June 07, 2019

EU published the final Capital Requirements Regulation II or CRR II (EU Regulation 2019/876) in the Official Journal of the European Union. Regulation 2019/876 of the European Parliament and of the Council amends Capital Requirements Regulation or CRR (Regulation No 575/2013). The amendments in the regulation cover the leverage ratio, the net stable funding ratio, requirements for own funds and eligible liabilities, counterparty credit risk, market risk, exposures to central counterparties, exposures to collective investment undertakings, large exposures, reporting and disclosure requirements, and the European Market Infrastructure Regulation (EMIR/EU Regulation No 648/2012). CRR II shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union. Regulation 2019/876 shall largely apply from June 28, 2021 with certain exceptions.

  • 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)
  • The provisions of CRR II are in line with the internationally agreed standards and ensure the continued equivalence of Capital Requirements Directive (CRD IV) and CRR with Basel III framework. The existing risk-reduction measures and, in particular, reporting and disclosure requirements have also been improved to ensure that they can be applied in a more proportionate way and that they do not create an excessive compliance burden, especially for smaller and less complex institutions. Article 1 on the scope of the regulation states that Regulation 2019/876 lays down uniform rules concerning general prudential requirements that institutions, financial holding companies, and mixed financial holding companies supervised under CRD IV shall comply with in relation to the following items:

    (a)  Own funds requirements relating to entirely quantifiable, uniform and standardized elements of credit risk, market risk, operational risk, settlement risk and leverage

    (b)  Requirements limiting large exposures

    (c)  Liquidity requirements relating to entirely quantifiable, uniform, and standardized elements of liquidity risk

    (d)  Reporting requirements related to points (a), (b) and (c)

    (e)  Public disclosure requirements

    CRR II lays down uniform rules concerning the own funds and eligible liabilities requirements that resolution entities that are global systemically important institutions (G-SIIs) or part of G-SIIs and material subsidiaries of non-EU G-SIIs shall comply with. CRR II does not govern publication requirements for competent authorities in the field of prudential regulation and supervision of institutions, as set out in CRD IV.

     

    Related Links

    Effective Date: June 27, 2019

    Keywords: Europe, EU, Banking, CRR 2, Credit Risk, Market Risk, Basel III, NSFR, LCR, TLAC, CRD IV, CRR, Reporting, European Council, European Parliament

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