Featured Product

    Council Agreement on Creditor Hierarchy, IFRS 9 and Large Exposures

    June 16, 2017

    The European Council agreed on part of a package of proposals aimed to reduce risk in the banking industry. Agreement was reached on a draft directive on the ranking of unsecured debt instruments in insolvency proceedings (bank creditor hierarchy) and on a draft regulation on transitional arrangements to phase in the regulatory capital impact of the IFRS 9 international accounting standard. The EC Vice President Valdis Dombrovskis also spoke about these recent agreements in the context of the banking package, at the ECOFIN press conference in Luxembourg.

    The draft directive on ranking of unsecured debt instruments requires member states to create a new class of non-preferred senior debt, eligible to meet the subordination requirement. It will facilitate the application of EU bail-in rules in cross-border situations and avoid distortions of the EU single market. A number of member states have amended, or are in the process of amending, their insolvency laws. The absence of harmonized EU rules creates uncertainty for both banks and investors. The draft, which mainly amends article 108 of the bank recovery and resolution directive (BRRD), has been made a priority among other banking proposals presented by the EC in November 2016. The aim is to provide legal certainty for banks and investors.

     

    The draft regulation on IFRS 9 transitional arrangements will mitigate the potential negative regulatory capital impact of the IFRS 9 introduction on banks. This draft regulation would allow banks to add back to their common equity tier 1 capital a portion of the increased expected credit loss provisions as extra capital during a five-year transitional period. That added amount will progressively decrease to zero during the course of the transitional period. The draft regulation also provides for a three-year phase-out of an exemption from the large exposure limit for banks' exposures to public sector debt denominated in the currency of any other member state. The exemption is used by banks in several non-eurozone member states for their euro-denominated holdings of those member states' public debt. Unless Capital Requirements Regulation (575/2013) is amended, the exemption will cease to apply after December 31 , 2017. The phase-out is intended to soften the impact of its termination. The draft regulation and directive shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.

     

    Related Links

    Draft Regulation on Transitional Period for IFRS 9 (PDF)

    Draft Directive on Creditor Hierarchy (PDF)

    Press Release

    Speech

    Keywords: Europe, EC, Banking, IFRS 9, Creditor Hierarchy, Large Exposures

    Featured Experts
    Related Articles
    News

    EBA Report on MREL Shows Progress in Resolution Planning

    EBA published the first quantitative report taking stock of the increased capacity of minimum requirements for own funds and eligible liabilities (MREL) in EU.

    February 17, 2020 WebPage Regulatory News
    News

    ESMA Updates Q&A on Credit Rating Agencies Regulation

    ESMA updated questions and answers (Q&A) document on the Credit Rating Agencies (CRA) Regulation.

    February 17, 2020 WebPage Regulatory News
    News

    EC Announces Funding for Sustainable Finance Project in France

    EC announced an investment for the latest projects, including a project on sustainable finance, under the LIFE program for the environment and climate action.

    February 17, 2020 WebPage Regulatory News
    News

    FDIC Releases Economic Scenarios for Stress Testing in 2020

    FDIC released the hypothetical economic scenarios for use in the upcoming stress tests for covered institutions with total consolidated assets of more than USD 250 billion.

    February 14, 2020 WebPage Regulatory News
    News

    EBA Acknowledges EC Adoption of Amended Supervisory Reporting Standard

    EBA acknowledged the adoption, by EC, of an Implementing Act with regard to the common reporting (COREP) and financial reporting (FINREP) changes, in accordance with the Capital Requirements Regulation or CRR.

    February 14, 2020 WebPage Regulatory News
    News

    APRA and ASIC Welcome Proposed Reforms for Superannuation Sector

    APRA and the Australian Securities and Investments Commission (ASIC) have jointly welcomed the proposed legislative reforms increasing the role of ASIC in the superannuation sector.

    February 14, 2020 WebPage Regulatory News
    News

    ESMA Responds to EC Consultation on Review of Benchmarks Regulation

    ESMA published its response to EC consultation on review of the Benchmarks Regulation in EU.

    February 14, 2020 WebPage Regulatory News
    News

    OSFI on Guide and Form for Replicating Portfolio Information Summary

    OSFI revised the instruction guide and form related to filing the Replicating Portfolio Information Summary.

    February 14, 2020 WebPage Regulatory News
    News

    FFIEC Publishes Guide to HMDA Reporting for Data Collected in 2020

    FFIEC issued the 2020 edition of guide to Home Mortgage Disclosure Act (HMDA) reporting for the data collected in 2020 and reported in 2021.

    February 13, 2020 WebPage Regulatory News
    News

    ISDA Guide on Smart Contracts for Equity and Interest Rate Derivatives

    ISDA has published the fourth and fifth installments in a series of legal guidelines for smart derivatives contracts.

    February 13, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 4687