February 11, 2019

ESRB adopted a recommendation (ESRB/2018/8) that seeks to ensure that the 5% large exposure (LE) limit of France applies not only to exposures of systemically important institutions (SIIs) authorized in France, but also to exposures of SIIs authorized in other EU member states. It thereby enhances the effectiveness and consistency of macro-prudential policy in the EU and contributes to a level playing field in the Single Market. The Recommendation ESRB/2018/8 was published in the Official Journal of the European Union on February 01, 2019. The measure applies from July 01, 2018 to SIIs authorized in France at the highest level of consolidation of their banking prudential perimeter.

This large exposure limit is for exposures of SIIs to highly indebted large non-financial corporations having their registered office in France. After considering the cross-border implications of this measure, the General Board of ESRB decided on December 05, 2018 to include the French measure in the list of macro-prudential policy measures to be reciprocated under Recommendation ESRB/2015/2. Relevant authorities are recommended to adopt reciprocating measures no later than six months following the publication of Recommendation ESRB/2018/8 in the Official Journal of the European Union. If the same macro-prudential policy measure is not available in their jurisdiction, relevant authorities are recommended to apply a macro-prudential policy measure available in their jurisdiction that has the most equivalent effect and to adopt the equivalent measure after consulting ESRB.

Upon the reciprocation of this measure, SIIs will have to apply a 5% large exposure limit to their exposures to any highly indebted non-financial corporation or group of connected non-financial corporations residing in France to which their original exposure is equal to or exceeds EUR 300 million. An NFC is considered highly indebted if it has, at its highest level of consolidation, a leverage ratio greater than 100% and a financial charges coverage ratio below 3. Non-financial corporations that do not have their registered office in France and that are not a subsidiary or an economically dependent entity of, or directly or indirectly controlled by, a non-financial corporation having its registered office in France fall outside the scope of the measure.

 

Related Links

Effective Date (recommended): August 01, 2019

Keywords: Europe, EU, France, Banking, Large Exposures, Recommendation ESRB/2018/8, SII, Systemic Risk, Macro-prudential Policy, ESRB

Related Articles
News

FSB to Evaluate Effects of Too-Big-To-Fail Reforms for Systemic Banks

FSB is seeking feedback as part of its evaluation of the effects of the too-big-to-fail reforms for banks.

May 23, 2019 WebPage Regulatory News
News

APRA Releases Minor Changes to Reporting Standards on SA-CCR for Banks

APRA released minor changes to the three reporting standards for the standardized approach for measuring counterparty credit risk exposures (SA-CCR).

May 22, 2019 WebPage Regulatory News
News

APRA on Industry Self-Assessments into Governance and Accountability

APRA released an information paper analyzing the self-assessments performed by 36 of the country’s largest banks, insurers, and superannuation licensees in response to the final report on the Prudential Inquiry into the Commonwealth Bank of Australia (CBA).

May 22, 2019 WebPage Regulatory News
News

PRA Consults on Maintenance of TMTP Under Solvency II

PRA published a consultation paper (CP11/19) that sets out its approach to update supervisory statement (SS6/16) on maintenance of the transitional measure on technical provisions (TMTP) under Solvency II.

May 22, 2019 WebPage Regulatory News
News

APRA Proposes to Amend Guidance on Residential Mortgage Lending

APRA is consulting on revisions to the prudential practice guide APG 223 on residential mortgage lending in Australia.

May 21, 2019 WebPage Regulatory News
News

IASB Proposes Improvements to IFRS 9 and IFRS 16

IASB published the exposure draft ED 2019/2 that proposes amendments to four IFRS standards, including IFRS 9 on Financial Instruments and IFRS 16 on Leases.

May 21, 2019 WebPage Regulatory News
News

Denis Beau of BDF on Supervisory Priorities for Climate-Change Risks

Denis Beau, the First Deputy Governor of BDF, delivered opening remarks at the BCBS-BSCEE-FSI High-level Meeting for Europe on banking supervision.

May 21, 2019 WebPage Regulatory News
News

ISDA CDM to be Deployed for UK Digital Regulatory Reporting Pilot

ISDA announced deployment of the ISDA Common Domain Model (ISDA CDM 2.0) to support the UK FCA, BoE, and participating financial institutions in testing phase two of the Digital Regulatory Reporting pilot for derivatives.

May 21, 2019 WebPage Regulatory News
News

MAS to Consolidate Regulation of Merchant Banks Under Banking Act

MAS published a consultation paper that proposes to consolidate the regulation of merchant banks under the Banking Act and to move merchant banks to a licensing regime under the MAS Act.

May 21, 2019 WebPage Regulatory News
News

ESAs Amend Technical Standards on Mapping of ECAIs Under CRR

ESAs published a second amendment to the implementing technical standards on the mapping of credit assessments of External Credit Assessment Institutions (ECAIs) for credit risk under the Capital Requirements Regulation (CRR).

May 20, 2019 WebPage Regulatory News
RESULTS 1 - 10 OF 3118