Featured Product

    EU to Introduce Common Backstop to Single Resolution Fund by 2022

    November 30, 2020

    European Council published a report monitoring the risk-reduction indicators and announced the Eurogroup agreement to proceed with the reform of the European Stability Mechanism and to advance the entry into force of the common backstop to the Single Resolution Fund by the beginning of 2022. The SRB Vice Chair Jan Reinder De Carpentier welcomed the Eurogroup agreement for early introduction of common backstop to Single Resolution Fund. The earlier commitment was to introduce the common backstop before the end of 2023. The statement from Eurogroup mentions that the common backstop to the Single Resolution Fund will be in the form of a credit line from the European Stability Mechanism to replace the Direct Recapitalization Instrument, providing a financial safety net for bank resolutions in the Banking Union.

    In its statement, the Eurogroup also welcomed the intent of the ECB Banking Supervision to maintain an extensive and comprehensive supervisory effort to further reduce risks, particularly for banks under stricter supervisory monitoring, still exceeding the 5% threshold in their gross nonperforming loan ratio. ECB is doing this by ensuring the implementation of nonperforming loan reduction strategies of banks and through stress testing and on–site inspection, as part of its comprehensive work to address all types of vulnerabilities in the banking sector. Eurogroup welcomed the ongoing EBA work on enhancement of the EU-wide stress test framework, taking into account the recommendations made by the European Court of Auditors in its report. It also encouraged EBA to review the scope of the recurring EU-wide stress test to ensure broader representativeness of the banking population under the remit of SRB and invites EBA to report to the Council on progress toward this by mid-2021.

    Additionally, the Eurogroup welcomed the resolve of SRB to set the banks’ final individual 2024 minimum requirement for own funds and eligible liabilities (MREL) targets in 2021 in line with Bank Recovery and Resolution Directive (BRRD2) and Single Resolution Mechanism Regulation (SRMR2) and based on the current SRB policy; it also welcomed the SRB resolve to ensure steady build-up of MREL buffers in line with those targets and takes note of the significant build-up of the Single Resolution Fund during the last few years. In its statement, Eurogroup recognized the need to continuously improve the crisis management framework. In this context and in view of the eventual expiry of the temporary state-aid framework after the pandemic, it invited EC to review its state-aid framework for banks in the context of the review of the crisis management framework, both starting in 2021 and to be completed in parallel by 2023. The Eurogroup urged EC to ensure consistency between the two frameworks, adequate burden-sharing of shareholders and creditors to protect taxpayers, and preservation of financial stability. The Eurogroup invited EC to report back to the Council by October 2021.

    To inform the political decisions in this context, EC, ECB, and SRB have prepared an extended risk-reduction report, which shows that all risk-reduction indicators have improved significantly, increasing resilience of the banking sector. Both gross and net nonperforming loan ratios declined significantly while progress on MREL was marked by a continued build-up of MREL-eligible liabilities against the background of increasing average MREL targets, leading to a significant decline in shortfalls as of the fourth quarter of 2019. Some vulnerabilities, however, remain, as reflected in the nonperforming loan levels and MREL shortfalls with regard to the agreed benchmarks. These will need to be addressed by a combination of additional efforts at bank, member state, and EU levels. The COVID-19 crisis is likely to temporarily interrupt or slow down the favorable trends observed over recent years. Nevertheless, tackling nonperforming loans and enhancing resolvability will remain a priority. While the outlook is subject to heightened levels of uncertainty in view of COVID-19, remedial actions are being taken at the appropriate level and by the appropriate authorities to address specific concerns.

     

    Related Links

    Keywords: Europe, EU, Banking, SRF, MREL, COVID-19, BRRD2, SRMR2, Stress Testing, Credit Risk, Basel, Regulatory Capital, Resolution Framework, EC, European Council

    Featured Experts
    Related Articles
    News

    BIS Paper Studies Impact of Fintech Lending on Small Businesses in US

    The Bank for International Settlements (BIS) published a paper that studies impact of fintech lending on credit access for small businesses in U.S.

    September 26, 2022 WebPage Regulatory News
    News

    UK Regulators Issue CRR Changes and Stress Test Scenarios for Banks

    The Prudential Regulation Authority (PRA) issued the policy statement PS8/22 to amend the Own Funds and Eligible Liabilities (CRR) Part of the PRA Rulebook and update the supervisory statement SS7/13 titled "Definition of capital (CRR firms).

    September 26, 2022 WebPage Regulatory News
    News

    EBA Launches EU-Wide Transparency Exercise in 2022

    The European Banking Authority (EBA) launched the EU-wide transparency exercise for 2022, with results of the exercise expected to be published at the beginning of December, along with the annual Risk Assessment Report.

    September 23, 2022 WebPage Regulatory News
    News

    SRB on CRR Quick-Fix to Policy for Multiple Point of Entry Banks

    The Single Resolution Board (SRB) welcomed the adoption of the review of the Capital Requirements Regulation, or CRR, also known as the "CRR quick-fix."

    September 22, 2022 WebPage Regulatory News
    News

    EC Rule Lists Advanced Economies for Market Risk Capital Calculations

    The European Commission (EC) recently adopted the Delegated Regulation 2022/1622, which sets out the regulatory technical standards to specify the countries that constitute advanced economies for the purpose of specifying risk-weights for the sensitivities to equity.

    September 21, 2022 WebPage Regulatory News
    News

    EBA Publishes Final Regulatory Standards on STS Securitizations

    The European Banking Authority (EBA) published the final draft regulatory technical standards specifying and, where relevant, calibrating the minimum performance-related triggers for simple.

    September 20, 2022 WebPage Regulatory News
    News

    ECB Further Reviews Costs and Benefits Associated with IReF

    The European Central Bank (ECB) is undertaking the integrated reporting framework (IReF) project to integrate statistical requirements for banks into a standardized reporting framework that would be applicable across the euro area and adopted by authorities in other EU member states.

    September 15, 2022 WebPage Regulatory News
    News

    EBA Publishes Funding Plans Report, Receives EMAS Certification

    The European Banking Authority (EBA) has been awarded the top European Standard for its environmental performance under the European Eco-Management and Audit Scheme (EMAS).

    September 15, 2022 WebPage Regulatory News
    News

    MAS Launches SaaS Solution to Simplify Listed Entity ESG Disclosures

    The Monetary Authority of Singapore (MAS) set out the Financial Services Industry Transformation Map 2025 and, in collaboration with the SGX Group, launched ESGenome.

    September 15, 2022 WebPage Regulatory News
    News

    BCBS to Finalize Crypto Rules by End-2022; US to Propose Basel 3 Rules

    The Basel Committee on Banking Supervision met, shortly after a gathering of the Group of Central Bank Governors and Heads of Supervision (GHOS), the oversight body of BCBS.

    September 15, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8521