EIOPA is re-consulting on the new amendments to the implementing technical standards on the mapping of External Credit Assessment Institutions (ECAIs) for credit risk. In October 2018, ESAs had launched a consultation to amend the Implementing Regulations on the mapping of credit assessments of ECAIs. The amendments were necessary to reflect the outcomes of a monitoring exercise on the adequacy of existing mappings, namely changes to the Credit Quality Steps (CQS) allocation for two ECAIs and the introduction of new credit rating scales for ten ECAIs. This re-consultation is required for the new amendments linked with Solvency II. The consultation period ends on July 10, 2019.
The re-consultation by EIOPA is required for the following two reasons:
- The approach chosen in October 2018 for the respondents to share their views related to the amendments linked with Solvency Capital Requirement was not fully functional.
- References to the Capital Requirement Regulation (CRR) and elements in the mapping table required an update to take into account the latest assessments.
These draft implementing technical standards specify the allocations that should be used for determining the credit risk for the purpose of calculating the Solvency Capital Requirement with the standard formula. Solvency II allows the use of external credit assessments of ECAIs for purpose of calculating technical provisions and the Solvency Capital Requirement. This provision represents an element of risk-sensitivity and prudential soundness of the credit risk rules. Under the Solvency II Delegated Regulation, external credit assessments can only be used by insurance and reinsurance undertakings if they have been issued or endorsed by an ECAI in accordance with the CRA Regulation.
Comment Due Date: July 10, 2019
Keywords: Europe, EU, Insurance, Securities, Solvency II, ECAI, Credit Risk, Standardized Approach, CRA, CRA Regulation, ESAs, EIOPA
Previous ArticleSAMA Publishes Financial Entities Ethical Red Teaming Framework
EBA published a report analyzing the impact of the unwind mechanism of the liquidity coverage ratio (LCR) for a sample of European banks over a three-year period, from the end of 2016 to the first quarter of 2020.
In response to questions from a member of the European Parliament, the ECB President Christine Lagarde issued a letter clarifying the possibility of amending the AnaCredit Regulation and making targeted longer-term refinancing operations (TLTROs) dependent on the climate-related impact of bank loans.
IASB started the post-implementation review of the classification and measurement requirements in IFRS 9 on financial instruments and added the review as a project to its work plan.
FSB published a report that examines progress in implementing policy measures to enhance the resolvability of systemically important financial institutions.
EBA published a report on the benchmarking of national loan enforcement frameworks across 27 EU member states, in response to the call for advice from EC.
FSB published a letter from its Chair Randal K. Quarles, along with two reports exploring various aspects of the market turmoil resulting from the COVID-19 event.
RBNZ launched a consultation on the details for implementing the final Capital Review decisions announced in December 2019.
The Trustees of the IFRS Foundation, which are responsible for the governance and oversight of IASB, have announced the appointment of Dr. Andreas Barckow as the IASB Chair, effective July 2021.
HKMA issued a letter to consult the banking industry on a full set of proposed draft amendments to the Banking (Capital) Rules for implementing the Basel standard on capital requirements for banks’ equity investments in funds in Hong Kong.
ESRB published an opinion assessing the decision of Swedish Financial Supervisory Authority (FSA) to extend the application period of a stricter measure for residential mortgage lending, in accordance with Article 458 of the Capital Requirements Regulation (CRR).