The European Commission (EC) published the Delegated Regulation 2022/676 on the regulatory technical standards specifying the conditions in accordance with which consolidation is to be carried out in the cases referred to in Article 18 of the Capital Requirements Regulation (CRR). Additionally, the European Systemic Risk Board (ESRB) published Recommendation ESRB/2022/1 on the reciprocation of macro-prudential measures in Belgium, France, Lithuania, Luxembourg, Netherlands, Norway, and Sweden.
This regulation specifies the conditions for the application of the different methods of prudential consolidation and the conditions in accordance with which the consolidation is to be carried out in cases:
- of groups of undertakings that are related within the meaning of Article 22(7) of the Capital Requirements Directive (CRD IV)
- of institutions or financial institutions managed by an undertaking included in the consolidation together with one or more undertakings not included in the consolidation
- of participations or capital ties in institutions or financial institutions other than those referred to Article 18(1) and (4) of CRR
- where an institution exercises a significant influence over one or more institutions or financial institutions, but without holding a participation or other capital ties in those institutions
- where two or more institutions or financial institutions are placed under single management other than pursuant to a contract, clauses of their memoranda or articles of association
- where a subsidiary or an undertaking in which an institution holds a participation is not an institution, financial institution or ancillary services undertaking
Regulation 2022/676 also sets out the conditions for inclusion in consolidated Common Equity Tier 1, Additional Tier 1, and Tier 2 capital of instruments owned by persons other than the undertakings included in the prudential scope of consolidation. The regulatory technical standards have taken into consideration the Basel Committee on Banking Supervision (BCBS) guidelines on the identification and management of step-in risk and, therefore, include several indicators that should be assessed in order to identify the undertakings that can lead to step-in risk. Regulation 2022/676 shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.
The Recommendation ESRB/2022/1, which amends Recommendation ESRB/2015/2, has been published in the Official Journal of the European Union. Via this recommendation, the General Board of ESRB decided to include
- macro-prudential measure imposing a minimum average risk-weight for credit institutions authorized in the Netherlands and using the internal ratings-based approach, in the list of macro-prudential measures that are recommended for reciprocation under Recommendation ESRB/2015/2.
- Lithuanian macro-prudential measure for systemic risk buffer rate in the list of macro-prudential measures that are recommended for reciprocation under Recommendation ESRB/2015/2
- amended text on the reciprocation of certain macro-prudential measures from Belgium, France, Luxembourg, Norway, and Sweden
Keywords: Europe, EU, Belgium, France, Lithuania, Luxembourg, Norway, Netherlands, Sweden, Banking, CRR, Basel, CRD IV, Prudential Consolidation, Regulatory Technical Standards, Regulatory Capital, Systemic Risk, Reciprocity, Macro-Prudential Policy, IRB Approach, Systemic Risk Buffer, EC, ESRB
The European Banking Authority (EBA) published four draft principles to support supervisory efforts in assessing the representativeness of COVID-19-impacted data for banks using the internal ratings based (IRB) credit risk models.
The European Council and the European Parliament (EP) reached a provisional political agreement on the Corporate Sustainability Reporting Directive (CSRD).
The Prudential Regulation Authority (PRA) launched a consultation (CP6/22) that sets out proposal for a new Supervisory Statement on expectations for management of model risk by banks.
The European Commission (EC) published the Delegated Regulation 2022/954, which amends regulatory technical standards on specification of the calculation of specific and general credit risk adjustments.
The Bank for International Settlements (BIS) Innovation Hub updated its work program, announcing a set of projects across various centers.
The European Insurance and Occupational Pensions Authority (EIOPA) published two consultation papers—one on the supervisory statement on exclusions related to systemic events and the other on the supervisory statement on the management of non-affirmative cyber exposures.
Certain members of the U.S. Senate Committee on Banking, Housing, and Urban Affairs issued a letter to the Securities and Exchange Commission (SEC)
The European Insurance and Occupational Pensions Authority (EIOPA) published a consultation paper on the advice on the review of the securitization prudential framework in Solvency II.
The Prudential Regulation Authority (PRA) issued a statement on PRA buffer adjustment while the Bank of England (BoE) published a notice on the statistical reporting requirements for banks.
The Basel Committee on Banking Supervision (BCBS) issued principles for the effective management and supervision of climate-related financial risks.