EBA published an opinion in response to the EC intention to amend the final draft regulatory technical standards on assigning risk-weights to specialized lending exposures, before endorsing these standards. The regulatory standards have been developed on the basis of Article 153 (9) of the Capital Requirements Regulation, or CRR (575/2013). EBA is of the view that the proposed changes, despite their substantive nature, do not alter the draft technical standards in a significant manner, as they still maintain a good balance between the flexibility and risk-sensitivity required for the internal ratings-based, or IRB, approach and the need for a harmonized regulatory framework.
In its opinion, EBA identifies three substantive changes introduced by EC. The first two changes allow a certain flexibility in relation to the incorporation of risk drivers. The first change introduces the possibility for institutions to consider a sub-factor or a sub-factor component as irrelevant for certain types of specialized lending exposures. The second change allows institutions to consider additional relevant information (or an additional risk driver) for a type of specialized lending exposures, jointly with the sub-factor that most closely corresponds to the additional risk driver. EBA is of the view that the flexibility introduced through these two substantive changes only marginally reduces the harmonization across institutions since such factors should be applied consistently for the same type of exposure and duly justified and documented.
The third substantive change simplifies the rules on overlapping criteria at the level of the sub-factor or of the sub-factor components. EBA is of the view that this change does not significantly jeopardize the risk-sensitivity of the approach and has the merit of simplifying the technical standards.
Keywords: Europe, EU, Banking, Risk Weight, CRR, Lending Exposures, Opinion, Regulatory Technical Standards, IRB Approach, Credit Risk, Regulatory Capital, EC, EBA
PRA published the policy statement PS8/21, which contains the final supervisory statement SS3/21 on the PRA approach to supervision of the new and growing non-systemic banks in UK.
EBA published a report that sets out the final draft regulatory technical standards specifying the conditions according to which consolidation shall be carried out in line with Article 18 of the Capital Requirements Regulation (CRR).
EBA updated the list of other systemically important institutions (O-SIIs) in EU.
BCBS published two reports that discuss transmission channels of climate-related risks to the banking system and the measurement methodologies of climate-related financial risks.
UK Authorities (FCA and PRA) welcomed the findings of FSB peer review on the implementation of financial sector remuneration reforms in the UK.
PRA and FCA jointly issued a letter that highlights risks associated with the increasing volumes of deposits that are placed with banks and building societies via deposit aggregators and how to mitigate these risks.
MFSA announced that amendments to the Banking Act, Subsidiary Legislation, and Banking Rules will be issued in the coming months, to transpose the Capital Requirements Directive (CRD5) into the national regulatory framework.
EC finalized the Delegated Regulation 2021/598 that supplements the Capital Requirements Regulation (CRR or 575/2013) and lays out the regulatory technical standards for assigning risk-weights to specialized lending exposures.
OSFI launched a consultation to explore ways to enhance the OSFI assurance over capital, leverage, and liquidity returns for banks and insurers, given the increasing complexity arising from the evolving regulatory reporting framework due to IFRS 17 (Insurance Contracts) standard and Basel III reforms.
ECB published results of the benchmarking analysis of the recovery plan cycle for 2019.