The European Banking Authority (EBA) updated two questionnaires for assessing regulatory and supervisory frameworks of third countries, as part of the methodology for assessing third-country equivalence. Following the entry into force, in June 2021, of the most recent updates of the Capital Requirements Directive and Regulation (CRD5 and CRR2), EBA has updated the questionnaires to reflect provisions introduced by the new capital requirements framework.
The first updated questionnaire on initial screening is focused on the most relevant requirements and principles and identifying similar laws in place (first step questionnaire). The second updated questionnaire allows for a granular and more detailed investigation of third-country frameworks by identifying and mapping similar rules and provisions to the CRR and analyzing the divergences (second step questionnaire). The updated questionnaires will replace the old ones and will be used to conduct future assessments of the regulatory and supervisory framework of third countries. The CRR foresees that certain exposures to entities in non-European Union countries can be treated, in terms of risk-weights, as exposures in member states of European Union, provided that the European Commission adopts an implementing decision determining that the country’s prudential requirements are equivalent to the ones in the European Union.
In the past years, EBA has been assisting the European Commission in preparing their decisions on the equivalence of prudential regimes applicable in third-country jurisdictions. On request by the European Commission, EBA assesses the supervisory and regulatory requirements of third country jurisdictions. The methodology used for this type of assessment is based on the first- and second-step questionnaires. The main goal of equivalence is to manage effectively and facilitate cross-border activity of financial market players in a sound prudential environment, as third countries adhere and adopt the same high standards of prudential rules that are in force within the European Union. EBA carries out two types of equivalence assessments: equivalence of the regulatory and supervisory framework and equivalence of confidentiality and professional secrecy. The equivalence assessment process is a key component for the establishment of cooperation agreements with third countries. Such cooperation agreements cover areas such as the exchange of information with third-country authorities relating to equivalence assessment and monitoring as well as cooperation with the European Union authorities with regard to the supervision, crisis management, and resolution aspects.
Keywords: Europe, EU, Banking, Equivalence Regime, Questionnaire, CRR, CRD, Basel, Third Country Equivalence, EC, EBA
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