Featured Product

    EBA Issues Guidelines on Approach to 2020 SREP in Light of Pandemic

    July 23, 2020

    EBA published guidelines for the pragmatic supervisory review and evaluation process (SREP) for 2020, in light of the COVID-19 pandemic. The guidelines have been published following the publication of an EBA statement, in April 2020, on additional supervisory measures in relation to the COVID-19 pandemic. These guidelines complement the SREP guidelines (EBA/GL/2014/13), are addressed to competent authorities, and aim to demonstrate how flexibility and pragmatism could be exercised in relation to the SREP framework in the context of this crisis. The guidelines establish a special procedure for SREP for 2020 and will apply from July 23, 2020.

    The risk‐driven approach put forward by these guidelines builds on the existing requirements of the Capital Requirements Directive and the SREP guidelines and adapts them to the exceptional circumstances of the COVID‐19 pandemic; this approach ensures the exercise of supervisory judgment to the greatest possible extent. These guidelines focus on the key aspects of SREP, such as the pragmatic SREP, the overall SREP assessment and scoring, the supervisory measures, and the conduct of SREP in cross‐border context. In terms of the supervisory measures applied in the 2020 cycle, the guidelines express a preference for qualitative measures in the first instance. Due to pragmatic nature of the 2020 SREP, Pillar 2 requirements could remain stable, if it is appropriate, and should be met by the institution at all times.

    The guidelines ensure the possibility for competent authorities to leave Pillar 2 guidance stable in 2020, if so warranted by the current uncertainties. Similar to the capital buffers that are designed to absorb losses and ensure continued lending to the economy during a downturn, the usability of the Pillar 2 guidance is important to ensure that institutions can provide the necessary support to households and the corporate sector. These guidelines acknowledge the usability of the Pillar 2 guidance in the current circumstances and provide for an enhanced supervisory follow‐up to ensure eventual restoration. Regardless of the periodic SREP assessment, competent authorities are encouraged to apply supervisory measures, where needed, to address immediate concerns arising from the continuous assessment of risks. 

    According to Article 16(3) of Regulation 1093/2010, competent authorities must notify EBA whether they comply or intend to comply with these guidelines, along with the reasons for non‐compliance (in case of non-compliance), by September 25, 2020. In the absence of notification by this deadline, EBA will consider the competent authority to be non‐compliant with these guidelines. Competent authorities may continue to apply the SREP guidelines as they currently stand, if they wish to do so. However, there is a need to ensure that competent authorities have the option to apply instead for the alternative specific process for the 2020 exercise, which may be necessary in response to the COVID‐19 pandemic and is set out in a harmonized manner in these guidelines. Due to the urgency of the matter and the limited focus of these guidelines on COVID‐19 pandemic‐related features as well as the continued validity of the SREP guidelines as they stand, EBA decided not to carry out public consultations or a cost–benefit analysis.

     

    Related Links

    Keywords: Europe, EU, Banking, COVID-19, SREP, Pillar 2, Cross-Border, Capital Buffer, Risk Assessment, Credit Risk, Liquidity Risk, CRD, EBA

    Featured Experts
    Related Articles
    News

    EBA Issues Erratum for Phase 2 Package of Reporting Framework 3.0

    EBA published an erratum for the technical package on phase 2 of the reporting framework 3.0.

    April 08, 2021 WebPage Regulatory News
    News

    EBA Updates Lists of Entities for Use in Capital Calculations under SA

    EBA published an erratum for the technical package on phase 2 of the reporting framework 3.0.

    April 08, 2021 WebPage Regulatory News
    News

    MAS Amends Notice on Related Party Transactions of Banks

    MAS amended Notice 643A that addresses requirements for banks to prepare statements of exposures and credit facilities to related concerns or parties.

    April 08, 2021 WebPage Regulatory News
    News

    ECB Amends Guideline on Euro Short-Term Rate

    ECB has published, in the Official Journal of the European Union, the Guideline 2021/565 on the euro short-term rate (€STR) and this guideline amends the previous ECB Guideline 2019/1265.

    April 07, 2021 WebPage Regulatory News
    News

    EBA Consults on Standards Related to FRTB-SA

    EBA launched a consultation on the draft regulatory technical standards on the list of countries with an advanced economy for calculating the equity risk under the alternative standardized approach (FRTB-SA).

    April 07, 2021 WebPage Regulatory News
    News

    PRA Proposes Rules Related to IRB Approach for Credit Risk

    PRA is proposing, via CP7/21, the approach to implementing new requirements related to the specification of the nature, severity, and duration of an economic downturn in the internal ratings-based (IRB) approach to credit risk.

    April 07, 2021 WebPage Regulatory News
    News

    BoE Outlines Regulatory Treatment of Recovery Loan Scheme of UK

    The UK government launched the Recovery Loan Scheme (RLS) as part of its continued COVID-19 support for UK businesses, as announced by HM Treasury on March 03, 2021.

    April 06, 2021 WebPage Regulatory News
    News

    FSB Addresses G20 on COVID Measures, TBTF Reforms, and Climate Risks

    FSB published a letter, from its Chair Randal K. Quarles, to the G20 Finance Ministers and Central Bank Governors, ahead of their virtual meeting on April 07, 2021.

    April 06, 2021 WebPage Regulatory News
    News

    OSFI Unwinds Temporary Increase to Covered Bond Limit for Banks

    OSFI issued a letter to the deposit-taking institutions issuing covered bonds and announced the unwinding of the temporary increase to the covered bond limit for deposit-taking institutions, effective immediately.

    April 06, 2021 WebPage Regulatory News
    News

    EU Amends CRR and Securitization Regulation in Response to Pandemic

    To support recovery from the COVID-19 crisis, EU has published two regulations to amend the securitization framework, as set out in the Securitization Regulation (2017/2402) and the Capital Requirements Regulation or CRR (575/2013).

    April 06, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6826