaction between prudential and AML/CFT supervision to enhance the effectiveness of the supervision of banks' AML/CFT regimes. The updated guidelines also merge and replace two other Basel Committee documents, namely Customer due diligence for banks (October 2001) and Consolidated KYC risk management (October 2004). The guidelines should be read in conjunction with other Basel Committee papers, such as the Core principles for effective bank supervision, as well as relevant guidance published by the Financial Action Task Force.

    View the updated guidelines.
  • Final EU Guidelines on the Treatment of Structural FX Under Capital Requirements Regulation
    07/01/2020

    The European Banking Authority has published final guidelines on the implementation of the structural FX provision under the Capital Requirements Regulation. The CRR requires institutions to calculate their net open positions in currencies according to specified formulae but permits institutions to exclude positions that have been taken for hedging purposes and that are structural. The guidelines will apply to both firms and national regulators from January 1, 2022, to allow firms time to comply with the new framework.  However, regulators should review, update or revoke permissions already granted before the guidelines apply.

    Read more.
  • UK Prudential Regulator Statement on EU CRR ‘Quick Fix’ Package
    06/30/2020

    The U.K. Prudential Regulation Authority has published a statement on the EU Capital Requirements Regulation ‘Quick Fix’ package, confirming that it applies directly to all PRA-regulated firms. The CRR Quick Fix package has applied across the EU since June 27, 2020. The CRR Quick Fix package is part of the EU’s response to the coronavirus pandemic.

    In its statement, the PRA confirms that U.K.-regulated banks already applying the CRR transitional arrangements for IFRS 9 must implement the revised calculations as a result of the Quick Fix package, which extended by two years the transitional measures for the implementation of IFRS 9. In addition, a bank contemplating ceasing to apply the IFRS 9 transitional measures must first obtain PRA approval to do so. The PRA is encouraging those banks to submit their requests by July 31, 2020, which requests must include a written explanation of the basis on which senior management has satisfied itself with the continuing adequacy of the bank’s financial resources.

    Read more.
  • UK Prudential Regulator Updates Statement on Regulatory Reporting
    06/26/2020

    The U.K. Prudential Regulator has announced that, given the time firms have had to adjust to working during COVID-19 and the need for prudential regulators to access data in a timely manner, the PRA expects that, in general, firms will submit regulatory reports on time going forward. Firms experiencing difficulty with this should contact their supervisor. This amends the statement made by the PRA on April 2, 2020, when it stated that it would accept delayed submission of certain regulatory returns with deadlines on or before May 31, 2020. The PRA's previous statement, which confirmed its flexibility on receiving firms' Pillar 3 disclosures, still stands, although the PRA notes that it does not expect publication timelines for Pillar 3 disclosures to be affected by COVID-19 in most cases.

    View the PRA's statement on regulatory reporting during COVID-19.

    View the PRA's April statement on regulatory reporting.
  • EU Banking ‘Quick Fix’ Regulation Published
    06/26/2020

    A new EU Regulation amending the Capital Requirements Regulation (and also amending the Regulation amending the CRR, known as CRR2), has been published in the Official Journal of the European Union. It is known as the CRR Quick Fix package and applies from June 27, 2020. The Regulation forms part of the EU’s response to the coronavirus pandemic. 

    Read more.
  • EU Amends Technical Standards on Prudent Valuation in Response to COVID-19
    06/25/2020
    An EU Regulation amending the Regulatory Technical Standards on prudent valuation has been published in the Official Journal of the European Union. The amending Regulation amends Delegated Regulation (EU) No 101/2016 (which supplements the EU Capital Requirements Regulation) by increasing the aggregation factor applicable to the core approach from 50% to 66% until December 31, 2020, with the aim of it applying for the June 30, 2020, COREP reporting. The amending Regulation applies from June 26, 2020.

    View the amending Regulation.
  • European Banking Authority Publishes Final Draft Technical Standards for Public Disclosures and Reporting Requirements Under CRR II
    06/24/2020

    The European Banking Authority has published its final reports and draft Implementing Technical Standards for public disclosures and supervisory reporting requirements under the revised EU Capital Requirements Regulation. CRR implements the Basel Committee on Banking Supervision's Pillar 3 disclosure requirements, which require banks to disclose information about their risks and risk management procedures and policies. In 2018, the Basel Committee published updated Pillar 3 requirements. The revised CRR, published in June 2019, incorporates the revised Basel Committee disclosure standards and mandates the EBA to produce the draft ITS to ensure comparability of the disclosures made with international non-EU active banks.

