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    EBA to Assess Application of Infrastructure Supporting Factor in CRR2

    April 05, 2022

    The European Banking Authority (EBA) published its risk dashboard for the fourth quarter of 2021, which indicates that first-round risks stemming from the Russian invasion of Ukraine are not a fundamental threat to the stability of the banking system, but second-round effects may be more material. The assessment highlights that the second-round effects will impact profitability, asset quality, operational risk, market risk, liquidity, and funding risk. EBA also launched survey for banks on the application of the infrastructure supporting factor in accordance with the Capital Requirements Regulation (CRR 2) and published revisions to the regulatory technical standards on strong customer authentication and secure communication under the revised Payment Services Directive (PSD2).

    The EBA survey with respect to CRR2 is intended to assess the experiences of banks with the application of the infrastructure supporting factor in accordance with the Capital Requirement Regulation (CRR 2). In addition, the survey aims at providing valuable information on the materiality of infrastructure project loans across EU banks, irrespective of whether credit institutions specialize in infrastructure lending or not. The survey runs until 27 May 2022. Article 501a of the CRR 2 introduces a reduction by 25% of the own fund requirements for specific corporate exposures, the so-called infrastructure supporting factor. The eligible infrastructure project loan exposures must be to entities that were created specifically to finance or operate physical structures or facilities, systems, and networks that provide or support essential public services. They must also meet additional conditions, which imply a certain minimum level of quality or maximum riskiness of the exposures. The original intention of CRR2 was to have the supporting factor in place from June 28, 2021. However, in response to the COVID-19 pandemic, the application was frontloaded to June 27, 2020 in the so-called “quick-fix” CRR package. The national competent authorities will disseminate the survey directly to the largest banks. However, any bank willing to participate in the survey can download the Excel file, which also includes instructions, and submit the template filled on a best effort basis to the respective national competent authority by May 27, 2022. The information requested should be submitted at the highest level of consolidation in the European Economic Area and should be provided as of the reference data December 31, 2021. 

    With regard to the regulatory technical standards under PSD2, in light of the comments received during the consultation process, EBA agreed with some of the proposals and their underlying arguments and introduced some changes to the draft amending regulatory technical standards while retaining the mandatory exemption proposed in the consultation paper. EBA disagreed with the respondents that were of the view that the proposed amendments are not technology neutral and will lead to an uneven playing field between ASPSPs that offer a dedicated interface (such as an API) and those that offer access to third-party providers via their customer interfaces. Finally, EBA also introduced additional clarifications on the application of the mandatory exemption. EBA states that the mandatory exemption does not prejudice the choice that ASPSPs have between offering a dedicated interface and allowing third-party providers to use the ASPSPs' direct customer interfaces, or the ability of ASPSPs that have chosen the latter option to decide whether or not to apply the voluntary exemption in Article 10 in their direct relationship with their customers. EBA extended the timeline for account servicing payment service providers (ASPSPs) to make available to account information service providers (AISPs) the changes to their interfaces from 1 month to 2 months before the implementation of these changes and extended the overall implementation period accordingly from 6 months to 7 months after the publication of the amending regulatory technical standards in the Official Journal of the European Union. The draft amending regulatory standards will be submitted to the European Commission for endorsement, following which they will be subject to scrutiny by the European Parliament and the Council before being published in the Official Journal of the European Union. The amending regulatory technical standards will apply seven months after entry into force.

     

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    Keywords: Europe, EU, Banking, Risk Dashboard, Regulatory Technical Standards, CRR2, Basel, Regulatory Capital, Standardized Approach, IRB Approach, Infrastructure Supporting Factor, Specialized Lending Transactions, Lending, Credit Risk, PSD 2, API, Open Banking, Regtech, Third-Party Ecosystem, Fintech, EBA, Subheadline

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