ESRB Issues Recommendation on Reciprocation of Macroprudential Actions
The General Board of ESRB has decided to exclude an Estonian macro-prudential measure related to the systemic risk buffer from the list of macro-prudential policy measures that are recommended to be reciprocated under the Recommendation ESRB/2015/2. In addition, ESRB has amended text related to the reciprocation of certain macro-prudential measures from Belgium, Finland, France, and Sweden. In this context, the Recommendation ESRB/2020/9, which amends Recommendation ESRB/2015/2, has been published in the Official Journal of the European Union.
On June 24, 2016, Recommendation ESRB/2015/2 (pursuant to the ESRB Recommendation ESRB/2016/4) was amended to recommend the reciprocation of the 1% systemic risk buffer rate applied by the Bank of Estonia (Eesti Pank) to the domestic exposures of all credit institutions authorized in Estonia. On April 06, 2020, Eesti Pank decided to reduce the level of the systemic risk buffer rate to 0%, with effect from May 01, 2020. In response to Eesti Pank’s decision of April 06, 2020, the General Board of ESRB has decided to exclude the Estonian measure from the list of macro-prudential policy measures that are recommended to be reciprocated under Recommendation ESRB/2015/2. Therefore, Recommendation ESRB/2015/2 is being amended accordingly. Another amendment involves the replacement of the Annex of Recommendation ESRB/2015/2 by the Annex of Recommendation ESRB/2020/9. Moreover, Section 1, sub-recommendation C(1), of Recommendation ESRB/2015/2 is being replaced by text that includes the following:
- Belgium—A risk-weight add-on for retail exposures secured by residential immovable property located in Belgium, applied (in accordance with the Capital Requirements Regulation) to credit institutions authorized in Belgium, using the Internal Ratings-Based, or IRB, Approach for calculating regulatory capital requirements and composed of a flat risk-weight add-on of 5 percentage points and a proportionate risk-weight add-on consisting of 33% of the exposure-weighted average of the risk-weights applied to the portfolio of retail exposures secured by residential immovable property located in Belgium
- Finland—A 15% floor for the average risk-weight on residential mortgage loans secured by a mortgage on housing units in Finland applied to credit institutions authorized in Finland, using the IRB Approach for calculating regulatory capital requirements
- France—A tightening of the large exposure limit applicable to exposures to highly indebted large non-financial corporations having their registered office in France to 5% of eligible capital, applied to global systemically important institutions (G-SIIs) and other systemically important institutions (O-SIIs) at the highest level of consolidation of their banking prudential perimeter
- Sweden—A credit institution-specific floor of 25% for the exposure-weighted average of the risk weights applied to the portfolio of retail exposures to obligors residing in Sweden secured by immovable property in accordance with CRR to credit institutions authorized in Sweden using the IRB Approach for calculating regulatory capital requirements
The framework on voluntary reciprocity for macro-prudential policy measures, which is set out in Recommendation ESRB/2015/2, aims to ensure that all exposure-based macro-prudential policy measures activated in one member state are reciprocated in the other member states.
Related Links
Keywords: Europe, EU, Estonia, Belgium, Finland, France, Sweden, Banking, Systemic Risk, Systemic Risk Buffer, ESRB 2015/2, Reciprocity, Recommendation, ESRB 2020/9, Macro-Prudential Policy, ESRB
Featured Experts
Blake Coules
Across 35 years in banking, Blake has gained deep insights into the inner working of this sector. Over the last two decades, Blake has been an Operating Committee member, leading teams and executing strategies in Credit and Enterprise Risk as well as Line of Business. His focus over this time has been primarily Commercial/Corporate with particular emphasis on CRE. Blake has spent most of his career with large and mid-size banks. Blake joined Moody’s Analytics in 2021 after leading the transformation of the credit approval and reporting process at a $25 billion bank.
Previous Article
EBA Guidelines on Treatment of Structural Foreign Exchange Under CRRRelated Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.