    Read more.
  • European Banking Authority Publishes Final Draft Technical Standards for Public Disclosures and Reporting Requirements Under CRR II
    06/24/2020

    The European Banking Authority has published its final reports and draft Implementing Technical Standards for public disclosures and supervisory reporting requirements under CRR II. The EU Capital Requirements Regulation implements the Basel Committee on Banking Supervision's Pillar 3 disclosure requirements, which require banks to disclose information about their risks and risk management procedures and policies. In 2018, the Basel Committee published updated Pillar 3 requirements. The revised CRR, published in June 2019, incorporates the revised Basel Committee disclosure standards and mandates the EBA to produce the draft ITS to ensure comparability of the disclosures made with international non-EU active banks.

    Read more.
  • European Banking Authority Publishes Amended Draft Technical Standards for Passport Notifications
    06/18/2020

    The European Banking Authority has published amending draft Regulatory Technical Standards and Implementing Technical Standards on passporting notifications under the fourth Capital Requirements Directive. CRD4 requires an EU bank wishing to establish a branch in another EU Member State to notify the national regulator of its home Member State of certain information. In the event of any changes in the information supplied, the relevant bank must notify the national regulators of both the home and host Member State at least one month prior to the change coming into effect. In 2014, the EBA produced RTS on the information to be provided to the national regulators in connection with the exercise of these passporting rights, and ITS on the forms, templates and procedures for such notifications.

    Read more.
  • European Banking Authority Extends Payments Moratoria Guidelines
    06/18/2020

    The European Banking Authority has extended the applicability of its Guidelines on legislative and non-legislative loan repayments in light of the ongoing effects of COVID-19. The Guidelines were originally published in April 2020 and stated that, where payment moratoria were based on national law or a private-sector initiative broadly applied by credit institutions in response to COVID-19, they would not be classified as forbearance or distressed restructuring measures. The Guidelines as originally published applied to moratoria applied before June, 30 2020. That deadline has now been extended to moratoria applied before September 30, 2020.
     
    View the EBA's updated statement on its Guidelines on payments moratoria.
     
    View details of the EBA's original statement on its Guidelines on payments moratoria.
  • European Banking Authority Publishes Peer Review of Deposit Guarantee Scheme Stress Test Results
    06/17/2020

    The European Banking Authority has published the results of its peer review of EU deposit guarantee schemes. The EU Deposit Guarantee Scheme Directive establishes requirements for EU DGSs, including that Member States conduct stress tests of their DGSs. Member States were required to report on their stress tests by July 3, 2019, and the EBA has based its peer review report on the results of the tests. The report is intended to assess the resilience of EU DGSs and identify good practices and areas for improvement.

    Read more.
  • UK Regulators Acknowledge European Systemic Risk Board Recommendation on Financial Institution Distributions
    06/08/2020

    The Bank of England and U.K. Prudential Regulation Authority have publicly acknowledged the ESRB's Recommendation on the restriction of distributions during COVID-19. The ESRB recommends that EU financial institutions refrain from making dividend distributions, entering into buy-backs of ordinary shares or creating obligations to pay variable remuneration to material risk takers where those actions reduce the quantity or quality of own funds at the EU group level and sub-consolidated or individual level. The BoE and PRA note that the Recommendation applies to U.K. authorities during the Brexit transition period.

    View the BoE and PRA's joint statement on the ESRB's Recommendation.

    View details of the ESRB's Recommendation.

