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    ECB Sets Out Multiple Regulatory Updates for Banks

    The European Central Bank (ECB) and the European Systemic Risk Board (ESRB) published a joint report addressing the ways in which climate shocks can affect the financial system in the European Union. ECB, together with the European System of Central Banks (ESCB) and the Single Supervisory Mechanism (SSM), also published the equality, diversity, and inclusion charter, the results of its comprehensive assessment of Addiko Bank AG, Agri Europe Cyprus Ltd, and Barclays Bank Ireland PLC, and the annexes to the manual and the validation checks for AnaCredit reporting.

    The key highlights of the aforementioned updates follow:

    • The joint report on macro-prudential challenge of climate change documents progress in the measurement and modeling of climate-related risks to European Union financial stability. The findings show that climate risks can quickly spread and harm companies and banks alike. The report adds further evidence on the systemic nature of climate risks and provides a foundation for a macroprudential policy response. The report identifies several amplifiers of climate risk across the financial system such as transition risk and physical climate risks. The report discusses the options for delivering a coordinated European macro-prudential response and considers adapting existing instruments, notably systemic risk buffers or concentration thresholds. As a next step, ECB will focus on strengthening an evidence-based case for policy action in the European Union, consolidating and developing necessary prudential policy recommendations. The Annexes to the report cover data and measurement on modeling framework for climate-related risks, main policy initiatives by institutions, and forward-looking climate risk metrics. 
    • The Equality, Diversity and Inclusion Charter lays out shared principles, common goals, and concrete commitments to improve working culture on a system-wide level. The charter upholds the principles that all people are equal in rights and dignity and that diverse teams bring more innovative solutions. The heads of 26 European national central banks and national competent authorities have become the first signatories of this charter, indicating their common vision for, and commitment to, equality, diversity, and inclusion. This charter will be updated on a quarterly basis to include any further institutions that decide to join.
    • The results of comprehensive assessment show no capital shortfall for Addiko Bank AG or Barclays Bank Ireland PLC, although Agri Europe Cyprus falls below the 5.5% Common Equity Tier 1 capital ratio threshold under the adverse scenario of the stress test. The exercise concludes that Agri Europe Cyprus faces no capital shortfall after adjustments, since its CET1 ratio increased significantly as of 2021, due to the bank’s decision to retain earnings from 2020 to 2021 during the first quarter of 2022. In addition, ECB conducted a stress test exercise to examine how banks’ capital positions would evolve under a baseline and an adverse scenario from end-2020 to end-2023. ECB expects all banks to follow up on the outcome of the exercise and address the shortcomings found in the comprehensive assessment.
    • The AnaCredit Validation checks document has been updated by ECB. The updates include addition of new consistency checks to identify misreporting of “Non-applicable” in the accounting dataset, amendment of several check definitions, and removal of some checks after introduction of new consistency checks with improved logic. Validation checks ensure that the information registered in AnaCredit complies with the AnaCredit data model. These checks also allow the methodologically inconsistent data (although the data might be logically compliant with the AnaCredit data model) to be identified. The published validation checks are a minimum set of self-contained rules which the data reported to AnaCredit must satisfy in order to comply with the completeness and consistency requirements stipulated.
    • The Annexes to the AnaCredit Manual, which includes the list of national identifiers, guidance document on non-EU entities identifiers search, and list of postal code formatting rules and regular expressions per country, has also been updated by ECB.

     

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    Keywords: Europe, EU, Banking, ESG, Climate Change Risk, Systemic Risk, Systemic Risk Buffer, Basel, Regulatory Capital, Addiko Bank AG, Barclays Bank Ireland PLC, Agri Europe Cyprus, Anacredit, Reporting, ESRB, ESCB, Diversity and Inclusion, ECB

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