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
BoE published a statistical notice (Notice 2020/9) explaining the approach for treatment of payment holidays on the profit and loss return or Form PL.
BoE updated the known issues document for the statistical reporting Forms AS and FV.
FED announced individual capital requirements for 34 large banks and these requirements go into effect on October 01, 2020.
SRB published a set of documents to give operational guidance to banks on implementation of the bail-in tool.
BIS published an update on the G20 TechSprint Initiative, which was launched in April 2020 and aims to highlight the potential for technologies to resolve regulatory compliance (regtech) and supervisory (suptech) challenges.
OSFI published a letter that provides an update on the milestones for the implementation of the IFRS 17 standard on insurance contracts.
EBA updated the report on the implementation of selected COVID-19 policies.
The Financial Stability Institute (FSI) of BIS published a brief note that examines the supervisory challenges associated with certain temporary regulatory relief measures introduced by BCBS and prudential authorities in response to the COVID-19 pandemic.
BCBS is consulting on the principles for operational resilience and the revisions to the principles for sound management of operational risk for banks.
BoE updated the reporting template for Form ER as well as the Form ER definitions, which contain guidance on the methodology to be used in calculating annualized interest rates.