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    EBA Assesses Application of Regulatory Standards on Identified Staff

    January 16, 2020

    EBA published its report on the application of the regulatory technical standards on criteria to identify categories of staff whose professional activities have a material impact on the risk profile of an institution. This peer review aims to assess the supervisory practices followed and measures taken by competent authorities with respect to the requirements of the technical standards. The results of the review show that, within the European Economic Area, the competent authorities have properly applied the technical standards during the reference period from January 01, 2015 to December 31, 2017.

    To gain a deep understanding of the identification process, which begins with practices within the institutions, the review panel selected a small number of institutions forming a representative sample, including one significant institution for each member state and two less significant institutions. These institutions were requested to provide data on the numbers of staff members identified under the qualitative and quantitative criteria set out in the technical standards and through the application of additional internal criteria. This assessment was intended to enable EBA and the review panel to flag any issues that institutions face in the application of the EBA requirements, along with any possible interpretation issues or loopholes resulting from the current text of the technical standards. This report highlights the following observed best practices:

    • Competent authorities collect information from institutions to ensure that the required information is all included in the documentation.
    • Institutions have a notification and prior approval process regarding exemptions for identified staff under Article 4(4) and (5) of the technical standards.
    • The application of exemptions for individual staff is assessed under Article 4(2) to (4) of the technical standards.
    • The use of supervisory tools for assessing the compliance of institutions.

    Additionally, the review panel identified certain weaknesses in the application of some parts of the technical standards. Competent authorities typically follow a risk-based approach, though some of them have some difficulties to distinguish their standard risk-based methods of supervision and the application of the proportionality principle. This leads to diverging approaches and, in a few cases, to the exclusion of certain institutions from the supervisory review on a systematic basis. The review panel suggested conducting a targeted review of the application of the technical standards after their amendment, following the entry into force of the Capital Requirements Directive or CRD5 (2019/879/EU). However, time should be allowed before this review takes place, as both supervisors and institutions will need time to implement CRD5 and the amended technical standards on identified staff. The review will aim to ensure that the competent authorities have addressed the observed weaknesses in a consistent manner.

     

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    Keywords: Europe, EU, Banking, Operational Risk, Peer Review, Competent Authorities, Regulatory Technical Standards, Remuneration, CRD5, EBA

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