European Council agreed on a package of measures aimed to reduce risk in the banking industry. The package comprises Capital Requirements Regulation and Directive (regulation 575/2013 or CRR 2, and directive 2013/36 or CRD 5), Bank Recovery and Resolution Directive (directive 2014/59/EU or BRRD 2), and Single Resolution Mechanism Regulation (806/2014 or SRMR 2).
The proposals are intended to implement reforms agreed at the international level following the 2007–08 financial crisis. The reforms include elements agreed by BCBS and FSB. The proposals on bank capital requirements include a binding net stable funding ratio and a binding leverage ratio to prevent banks from excessively increasing leverage. The proposals on bank recovery and resolution implement the November 2015 standard of FSB on total loss-absorbing capacity (TLAC). They integrate the TLAC requirement into the minimum requirement for own funds and eligible liabilities (MREL) rules of EU. The TLAC standard sets out requirements for G-SIIs only while MREL covers the entire EU banking industry; the proposals address this and other differences between the two. While speaking at the ECOFIN Conference, the EC Vice President Valdis Dombrovskis highlighted that "this package also includes the principle of proportionality, with certain alleviations for smaller banks to reduce their reporting requirements and the related administrative burden." This important milestone "provides the Council Presidency with the mandate to start negotiations with the European Parliament."
This package contributes significantly to further reducing risks in EU banks and it is an essential element for the completion of Banking Union. It builds on existing banking rules and aims to complete the post-crisis regulatory agenda, making sure that outstanding challenges to financial stability are addressed. The European Council is due to review the progress achieved so far in reducing risk in the EU banking industry in June 2018 and could decide on further specific steps to be taken.
Keywords: Europe, EU, Banking, CRR 2, CRD 5, BRRD 2, SRMR 2, Proportionality, EC, European Council
Previous ArticleESMA Updates Q&As on the Implementation of MiFID, CSDR, and MAR
Next ArticleFCA Publishes Its Business Plan for 2018-19
BCBS published a technical amendment to the capital treatment of securitizations of non-performing loans by banks.
BoE announced that the Data and Statistics Division is planning to move collection of statistical data to the BoE Electronic Data Submission (BEEDS) portal.
APRA published the updated reporting standards and guidance for the collection of Economic and Financial Statistics (EFS), following a consultation process. Also published was a response letter to the feedback received on the proposal for amending the EFS reporting standards and guidance.
EC is consulting on a draft delegated regulation to supplement the Taxonomy Regulation (2020/852) by establishing the technical screening criteria for determining the conditions under which an economic activity qualifies as environmentally sustainable.
The IFRS Foundation published material highlighting the ways in which existing requirements in IFRS standards require companies to consider climate-related matters when their effect is material to the financial statements.
EBA published a report analyzing the impact of the unwind mechanism of the liquidity coverage ratio (LCR) for a sample of European banks over a three-year period, from the end of 2016 to the first quarter of 2020.
In response to questions from a member of the European Parliament, the ECB President Christine Lagarde issued a letter clarifying the possibility of amending the AnaCredit Regulation and making targeted longer-term refinancing operations (TLTROs) dependent on the climate-related impact of bank loans.
IASB started the post-implementation review of the classification and measurement requirements in IFRS 9 on financial instruments and added the review as a project to its work plan.
FSB published a report that examines progress in implementing policy measures to enhance the resolvability of systemically important financial institutions.
EBA published a report on the benchmarking of national loan enforcement frameworks across 27 EU member states, in response to the call for advice from EC.