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    EC Finalizes Rules on Internal Approaches Benchmarking Exercise

    November 26, 2021

    The European Commission, or EC, finalized the Implementing Regulation 2021/2017 with respect to the benchmark portfolios, reporting templates, and reporting instructions for the supervisory benchmarking of internal approaches for calculating own funds requirements. Regulation 2021/2017 amends Regulation 2016/2070 in reference to the reporting rules specified in Article 78(2) of the Capital Requirements Directive (2013/36/EU). CRD requires institutions to submit the results of their calculations, along with an explanation of the methodologies used to produce them, to the competent authorities at an appropriate frequency and at least annually. Regulation 2021/2017, which is based on the draft implementing technical standards that the European Banking Authority submitted to the European Commission, shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.

    Given that institutions have to submit the results of their annual calculations at least annually and that the focus of the competent authorities’ assessments and of the reports of the European Banking Authority (EBA) have changed, exposures or positions that are included in the benchmark portfolios, and therefore also reporting requirements, need to be adapted. Thus, it was appropriate to amend Annexes I to VII to the Implementing Regulation 2016/2070. Additionally, two new Annexes have been added in Regulation 2021/2017, one with the templates for reporting the International Financial Reporting Standard 9 (IFRS 9) impact and the other with the instructions for completing those templates. The IFRS 9 standard had introduced new rules for the measurement of credit losses, and, as a result, directly impacts on the amount of own funds and regulatory ratios reported.

     

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    Effective Date: December 16, 2021 

    Keywords: Europe, EU, Banking, Regulatory Capital, CRR, Basel, Credit Risk, Supervisory Benchmarking, SBP, Reporting, CRD, Counterparty Credit Risk, IFRS 9, Expected Credit Loss, EC

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