EBA published its advice on the EC proposal for statutory prudential backstops on banks' provisioning practices for new loans that turn non-performing. EBA notes that the backstop complements the existing prudential set of measures and the new accounting provisions under IFRS9; this advice aims to provide some qualitative considerations as well as a conservative impact analysis of the proposed measures.
In its impact analysis, EBA provided some considerations about the design of the statutory prudential backstop as well as some quantitative evidence about the different specifications of the backstop. The report also includes a qualitative section, in which EBA considers the statutory prudential backstop from a supervisory perspective. This section focuses on the interaction of the backstop with the full set of available regulatory and supervisory measures, which are currently in place. It provides observations about the possible effects of prudential backstops, in combination with the existing CRR provisions, the Pillar 2 measures, and the newly introduced accounting provision under IFRS9.
Non-discretionary backstop requirements (that is, compulsory deductions from regulatory capital) can help incentivize banks to address NPLs proactively and prevent the future accumulation of NPLs on balance sheets. This report is EBA's response to EC's call for advice on the introduction of statutory prudential backstops proposed in its consultation document, which was published on November 10, 2017. This report complements EC’s legislative proposal, which was published on March 14, 2018.
Keywords: Europe, EU, Banking, NPLs, Prudential Backstops, IFRS 9, EBA
Previous ArticleBank of Italy Updates the Application Interface Manual on AnaCredit
HKMA is consulting on revisions to the Supervisory Policy Manual module CR-G-14 on margin and other risk mitigation standards for non-centrally cleared over-the-counter (OTC) derivatives transactions.
PRA provided further information on the application of regulatory capital and IFRS 9 requirements to payment holidays granted or extended to address the challenges arising from COVID-19 outbreak.
HKMA announced the publication of a report on fintech adoption and innovation in the banking industry in Hong Kong.
BIS published a working paper that examines the drivers of cyber risk, especially in context of the cloud services.
ECB launched consultation on a guide specifying how the Banking Supervision expects banks to consider climate-related and environmental risks in their governance and risk management frameworks and when formulating and implementing their business strategy.
ECB published an opinion (CON/2020/16) on amendments to the prudential framework in EU in response to the COVID-19 pandemic.
EBA published a report that examines the interlinkages between recovery and resolution planning under the Bank Recovery and Resolution Directive (BRRD).
SRB published the final Minimum Requirements for Own Funds and Eligible Liabilities (MREL) policy under the Banking Package.
US Agencies (FDIC, FED, and OCC) published a final rule that makes technical changes to the March 31, 2020 interim final rule that provides a five-year transition period for the impact of the current expected credit loss (CECL) methodology on regulatory capital.
ECB published results of the March 2020 survey on credit terms and conditions in euro-denominated securities financing and over-the-counter (OTC) derivatives markets.