EBA Issues Phase 1 of Reporting Framework 3.2 and Other Announcements

The phase 1 of its reporting framework 3.2, with the technical package covering the new reporting requirements that are expected apply from December 2022. The new reporting requirements under the reporting framework 3.2 include amendments to the supervisory reporting frameworks for common reporting (COREP) on own funds, additional liquidity monitoring metrics (ALMM), net stable funding ratio (NSFR), asset encumbrance, global systemically important institutions (G-SII) reporting, and investment firms. The technical package supports the implementation of the reporting framework by providing standard specifications and includes the validation rules, the Data Point Model (DPM) and the XBRL taxonomies. The DPM Query Tool has also been updated to reflect the current release. The EBA reporting framework release 3.2 includes the following amended reporting requirements:

• Changes to own funds in response to regulatory technical standards on software, to securitizations to align with the Capital Market Recovery Package in response to the COVID-19 crisis and other technical amendments (implementing technical standards and technical package)
• Changes to ALMM, including new proportionality measures for small and non-complex institutions
• Amendments to the DPM and validation rules of NSFR
• Changes to asset encumbrance, including a revision of the definition of the asset encumbrance level and further proportionality measures
• Extension of scope and amendments to the DPM and validation rules with respect to G-SII
• Annual update and minor amendments to the technical package on supervisory benchmarking
• New and amended remuneration reporting requirements for investment firms and credit institutions
• New regulatory technical standards on reporting for threshold monitoring purposes; expected first reference date of technical standards is June 2022

Phases 2 and 3 of the reporting framework 3.2 will be published in second and third quarters of this year. The technical package for Supervisory Benchmarking and Remunerations will be published in phases 2 and 3, respectively. EBA also published a revised list of validation rules for the reporting frameworks currently in use. The revised list highlights the validation rules that have been deactivated or the updated severity status. Coming back to the revised guidelines on SREP, the revisions aim at implementing the amendments to the Capital Requirements Directive (CRD5) and Capital Requirements Regulation (CRR2) and promoting convergence towards best supervisory practices. The changes to these guidelines do not alter the overall SREP framework but affect its main elements, including business model analysis, assessment of internal governance and institution-wide control arrangements, assessment of risks to capital and adequacy of capital to cover these risks, and assessment of risks to liquidity and funding and adequacy of liquidity resources to cover these risks. The guidelines will apply from January 01, 2023.

The key details of the other regulatory updates follow:

• EBA published an opinion on the intention of NBB to activate a new systemic risk buffer under Article 133 of the Capital Requirements Directives (CRD IV). EBA welcomed the introduction of the new sectoral systemic risk buffer of 9%, which will enter into force on May 01, 2022. The intended systemic risk buffer applies to nine institutions in Belgium and a specific subset of exposures—that is, the retail exposures to natural persons, calculated under the internal ratings-based (IRB) approach and secured by residential property for which the collateral is in Belgium.
• EBA finalized the revised guidelines on common procedures and methodologies for the supervisory review and evaluation process (SREP) and supervisory stress testing. The revisions aim at implementing the amendments to CRD5 and Capital Requirements Regulation (CRR2) and promoting convergence toward best supervisory practices. The changes to these Guidelines do not alter the overall SREP framework but affect its main elements, including  business model analysis, assessment of internal governance and institution-wide control arrangements, assessment of risks to capital and adequacy of capital to cover these risks, and assessment of risks to liquidity and funding and adequacy of liquidity resources to cover these risks. These guidelines will apply from January 01, 2023.
• In another update, EBA notified that the Council of the European Union has adopted restrictive measures against Russia and Belarus, following the invasion of Ukraine, which require actions from the financial sector. EBA underscores the need for European banks and other financial institutions to implement and comply with the restrictive measures adopted in response to the Ukrainian crisis. EBA will collect and filter queries related to the scope of the restrictive measures as they apply to banks, and channel them to the EU Commission who will answer them. 
• Finally, the European Supervisory Authorities (ESAs) warned consumers that many crypto-assets are highly risky and speculative. This warning comes in the context of growing consumer activity and interest in crypto-assets and the aggressive promotion of those assets and related products to the public, including through social media. ESAs also warn consumers that they should be aware of the lack of recourse or protection available to them, as crypto-assets and related products and services typically fall outside existing protection under current EU financial services rules.

Related Links

• Press Release on Opinion on Systemic Risk Buffer
• Opinion on Systemic Risk Buffer (PDF)
• Press Release on SREP Guidelines
• SREP Guidelines (PDF)
• Press Release on Reporting Framework and Validation Rules
• Reporting Framework 3.2
• DPM Query Tool (ZIP)
• Press Release on Measures Against Russia
• Press Release on Warning on Risks of Crypto-Assets

Keywords: Europe, EU, Belgium, Banking, Insurance, Securities, Systemic Risk Buffer, Systemic Risk, CRD IV, Basel, Opinion, SREP, Reporting, Reporting Framework 3.2, Investment Firms, COREP, Supervisory Benchmarking, Validation Rules, Ukraine, Russia, Restrictive Measures, Crypto-assets, Stress Testing, CRR, EBA, ESAs, NBB, Headline, Pillar 2