EBA published a set of roadmaps outlining the approach and timelines for delivering the mandates stemming from the Risk Reduction Measures Package adopted by the European Council and European Parliament on May 20, 2019. EBA published roadmaps on the delivery of mandates on governance and remuneration, large exposures, Pillar 2, resolution, Pillar 3 disclosures, and supervisory reporting. For each roadmap, EBA has provided tables with information on the deliverables and their original and proposed release timelines.
The Risk Reduction Package allocates to the EBA more than 100 new mandates under the revised Capital Requirements Directive (CRD 5), Capital Requirements Regulation (CRR 2), and Bank Recovery and Resolution Directive (BRRD 2). The key mandates are focused in the areas of governance and remuneration, large exposures, resolution, prudential reporting, and disclosures. Most of the mandates are intended to complete and update the Single Rulebook as well at monitoring regulatory practices within the Single Market to ensure effective and consistent implementation of such rules. Out of all the mandates attributed to EBA, a small number of mandates prescribe a deadline of 6-9 months after entry into force of CRD 5 and CRR 2. Timely delivery will remain to be challenge for most of these mandates. In contrast to the area of market risk where consultation papers could be issued before the Official Journal publication of CRR 2, almost all mandates with 6-9 month deadlines are at risk of a 3-9 month delay from the deadline set in the legislative texts.
For mandates with deadlines within one year or more, EBA will strive to deliver on time for its submission to EC. However, some limited delays are anticipated in the areas of large exposures, interest rate risk in the non-trading book (IRRBB), and minimum requirements for own funds and eligible liabilities (MREL) or bail-in execution due to their complexity and/or contingency to substantive progress in other areas such as Pillar 2 and internal MREL. Likewise, some mandates on reporting may also be delayed as any calibration of requirements is contingent on an agreement on the policy side. The delay can be influenced by the sequencing of work in the event that the content needs to be aligned to other EBA work that is still in progress, such as for guidelines on cooperation between authorities. The detailed roadmaps support the explanatory communication on the actual sequencing and possible delays.
The key areas covered in the roadmap include the following:
- In the area of governance, EBA will contribute to optimizing the existing framework with an emphasis on the finalization of the remuneration deliverables.
- In the area of large exposures, the priority will be to complete the framework where no EBA work exists, namely for determining exposures arising from derivatives.
- In the area of Pillar 2, EBA will consider how to make the Pillar 2 framework fit for purpose in view of ongoing and new challenges. Proportionality will be strengthened and sustainable finance dimension will be clarified, along with the Pillar 2 capital add-ons.
- On resolution, the work is intended to facilitate effective resolution planning and preparedness, such as on MREL calibration and monitoring.
- In the area of supervisory reporting, the aim is to achieve an efficient reporting framework with enhanced proportionality.
- With the work on disclosure, EBA aims to become the EU-wide Pillar 3 hub, following the completion of the European Centralized Infrastructure for Supervisory Data (EUCLID) project.
Besides clarifying the sequencing of mandates and the rationale behind their prioritization, the roadmaps aim to provide a preliminary understanding of the mandates combined with some policy guidance. Through this work, EBA will contribute to making the European Single Rulebook more comprehensive, proportionate, and apt to reflect developments in the banking sector.
Keywords: Europe, EU, Banking, CRR 2, CRD 5, BRRD 2, Basel III, Governance, Proportionality, Reporting, Disclosures, Pillar 2, Roadmap, Resolution, Pillar 3, Risk Reduction Package, EBA
EBA issued a revised list of validation rules with respect to the implementing technical standards on supervisory reporting.
EBA published its response to the call for advice of EC on ways to strengthen the EU legal framework on anti-money laundering and countering the financing of terrorism (AML/CFT).
NGFS published a paper on the overview of environmental risk analysis by financial institutions and an occasional paper on the case studies on environmental risk analysis methodologies.
MAS published the guidelines on individual accountability and conduct at financial institutions.
APRA published final versions of the prudential standard APS 220 on credit quality and the reporting standard ARS 923.2 on repayment deferrals.
SRB published two articles, with one article discussing the framework in place to safeguard financial stability amid crisis and the other article outlining the path to a harmonized and predictable liquidation regime.
FSB hosted a virtual workshop as part of the consultation process for its evaluation of the too-big-to-fail reforms.
ECB updated the list of supervised entities in EU, with the number of significant supervised entities being 115.
OSFI published the key findings of a study on third-party risk management.
FSB is extending the implementation timeline, by one year, for the minimum haircut standards for non-centrally cleared securities financing transactions or SFTs.