    Details of other regulatory responses to COVID-19 are available on our COVID-19 Research Center.
  • European Systemic Risk Board Announces Further Actions to Combat Impact of COVID-19
    06/08/2020

    The European Systemic Risk Board has announced a series of further actions designed to combat the impact of COVID-19 on European financial markets. The actions relate to the five priority areas already identified by the ESRB as requiring particular focus in the context of the COVID-19 pandemic, as follows:
    • Implications for the financial system of guarantee schemes and other fiscal measures to protect the economy: the ESRB has published a Recommendation introducing minimum requirements for national monitoring of the financial stability implications of the various debt moratoria and guarantee schemes introduced by Member States to support economies through COVID-19 (Recommendation A); national regulators are also advised to regularly report information on these schemes to the ESRB in accordance with reporting templates to be published by the ESRB by June 30, 2020 (Recommendation B); national regulators implicated by the Recommendation should communicate the actions they have taken, or intend to take, in response to the Recommendation A by July 31, 2020 and Recommendation B by December 31, 2020;
    Read more.
  • UK Prudential Regulator Publishes Further Guidance on IFRS 9 and Capital Requirements
    06/04/2020

    The U.K. Prudential Regulation Authority has published a “Dear CEO” letter providing further guidance on IFRS 9 and capital requirements in the context of COVID-19. The PRA published a “Dear CEO” letter in March 2020, advising firms on the application of certain key concepts (including the definition of "default" in the Capital Requirements Regulation and expected credit loss accounting under IFRS 9). This guidance related in large part to payment holidays, many of which are now coming to an end. The PRA’s latest guidance therefore focuses on exits from those initial payment deferrals. 

    Read more.
  • EU Consultation on Proposed Capital Requirements of Non-Modellable Risks Under the Fundamental Review of the Trading Book
    06/04/2020

    The European Banking Authority has opened a consultation on proposed Regulatory Technical Standards on capital requirements of non-modellable risks under the Fundamental Review of the Trading Book. The Regulation amending CRR, which was finalized in June 2019, implements, among other things, the Basel III revised requirements to calculate own funds requirements for market risk (FRTB). It will apply directly across the EU from June 28, 2021. The consultation closes on September 4, 2020.

    Read more.
  • First Consultations on Proposed Technical Standards for New EU Investment Firm Prudential Regime
    06/04/2020

    The European Banking Authority has opened consultations on several draft technical standards required to implement the new prudential framework for investment firms. The Investment Firm Regulation and the Investment Firm Directive introduce a more tailored prudential regulatory regime for many EU investment firms that reflect the risks inherent in the diverse activities those firms undertake. It also aims to amend the prudential requirements imposed on certain investment firms to avoid the imposition of undue administrative burdens by removing those firms from the scope of the revised Capital Requirements Regulation and Capital Requirements Directive. Only the largest investment firms will be subject to, and need to obtain bank authorization under, CRD and CRR. The majority of both the IFR and IFD will apply from June 26, 2021. The EBA's consultations are on proposed technical standards that will supplement the IFR and IFD.

    Read more.
  • European Banking Authority Publishes Roadmap on Investment Firm Regulation and Directive Deliverables
    06/02/2020

    The European Banking Authority has published a new roadmap under the Investment Firm Regulation and the Investment Firm Directive. The IFR and IFD introduce a more tailored regulatory regime for many EU investment firms that reflects the risks inherent in the diverse activities those firms undertake. It also aims to amend the prudential requirements imposed on certain investment firms to avoid the imposition of undue administrative burdens by removing them from the scope of the revised Capital Requirements Regulation and Capital Requirements Directive. The majority of both the IFR and IFD will apply from June 26, 2021.

    The EBA's roadmap sets out the timing for the EBA to produce final versions of Regulatory Technical Standards, Implementing Technical Standards, Guidelines and Reports. The EBA must also establish a list of capital instruments and a database of administrative sanctions. The mandates will be delivered in four phases, starting from December 2020, and cover:
    • Thresholds and criteria for investment firms to be subject to the CRR;
    • Capital requirements and composition;
    • Reporting and disclosure;
    • Remuneration and governance;
    • Supervisory convergence and supervisory review and Pillar 2; and
    • Environmental, social and governance exposures.

    View the EBA's IFR and IFD Roadmap.

    View details of the IFR and IFD.
  • UK Prudential Regulator Publishes Statement on Electronic Signatures
    06/02/2020

    The U.K. Prudential Regulation Authority has published a statement on the use of electronic signatures in the context of remote working arrangements during the COVID-19 pandemic. The PRA has stated that, in the absence of specific legal provisions to the contrary, firms are entitled to use electronic signatures to submit forms and other regulatory documents to the PRA. The advice does not extend to the use of electronic signatures more generally.

