June 07, 2019

EU published the finalized fifth Capital Requirements Directive CRD V (EU Directive 2019/878) in the Official Journal of the European Union. Directive 2019/878 of the European Parliament and of the Council amends the fourth Capital Requirements Directive, or CRD IV (Directive 2013/36/EU). The amendments to CRD IV relate to exempted entities, financial holding companies, mixed financial holding companies, remuneration, supervisory measures and powers, and capital conservation measures. CRD V shall enter into force on the twentieth day following that of their publication in the Official Journal of the European Union. Directive 2019/878 specifies that the members states shall adopt and publish the measures necessary to comply with CRD V by December 28, 2019, with certain exceptions, as specified in the Article 3 (titled "Transposition") of CRD V.

  • The information to be provided by a third party seeking authorization to assess the compliance of securitizations with the STS criteria provided for in Securitization Regulation should enable a competent authority to evaluate whether and, to what extent, the applicant meets the conditions of Article 28(1) of the Securitization Regulation. An authorized third party will be able to provide STS assessment services across EU. The application for authorization should, therefore, comprehensively identify that third party, any group to which this third party belongs, and the scope of its activities. With regard to the STS assessment services to be provided, the application should include the envisaged scope of the services to be provided as well as their geographical scope, particularly the following:

    • To facilitate effective use of the authorization resources of a competent authority, each application for authorization should include a table clearly identifying each submitted document and its relevance to the conditions that must be met for authorization.
    • To enable the competent authority to assess whether the fees charged by the third party are non-discriminatory and are sufficient and appropriate to cover the costs for the provision of the STS assessment services, as required by Article 28(1)(a) of Securitization Regulation, the third party should provide comprehensive information on pricing policies, pricing criteria, fee structures, and fee schedules.
    • To enable the competent authority to assess whether the third party is able to ensure the integrity and independence of the STS assessment process, that third party should provide information on the structure of those internal controls. Furthermore, the third party should provide comprehensive information on the composition of the management body and on the qualifications and repute of each of its members.
    • To enable the competent authority to assess whether the third party has sufficient operational safeguards and internal processes to assess STS compliance, the third party should provide information on its procedures relating to the required qualification of its staff. The third party should also demonstrate that its STS assessment methodology is sensitive to the type of securitization and that specifies separate procedures and safeguards for asset-backed commercial paper (ABCP) transactions/programs and non-ABCP securitizations.

    The use of outsourcing arrangements and a reliance on the use of external experts can raise concerns about the robustness of operational safeguards and internal processes. The application should, therefore, contain specific information about the nature and scope of any such outsourcing arrangements or use of external experts as well as the third party's governance over those arrangements. Regulation (EU) 2019/885 is based on the draft regulatory technical standards submitted by ESMA to EC.

     

    Related Links

    Effective Date: June 18, 2019

    Press Release
  • Proposed Rule 1
  • Proposed Rule 2
  • Proposed Rule 3
  • Presentation on Regulatory Framework (PDF)
  • Presentation on Resolution Plan Rules (PDF)
  • CRD V aims to address issues raised in relation to the provisions of CRD IV that proved not to be sufficiently clear and have, therefore, been subject to divergent interpretations or that have been found to be overly burdensome for certain institutions. It also contains adjustments to CRD IV that are necessary following either the adoption of other relevant Union legal acts or the changes proposed in parallel to the Capital Requirements Regulation (CRR). Finally, the amendments better align the current regulatory framework to international developments to promote consistency and comparability among jurisdictions.

    The member states shall adopt and publish, by December 28, 2020, the measures necessary to comply with this Directive and shall immediately inform the Commission thereof. They shall apply those measures from December 29, 2020. However, the provisions necessary to comply with the amendments set out in point (21) and points (29)(a), (b), and (c) of Article 1 of CRD V as regards Article 84 and Article 98(5) and (5a) of CRD IV shall apply from June 28, 2021 and the provisions necessary to comply with the amendments set out in points (52) and (53) of Article 1 of CRD V as regards Articles 141b, 141c, and 142(1) of CRD IV shall apply from January 01, 2022.

     

    Related Links

    Effective Date: June 27, 2019

    Keywords: Europe, EU, Banking, CRD IV, CRD V, Systemic Risk, CRR2, Regulatory Capital, Basel III, European Council, European Parliament

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