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    EU Issues Rules on CRR, Makes Headway on CCD, CSRD, NIS2, and DORA

    December 05, 2022

    The European Commission (EC) published an implementing regulation on the mapping tables correspondence of credit assessments of external credit assessment institutions (ECAIs) for securitization, along with a Delegated Regulation on specifications for exotic underlyings and instruments bearing residual risks under the Capital Requirements Regulation or CRR. The European Council reached a provisional agreement, with the European Parliament, to revise the Consumer Credit Directive; it also adopted its position on the proposals amending the Capital Requirements Directive and Regulation with regard to supervisory powers, sanctions, third-country branches, and environmental, social, and governance (ESG) risks. Finally, the European Council gave its final approval to the Corporate Sustainability Reporting Directive (CSRD), revised its Directive on Security of Network and Information Systems (NIS2), and adopted the Digital Operational Resilience Act (DORA).

    The revised Consumer Credit Directive (CCD) modernizes and enhances protection for consumers applying for credit. The revised directive promotes responsible and transparent practices by all players involved in consumer credit and ensure that consumers are protected from irresponsible lending practices that could lead to over-indebtedness. The revised directive will provide for stronger rules, a level-playing field for all credit operators and for fair access to credit. The revised directive also improved the creditworthiness assessment rules, by which the creditor assesses whether a consumer is able to repay its loan. The revised directive repeals and replaces the current 2008 Directive (2008/48/EC) on Consumer Credit Agreements and will be applicable to certain risky loans, which include loans below EUR 200, loans offered through crowdlending platforms, and buy-now-pay-later products. The new rules will cover new forms of credits often proposed online, such as buy now pay later schemes, as well as short-term, high-cost loans, to ensure consumers are protected against the risks such credits can entail. The revised directive is subject to approval by the Council and the European Parliament.

    EC published the Implementing Regulation 2022/2365 that amends the implementing technical standards laid down in Implementing Regulation (2016/1801) with regard to the mapping tables correspondence of credit assessments of external credit assessment institutions for securitization in accordance with the CRR (575/2013). The Implementing Regulation specifies the mapping tables of the relevant credit assessments of all ECAIs to the credit quality steps set out in Part Three, Title II, Chapter 5, of the Capital Requirements Regulation, or CRR (575/2013). The Regulation amends the correspondence of the rating categories of each external credit assessment institution for securitization positions subject to the external ratings based approach with the credit quality steps set out in Articles 263 and 264 of the CRR (575/2013). The date of effect for this regulation is December 25, 2022.

    EC adopted the Commission Delegated Regulation 2022/2328 that supplements the CRR (575/2013) with regard to regulatory technical standards specifying exotic underlyings and the instruments bearing residual risks for the purposes of the calculation of own funds requirements for residual risks. The Regulation specifies that longevity risk, weather, natural disasters, and future realized volatility shall be considered as exotic underlyings. The Regulation also states that the instruments listed in the Annex to this Regulation shall be considered as instruments meeting the conditions set out in Article 325u(2) of CRR Regulation and constituting instruments bearing residual risks. The date of effect for this regulation is December 19, 2022.

     

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    Keywords: Europe, EU, Banking, Consumer Credit Directive, Credit Assessments, Credit Risk, Lending, CRR, Basel, Securitization, Exotic Underlyings, ECAIs, Regulatory Capital, Regulation 2022 2365, Regulation 2022 2328, NIS2, CCD, CSRD, DORA, European Council, EC

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