The European Banking Authority (EBA) published the final guidelines on liquidity requirements exemption for investment firms, updated version of its 5.2 filing rules document for supervisory reporting, and Single Rulebook Question and Answer (Q&A) updates in July 2022. EBA also seeks comments on the revised guidelines on the Deposit Guarantee scheme (DGS) contributions, draft regulatory technical standards on the homogeneity of underlying exposures in simple, transparent, and standardized (STS) securitizations, and the supervisory handbook for the validation of internal ratings based systems.
The key highlights of the aforementioned updates follow:
- The guidelines on liquidity requirements exemption specify the criteria under which competent authorities may exempt small and non‐interconnected investment firms from liquidity requirements. The guidelines, which are in accordance with the Investment Firms Regulation or IFR, address three main elements: the set of investment services and activities provided by investment firms which are eligible for the exemption, the criteria for the exemption, and the guidance for competent authorities when granting and withdrawing an exemption. The guidelines will be applicable from two months after issuance date.
- The updated version 5.2 of filing rules document for supervisory reporting modifies rule 3.6 to redefine the condition to apply the new reporting subject and to explicitly instruct the usage of entity types to indicate aggregate levels in the reporting subject of an aggregate reporting document. The filing rules represent a collection of additional rules and guidance specifically applicable to the remittance of eXtensible Business Reporting Language (XBRL) reports for reporting entities in scope of relevant EBA regulations (for example, banks) regulatory filings by relevant national and supranational authorities to EBA.
- The EBA Single Rulebook Q&A tool updates for July 2022 include answers to 18 questions. The updates cover queries on topics such as credit risk, market risk, own funds, k-factor requirements, leverage ratio, STS securitization, and minimum requirements for own funds and eligible liabilities (MREL). The overall objective of the Q&A tool is to ensure consistent and effective application of regulatory framework across the Single Market. Institutions, supervisors, and other stakeholders can use the Single Rulebook Q&A tool to submit questions on certain EU regulations and directives.
- The revised guidelines on DGS contributions aim to enhance proportionality between the risk of a credit institution and its contributions to the deposit guarantee schemes and at streamlining and simplifying the original guidelines. EBA, in its latest review of the guidelines in 2021-22, concluded that, overall, the methodology remains appropriate, and identified several elements of the calculation method that should be improved. The key proposals include setting minimum thresholds for the majority of core risk indicators, adjusting the minimum weights of the core risk indicators, replacing the formula for determining the risk adjustment factor of each member institution, specifying how to account for deposits where the DGS coverage is subject to uncertainty, including in relation to client funds, and clarifying the addressees of the guidelines and their respective roles. The consultation period ends on October 31, 2022.
- The draft regulatory technical standards on homogeneity of underlying exposures in STS securitizations specify which underlying exposures are deemed to be homogeneous as part of the simplicity requirements under the Securitization Regulation and as amended by the Capital Markets Recovery Package. The draft regulatory technical standards carry over the provisions on homogeneity set out in the existing RTS (Regulation No 2019/1851) with some modifications and will be applicable to all securitizations, including asset-backed commercial paper (ABCP), non-ABCP, and on-balance-sheet securitizations. The consultation period ends on October 28, 2022. Following a submission to the European Commission for endorsement, these standards will be subject to scrutiny by the European Parliament and the Council before being published in the Official Journal of the European Union.
- The supervisory handbook for validation of internal ratings-based systems clarifies the role of the validation function as part of corporate governance, in terms of scope of work and interaction with the credit risk control unit. The handbook provides general guidance on the expectations relative to the validation function, in accordance with article 185 of the Capital Requirements Regulation (CRR). The handbook does not present any specific methodology to be used by the validation function. Instead, the handbook provides a set of expectations and good practices on the work of the validation function depending on its position in the model cycle (that is, first or subsequent validation) as well as some additional guidance for the validation of rating systems when using external data, when outsourcing some validation tasks, as well as in a situation of data scarcity. The consultation period ends on October 28, 2022.
- Press Release on Guidelines on Liquidity Requirements Exemption
- Guidelines on Liquidity Requirements Exemption (PDF)
- Press Release on EBA Filing Rules Version 5.2
- EBA Filing Rules Version 5.2 (PDF)
- Press Release on Revised Guidelines on Deposit Guarantee Schemes
- Consultation Paper on Revised Guidelines on Deposit Guarantee Schemes (PDF)
- Press Release on Draft Standards on STS Securitizations
- Consultation Paper on Draft Standards on STS Securitizations (PDF)
- Press Release on Supervisory Handbook
- Consultation Paper on Supervisory Handbook (PDF)
- Single Rulebook Q&A
Keywords: Europe, EU, Banking, Securities, Investment Firms, IFR, Liquidity Risk, XBRL, Filing Rules, Deposit Guarantee Scheme, Credit Risk, STS Securitization, Securitization Regulation, Regulatory Technical Standards, Supervisory Handbook, CRR, Single Rulebook, Q&A, Reporting, Basel, Market Risk, MREL, Own Funds, IRB Approach, EBA
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