    Read more.
  • European Banking Authority Publishes Guidelines on COVID-19 Exposures Reporting
    06/02/2020

    The European Banking Authority has published guidelines on bank reporting and disclosure of exposures subject to measures designed to protect borrowers from the economic impact of the COVID-19 crisis. The measures include payment moratoria, which are exempt from prudential treatment as forbearance measures and therefore not subject to the usual supervisory reporting framework. Public guarantee schemes introduced in many Member States are also not captured by existing reporting frameworks. This has created a data gap, which has implications for the risk-analysis of individual institutions and for overall financial stability in the EU.

    Read more.
  • European Banking Authority Reports on Impact of COVID-19 on EU Banking Sector
    05/25/2020

    The European Banking Authority has published a report on the impact of the COVID-19 pandemic on the financial health of EU banks. The report is mostly based on supervisory data submitted by banks in Q4 2019 and Q1 2020. The EBA's report confirms that banks have activated their contingency plans in response to the crisis, however, their operational capabilities remain under pressure. In addition, some banks have used parts of their capital and liquidity buffers and are expected to continue to do so in the coming months. The report also confirms that the asset quality of banks is likely to continue deteriorating as non-performing loan volumes increase.

    View the EBA's report.

    Details of other regulatory responses to COVID-19 are available on our COVID-19 Research Center.
  • UK Prudential Regulator Publishes Guidance on Treatment of COVID-19 Payment Holidays
    05/22/2020

    The U.K. Prudential Regulation Authority has published a new statement on the application of regulatory capital and IFRS 9 requirements to payment holidays granted or extended to address COVID-19. The statement follows the announcements made by the PRA, the U.K. Financial Conduct Authority and the U.K. Financial Reporting Council in March 2020 on financial reporting and audit requirements in light of COVID-19. Those announcements included a letter from the PRA to banks on the application of IFRS 9 (including expected credit loss accounting) to loan arrangements during the pandemic.

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  • European Central Bank Consults on Climate-Related and Environmental Risks Guide for Banks
    05/20/2020

    The European Central Bank has launched a consultation on its proposed guide on how Eurozone banks should manage and disclose climate-related and environmental risks in accordance with the EU prudential framework. The guide is not legally binding, but aims to raise awareness within the Eurozone banking industry of climate-related and environmental risks and to improve the management of such risks. The consultation closes on September 25, 2020.
     
    The guide applies to significant institutions directly supervised by the ECB, although national regulators in Eurozone member states are expected to apply the guide’s expectations proportionately when supervising less significant Eurozone banks. It should be read in the context of the wider EU bank prudential framework, with particular reference to the Capital Requirements Regulation, the Capital Requirements Directive and relevant ECB guidelines. The guide includes an overview of the nature and characteristics of climate-related and environmental risks as well as the ECB’s supervisory expectations of banks’ business models and strategies, governance and risk appetite and integration of climate-related and environment risks into their credit, operational, market and liquidity risk management frameworks.
     
    View the ECB's consultation on its Climate-Related and Environmental Risks Guide.
  • EU Single Resolution Board Publishes Revised MREL Policy
    05/20/2020

    The EU Single Resolution Board has published a revised policy on minimum requirements for own funds and eligible liabilities. The policy is applicable to Eurozone banks and reflects the changes made in 2019 to the EU Banking Package (which includes the Bank Recovery and Resolution Directive, the Capital Requirements Regulation and the Capital Requirements Directive).

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  • EU Single Resolution Board Publishes Revised MREL Policy
    05/20/2020

    The EU Single Resolution Board has published a revised policy on minimum requirements for own funds and eligible liabilities. The policy is applicable to Eurozone banks and reflects the changes made in 2019 to the EU Banking Package (which includes the Bank Recovery and Resolution Directive, the Capital Requirements Regulation and the Capital Requirements Directive). 

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  • UK Regulator Confirms Policy on Credit Risk
    05/14/2020

    The U.K. Prudential Regulation Authority has published a Policy Statement on its approach to implementing the European Banking Authority's Technical Standards and Guidelines on Probability of Default estimation, Loss Given Default estimation and the treatment of defaulted exposures in the Internal Ratings Based approach to credit risk. The EBA's regulatory products are designed to address concerns about the variability of own funds requirements arising from the internal models that firms use to calculate their minimum credit risk capital requirements under the Capital Requirements Regulation. The Policy Statement is relevant to U.K. banks, building societies and PRA-designated U.K. investment firms.

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