Featured Product

    EBA Seeks Views on Proportionality Assessment Methodology

    July 22, 2021

    The European Banking Authority (EBA) is seeking preliminary input on standardization of the proportionality assessment methodology for credit institutions and investment firms. The published discussion paper gives an opportunity to the industry to comment on the proposed classifications of institutions as well as on the metrics used for proportionality assessment. Feedback period for the discussion paper ends on October 22, 2021, as mentioned in the EBA press release.

    EBA developed a proportionality assessment methodology to set a high-level framework for assessing the need for applying proportional treatment of certain institutions in the relevant EBA Regulation. With this methodology, EBA intends to provide policy experts with a reference point that will assist them in the development of impact assessments that provides evidence on the need for applying proportional treatment of institutions. The proportionality assessment methodology entails the following two steps:

    • Definition of classifications. The first step proposes three categorizations for credit institutions and a categorization for investment firms. Although all categorizations comprise a different mixture of size and risk profile discriminatory criteria, the discrimination according to size is more predominant in two categorizations of credit institutions (Classification I and Classification III), while the business model categorization (Classification II) addresses the risk profile of credit institutions as indicated by the business model (based on the stock of exposures), international activity, and systemic importance. Finally, the categorization of investment firms (Classification IV) constitutes a well-balanced mixture of size and risk profile discriminatory factors.
    • Definition of metrics for proportionality assessment. This step aims to suggest a set of predefined metrics to evaluate the impact of regulations on institutions that could result in a proportional application of certain regulations. The predefined metrics suggested in the discussion paper evaluate the impact on regulatory capital and liquidity, impact on the cost structure of credit institutions and investment firms, and impact on the wider economy, including impact on lending and impact on stakeholders. As far as possible, EBA will use already existing data from its database of supervisory reporting without requesting additional input from competent authorities or institutions. However, for new pieces of regulation additional information requests are often the only viable source to gather reliable data. In case of need for additional information requests, EBA will evaluate whether there is need for a quantitative data collection, a qualitative questionnaire, or a combination of these tools for the conduct of the assessment. Depending on the regulation in question, additional tailor-made metrics could be useful and even necessary to either complement or replace the predefined metrics.

    EBA already uses part of the proposed classifications in its work involved with the Basel III monitoring exercise—namely, Classification I and Classification II. However, EBA identified the need to expand the classifications to align with the classifications provided by the EU Regulation, such as the revised Capital Requirements Regulation (Classification III) and the Investment Firms Regulation (Classification IV). EBA intends to standardize the classifications and metrics for proportionality assessment, in an effort to enhance common understanding on how proportional treatment in the EBA Regulation is being assessed.


    Related Links

    Comment Due Date: October 22, 2021

    Keywords: Europe, EU, Banking, Securities, Investment Firms, CRR2, IFR, Proportionality, Basel, Reporting, Regulatory Capital, EBA

    Featured Experts
    Related Articles

    ESAs Issue Multiple Regulatory Updates for Financial Sector Entities

    The three European Supervisory Authorities (ESAs) issued a letter to inform about delay in the Sustainable Finance Disclosure Regulation (SFDR) mandate, along with a Call for Evidence on greenwashing practices.

    November 15, 2022 WebPage Regulatory News

    ISSB Makes Announcements at COP27; IASB to Propose IFRS 9 Amendments

    The International Sustainability Standards Board (ISSB) of the IFRS Foundations made several announcements at COP27 and with respect to its work on the sustainability standards.

    November 10, 2022 WebPage Regulatory News

    IOSCO Prioritizes Green Disclosures, Greenwashing, and Carbon Markets

    The International Organization for Securities Commissions (IOSCO), at COP27, outlined the regulatory priorities for sustainability disclosures, mitigation of greenwashing, and promotion of integrity in carbon markets.

    November 09, 2022 WebPage Regulatory News

    EBA Finalizes Methodology for Stress Tests, Issues Other Updates

    The European Banking Authority (EBA) issued a statement in the context of COP27, clarified the operationalization of intermediate EU parent undertakings (IPUs) of third-country groups

    November 09, 2022 WebPage Regulatory News

    OSFI Sets Out Work Priorities and Reporting Updates for Banks

    The Office of the Superintendent of Financial Institutions (OSFI) published an annual report on its activities, a report on forward-looking work.

    November 07, 2022 WebPage Regulatory News

    APRA Finalizes Changes to Capital Framework, Issues Other Updates

    The Australian Prudential Regulation Authority (APRA) finalized amendments to the capital framework, announced a review of the prudential framework for groups.

    November 03, 2022 WebPage Regulatory News

    BIS Hub and Central Banks Conduct CBDC and DeFI Pilots

    The Bank for International Settlements (BIS) Innovation Hubs and several central banks are working together on various central bank digital currency (CBDC) pilots.

    November 03, 2022 WebPage Regulatory News

    ECB Sets Deadline for Banks to Meet Its Climate Risk Expectations

    The European Central Bank (ECB) published the results of its thematic review, which shows that banks are still far from adequately managing climate and environmental risks.

    November 02, 2022 WebPage Regulatory News

    ESAs, ECB, & EC Issue Multiple Regulatory Updates for Financial Sector

    Among its recent publications, the European Banking Authority (EBA) published the final standards and guidelines on interest rate risk arising from non-trading book activities (IRRBB)

    October 31, 2022 WebPage Regulatory News

    EC Adopts Final Rules Under CRR, BRRD, and Crowdfunding Regulation

    The European Commission (EC) recently adopted regulations with respect to the calculation of own funds requirements for market risk, the prudential treatment of global systemically important institutions (G-SIIs)

    October 26, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8582