Featured Product

    EBA Issues No-Action Letter on Trading Book Boundary Provisions

    February 27, 2023

    The European Banking Authority (EBA) answered 27 questions under the Single Rulebook Question and Answer (Q&A) tool, in the month of February 2023. The addressed Q&A topics include Pillar 3 ESG disclosures as well as supervisory reporting (FINREP, COREP, Liquidity, Leverage ratio and own funds) under the Capital Requirements Regulation or CRR. EBA also published a no-action letter stating that competent authorities should not prioritize any supervisory or enforcement action in relation to the new banking book—trading book boundary provisions. Along with the letter, EBA published an opinion on the application of the provisions relating to the boundary between trading book and banking book.

    EBA issued the no-action letter on the new baking book, following an assessment of the concerns as well as considering the positions recently adopted by the legislators in the ongoing legislative process to amend the Capital Requirements Regulation (CRR2). The amendments to the CRR2 introduced certain elements of the Basel standards on the trading book/non-trading book boundary framework, which will enter into application as of June 28, 2023. As part of the ongoing legislative process amending the CRR2, both the Council and the Parliament, in their respective positions, proposed to postpone the application date of the boundary provisions to January 01, 2025. However, the legislators’ effort to postpone the application date of the boundary provisions is void if the legislative process ends after June 28, 2023. The front-loaded application of the boundary provisions compared to the rest of the Fundamental Review of the Trading Book (FRTB) framework creates the following significant operational issues:

    • Institutions would be subject to an operationally complex and fragmented two-step implementation of the boundary framework.
    • Institutions would be subject to an operationally burdensome and costly fragmented application of the rules for the reclassification of positions and internal-risk transfer between the trading and non-trading books.
    • No jurisdictions at global level envisaged such a two-step implementation of the boundary and internal-risk transfer frameworks. This would de-facto lead global institutions to be subject to very different regulatory requirements depending on where the risk management is performed, leading to fragmentation in the regulatory framework and in the financial markets.

     

    Related Links

     

    Keywords: Europe, EU, Banking, Single Rulebook, Q&A, Reporting, Basel, Regulatory Capital, CRR2, FRTB, Trading Book, Market Risk, EBA

    Featured Experts
    Related Articles
    News

    EBA Finalizes Templates for One-Off Climate Risk Scenario Analysis

    The European Banking Authority (EBA) has published the final templates, and the associated guidance, for collecting climate-related data for the one-off Fit-for-55 climate risk scenario analysis.

    November 28, 2023 WebPage Regulatory News
    News

    EBA Mulls Inclusion of Environmental & Social Risks to Pillar 1 Rules

    The European Banking Authority (EBA) recently published a report that recommends enhancements to the Pillar 1 framework, under the prudential rules, to capture environmental and social risks.

    October 31, 2023 WebPage Regulatory News
    News

    BCBS Consults on Disclosure of Crypto-Asset Exposures of Banks

    As a follow on from its prudential standard on the treatment of crypto-asset exposures, the Basel Committee on Banking Supervision (BCBS) proposed disclosure requirements for crypto-asset exposures of banks.

    October 19, 2023 WebPage Regulatory News
    News

    BCBS and EBA Publish Results of Basel III Monitoring Exercise

    The Basel Committee on Banking Supervision (BCBS) and the European Banking Authority (EBA) have published results of the Basel III monitoring exercise.

    October 18, 2023 WebPage Regulatory News
    News

    PRA Updates Timeline for Final Basel III Rules, Issues Other Updates

    The Prudential Regulation Authority (PRA) recently issued a few regulatory updates for banks, with the updated Basel implementation timelines being the key among them.

    October 18, 2023 WebPage Regulatory News
    News

    US Treasury Sets Out Principles for Net-Zero Financing

    The U.S. Department of the Treasury has recently set out the principles for net-zero financing and investment.

    October 17, 2023 WebPage Regulatory News
    News

    EC Launches Survey on G7 Principles on Generative AI

    The European Commission (EC) launched a stakeholder survey on the draft International Guiding Principles for organizations developing advanced artificial intelligence (AI) systems.

    October 14, 2023 WebPage Regulatory News
    News

    ISSB Sustainability Standards Expected to Become Global Baseline

    The finalization of the two sustainability disclosure standards—IFRS S1 and IFRS S2—is expected to be a significant step forward in the harmonization of sustainability disclosures worldwide.

    September 18, 2023 WebPage Regulatory News
    News

    IOSCO, BIS, and FSB to Intensify Focus on Decentralized Finance

    Decentralized finance (DeFi) is expected to increase in prominence, finding traction in use cases such as lending, trading, and investing, without the intermediation of traditional financial institutions.

    September 18, 2023 WebPage Regulatory News
    News

    BCBS Assesses NSFR and Large Exposures Rules in US

    The Basel Committee on Banking Supervision (BCBS) published reports that assessed the overall implementation of the net stable funding ratio (NSFR) and the large exposures rules in the U.S.

    September 14, 2023 WebPage Regulatory News
    RESULTS 1 - 10 OF 8938