EBA published the annual report for 2019. The report provides a detailed account of the EBA achievements in the past year and anticipates the key areas of focus in the coming year. The key deliverables of EBA are in the areas of deployment of the risk reduction package, integration of reporting framework, various prudential and technical standards for banks and investment firms, operational framework for resolution, integration of environment, social, and governance (ESG) risks, and identifying policy actions to facilitate use of regtech and suptech. From 2020 onward, EBA will collect data from all supervised credit institutions and groups in the European Economic Area and data for the expanded set of entities will be collected through the new EUCLID platform, which is one of the highest priorities of EBA for 2020.
The following are the key highlights of the planned work for 2020:
- Support the deployment of the risk reduction package and the implementation of global standards in EU, including publishing the final recommendations on a set of criteria for simple, transparent, and standardized (STS) balance-sheet synthetic secularization (in the second quarter of 2020).
- Finalize the report on significant risk transfer, which will include recommendations on harmonization of the supervisory process for significant risk transfer assessment and quantitative significant risk transfer tests.
- Develop regulatory technical standards for eligible liabilities and ensure coherence with own funds standards. Much of the drafting work on the amended regulatory technical standards on own funds and eligible liabilities instruments had been completed at the end of 2019. Following the public consultation in Spring and Summer 2020, the draft revised standards will be delivered to EC by the end of 2020.
- Continue the monitoring of own funds instruments and extend the scope to total loss absorbing capacity (TLAC)/Minimum Requirement for own funds and Eligible Liabilities (MREL) issuance, with the goal of publishing a first eligible liabilities report by mid-2020.
- Communicate on and sequence Pillar 2 requirements and publish the revised SREP guidelines by the end of 2021.
- Produce EBA guidance on the end-treatment of grandfathered capital instruments to allow institutions to have time to prepare for the end of the beneficial treatment provided by grandfathering grandfathering provisions on December 31, 2021.
- Continue to monitor the implementation of IFRS 9 and the benchmarking of modeling of expected credit losses and foster supervisory convergence through the EBA 2020 convergence plan.
- Monitor existing and emerging regtech and suptech solutions in the financial sector, evaluate if and where additional focus is needed to identify any potential obstacles to the use of regtech and suptech solutions, and identify actions or policy recommendations to facilitate and encourage the use of regtech and suptech by financial institutions and by supervisory authorities.
- Work on the sustainable finance agenda through a number of activities and publications. EBA will publish consultation papers stemming from the mandates under the Capital Requirements Directive and Regulation (CRD and CRR), in particular on the incorporation of ESG factors and ESG risks into strategies, risk management, and the supervisory review process, in addition to the standards on Pillar 3 disclosure of ESG risks. Additionally, ESAs will jointly publish the technical standards on sustainability disclosures, as mandated in the Sustainability Disclosure Regulation.
- Promote an operational framework for resolution and support coherence and progress on recovery and resolution decisions. Further guidance work is to be carried out on additional aspects of these interlinkages, including some practical aspects relating to the process of coordination between competent and resolution authorities. As part of the quantitative monitoring of MREL, EBA will annually publish a report on the progress made by authorities in setting MREL requirements and by banks in issuing eligible instruments to meet these requirements.
- Develop technical standards on disclosures by investment firms under the Investment Firms Regulation for consultation and integrate into the comprehensive implementing technical standards on institutions’ prudential disclosures ESG risk disclosures, including climate change risks (also to be consulted on in 2020).
- Move toward an integrated EU data hub and a streamlined reporting framework by aligning supervisory reporting and disclosure requirements and finalizing reporting packages.
EBA will deliver final products on the supervisory reporting framework. This will include the finalization of the implementing technical standards in relation to the Nonperforming Loan (NPL) Backstop Regulation and the amendments stemming from CRR 2, which will apply to a number of key policy areas including credit risk, counterparty credit risk, market risk, the leverage ratio, and large exposures. EBA will also publish the final reports on the implementing technical standards on disclosure and reporting of TLAC and MREL. In addition to the finalization of these products, EBA will start developing reporting and disclosure requirements for investment firms. This reporting framework for investment firms will set out requirements in terms of own funds, levels of minimum capital, concentration risk, liquidity, and the level of activity of small and non-interconnected investment firms, along with the reporting requirements for the purposes of the thresholds that apply to certain investment firms. EBA will develop a proportionate regulatory framework taking into account the business of investment firms and their activity, size, and interconnectedness.
From 2020 onward, EBA will collect data from all supervised credit institutions and groups in the European Economic Area. It will expand the collection of resolution data and enhance the flexibility of the data collection platform to collect a number of other sets of data through a single entry point. EBA is a data-driven institution and the expanded samples of reporting entities will allow it to conduct deeper analyses of the banking sector and help in monitoring risks to the European banking system. This will support the creation of a harmonized regulatory and supervisory banking framework for EU, with policy decision-making backed up with up-to-date banking and supervisory data. The data for the expanded set of entities will be collected through the new EUCLID platform, which continues to be one of the highest priorities of EBA for 2020. The expansion of the sample will take place gradually during 2020, in tandem with the step-by-step construction of the EUCLID platform: EUCLID master data will be collected during 2020 for the entire EU banking population. With the characteristics of the EU banks in place, EBA will be able to open the gates to receive supervisory data for the whole EU banking population in 2021.
Keywords: Europe, EU, Banking, CRR, Basel, Resolution Framework, ESG, Reporting, EUCLID, Regtech, Suptech, IFR, Annual Report, EBA
US Agencies (FDIC, FED, and OCC) finalized two rules, which are either identical or substantially similar to the interim final rules in effect and issued earlier this year.
EIOPA is consulting on a supervisory statement on the use of risk mitigation techniques by insurance and reinsurance undertakings.
APRA announced that it is resuming consultation on the confidentiality of data submitted to APRA by the authorized deposit-taking institutions.
BoE and FCA are supporting and encouraging liquidity providers in the sterling swaps market to adopt new quoting conventions for inter-dealer trading based on SONIA, instead of LIBOR, from October 27, 2020.
Deutsche Bundesbank published special schema files for securities holdings statistics (SHS), along with a document on the XML format description.
EC adopted a decision determining, for a limited period of time, that the regulatory framework applicable to central counterparties, or CCPs, in the UK and Northern Ireland is equivalent to the requirements laid down in the European Market Infrastructure Regulation (EMIR or Regulation 648/2012).
ESMA announced that it will recognize three central counterparties (CCPs) established in the UK as third-country CCPs, from January 01, 2021.
PRA published Version 02.04 of the PRA110 liquidity metric monitoring tool (PRA110 LMM tool).
FSB confirmed the Regulatory Oversight Committee (ROC) of the Global Legal Entity Identifier System (GLEIS) as the International Governance Body for the globally harmonized identifiers used to track over-the-counter (OTC) derivatives transactions, with effect from October 01, 2020.
FCA is consulting on its approach to the authorization and supervision of international firms operating in UK.