EBA to Issue Stress Test Results in July, Consults on SREP Guidelines
EBA announced that individual results for the banks participating in the 2021 EU-wide stress test, along with a report summarizing the results in aggregate terms, will be published on July 30, 2021. In addition, EBA launched a public consultation on the revised guidelines on common procedures and methodologies for the supervisory review and evaluation process (SREP) and supervisory stress testing. The comprehensive revisions are intended to implement recent amendments to the Capital Requirements Directive (CRD5) and the Capital Requirements Regulation (CRR2) as well as to align the guidelines with other regulatory developments and best supervisory practices. The comment period for the proposed guidelines ends on September 28, 2021.
SREP is an ongoing supervisory process bringing together findings from all supervisory activities into a comprehensive supervisory overview of an institution. The guidelines being revised are aimed to achieve convergence of practices followed by competent authorities across EU, in their SREP and supervisory stress testing processes. This ongoing review of the SREP guidelines affects all main SREP elements, including business model analysis, assessment of internal governance and institution-wide control arrangements, assessment of risks to capital and capital adequacy to cover these risks, and assessment of liquidity and funding risks and adequacy of liquidity resources to cover such risks. The main amendments implementing the requirements laid down in the CRD5 and CRR2 include the following:
- Reviewing institutions’ categorization and application of the minimum engagement model to reflect the new definitions on small and non-complex as well as large institutions, thus better embedding the proportionality principle
- Incorporating an assessment of money laundering and terrorist financing (ML/TF) risks, in line with the EBA opinion on how to take into account ML/TF risks in the SREP published in November 2020
- Reviewing the provisions on Pillar 2 capital add-ons and the Pillar 2 guidance in accordance with Articles 104a and 104b of CRD4, to ensure that they reflect a purely micro-prudential perspective
- Providing clarifications on the assessment of the risk of excessive leverage and the related Pillar 2 capital add-ons and the Pillar 2 guidance to reflect the separate stack of own funds requirements based on the leverage ratio
- Adjusting the requirements for the assessment of the interest rate risk in the non-trading book as well as assessing liquidity risk and liquidity adequacy to align them with the current regulatory framework
EBA is consulting only on changes to the existing SREP guidelines and plans to finalize the guidelines once the consultation responses have been assessed. On publication of the final guidelines, the existing SREP guidelines will be repealed and replaced.
Related Links
- Press Release on Stress Test Results
- Press Release on SREP Guidelines
- Consultation Paper on SREP Guidelines (PDF)
Comment Due Date: September 28, 2021
Keywords: Europe, EU, Banking, SREP, Stress Testing, CRR2, CRD5, Basel, Pillar 2, Regulatory Capital, IRRBB, Liquidity Risk, 2021 Stress Test, ML/TF Risk, EBA
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Metin Epözdemir
Metin Epözdemir helps European and African banks with design and implementation of credit risk, stress testing, capital management, and credit loss accounting solutions.
Previous Article
BOM Publishes Several Regulatory Updates in June 2021Related Articles
PRA and FPC Finalize Changes to Leverage Ratio Framework in UK
The Prudential Regulation Authority (PRA) published the final policy statement PS21/21 on the leverage ratio framework in the UK. PS21/21, which sets out the final policy of both the Financial Policy Committee (FPC) and PRA
CFPB Proposes Rule on Small Business Lending Data Collection
The Consumer Financial Protection Bureau (CFPB) proposed to amend Regulation B to implement changes to the Equal Credit Opportunity Act (ECOA) under Section 1071 of the Dodd-Frank Act.
PRA Decides to Maintain O-SII Buffers for Another Year
The Prudential Regulation Authority (PRA) decided to maintain, at the 2019 levels, the buffer rates for the Other Systemically Important Institutions (O-SII) for another year, with no new rates to be set until December 2023.
FSB Report Assesses Implementation of Recommendations on Stablecoins
The Financial Stability Board (FSB) published a progress report on implementation of its high-level recommendations for the regulation, supervision, and oversight of global stablecoin arrangements.
APRA Updates Loan Serviceability Expectations for Home Lending
In a letter to the authorized deposit taking institutions, the Australian Prudential Regulation Authority (APRA) announced an increase in the minimum interest rate buffer it expects banks to use when assessing the serviceability of home loan applications.
CPMI and IOSCO Consult on Guidance on Stablecoin Arrangements
The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) are consulting on the preliminary guidance that clarifies that stablecoin arrangements should observe international standards for payment, clearing, and settlement systems.
EBA and EIOPA Set Out Work Priorities for 2022
The European Banking Authority (EBA) and the European Insurance and Occupational Pensions Authority (EIOPA) have set out their respective work priorities for 2022.
MFSA Issues Reporting Updates and Guidance for Banks
The Malta Financial Services Authority (MFSA) updated the guidelines on supervisory reporting requirements under the reporting framework 3.0, in addition to the reporting module on leverage under the common reporting (COREP) framework.
EC Publishes Decision on List of Equivalent Third Countries Under CRR
The European Commission (EC) published the Implementing Decision 2021/1753 on the equivalence of supervisory and regulatory requirements of certain third countries and territories for the purposes of the treatment of exposures, in accordance with the Capital Requirements Regulation or CRR (575/2013).
EC Rule on Contractual Recognition of Write-Down and Conversion Powers
EC published the Implementing Regulation 2021/1751, which lays down implementing technical standards on uniform formats and templates for notification of determination of the impracticability of including contractual recognition of write-down and conversion powers.
