ECB published its opinion on the proposal for the regulation on amending Capital Requirements Regulation or CRR (EU Regulation No 575/2013) with respect to minimum loss coverage for non-performing exposures (NPEs). ECB supports the proposed regulation, which is part of the EC’s package of measures to deal with NPEs in EU.
ECB, in April 2018, had received requests from the European Parliament and the Council of the European Union, respectively, for an opinion on the proposed regulation. The proposed regulation is expected to address the possible risks arising from the build-up of insufficiently provisioned NPEs in the future. The proposed regulation is also an important part of the EU efforts to further reduce risks in the banking system. Following are the key observations of the ECB opinion on the proposed regulation:
- ECB welcomes the clarification in the proposed regulation that the prudential backstop for NPEs, which is established by the proposed regulation, does not prevent competent authorities from exercising their supervisory powers in accordance with applicable law. More specifically, despite the application of this prudential backstop, ECB may, on a case-by-case basis, determine that the NPEs of a specific credit institution are not sufficiently covered and use its supervisory powers under the Pillar 2 framework
- ECB welcomes the fact that the definition of an NPE includes all types of NPEs, in particular retail exposures.
- To determine the applicable amount of insufficient coverage for NPEs to be deducted from common equity tier (CET) 1 items, institutions are required to multiply their NPEs by the applicable factor specified in the proposed regulation. ECB supports calibration of the applicable factors under the proposed regulation.
- ECB understands that the relevant supervisory reporting requirements specified under Implementing Regulation (EU) No 680/2014 will be amended to the effect that competent authorities will be able to monitor institutions’ compliance with the proposed regulation. Furthermore, ECB invites EC to consider whether a disclosure requirement with regard to institutions’ compliance with the minimum coverage requirement should be introduced in CRR.
Keywords: Europe, EU, Banking, Non-Performing Exposures, NPLs, CRR, Pillar 2, CET1, EC, ECB
BCBS amended the guidelines on sound management of risks related to money laundering and financing of terrorism (ML/FT).
US Agencies (Farm Credit Administration, FDIC, FED, FHFA, and OCC) finalized changes to the swap margin rule to facilitate implementation of prudent risk management strategies at banks and other entities with significant swap activities.
PRA published a letter that builds on the expectations set out in the supervisory statement (SS3/19) on enhancing banks' and insurers' approaches to managing the financial risks from climate change.
EBA finalized the guidelines on treatment of structural foreign-exchange (FX) positions under Article 352(2) of the Capital Requirements Regulation (CRR).
FSB published a statement on the impact of COVID-19 pandemic on global benchmark transition.
IAIS published the list of Internationally Active Insurance Groups (IAIGs) publicly disclosed by group-wide supervisors.
FED has temporarily revised the reporting form on consolidated financial statements for holding companies (FR Y-9C; OMB No. 7100-0128).
EC launched a consultation on the review of the key elements of Solvency II Directive, with the comment period ending on October 21, 2020.
ECB launched a consultation on the guide that sets out supervisory approach to consolidation projects in the banking sector.
IAIS published technical specifications, questionnaires, and templates for 2020 Insurance Capital Standard (ICS) and Aggregation Method data collections.