Featured Product

    EBA Report Assesses the Current Credit Risk Mitigation Framework in EU

    March 19, 2018

    EBA published a report reviewing the Credit Risk Mitigation (CRM) framework in EU. EBA conducted this assessment as part of its work on the review of the internal ratings-based (IRB) approach. This report is part of the fourth and last phase of the EBA roadmap on the IRB approach, which also includes a review of supervisory practices, a harmonized definition of default, and clarifications on modeling approaches to be used by institutions.

    The report clarifies the application of the Capital Requirements Regulation (CRR) provisions regarding CRM under different credit risk approaches. The report mapped relevant provisions to the corresponding credit risk approach, detailing the provisions for the techniques, eligibility, and methods of CRM available to institutions under the Standardized Approach (SA) and the Foundation-IRB Approach (F-IRB). The report provides a quantitative overview of the use of the CRM framework by institutions. Additionally, the report presents policy proposals for the consideration of EC, with a view to ensuring a proper and harmonized application of the current CRR provisions on the CRM framework through the necessary amendments to the Regulation. The report identifies the following key issues for consideration by EC:

    • Limited guidance is provided in the current CRR provisions on CRM under the Advanced-IRB (A-IRB) Approach. In line with the feedback received from the industry, EBA has committed to provide further guidance on the application of CRM provisions to institutions using the A-IRB Approach. 
    • The report re-iterates the position of EBA on the three mandates for technical standards in the area of CRM (identified in CRR): the regulatory technical standards (RTS) on recognition of conditional guarantees, the RTS on liquid assets, and the RTS on the internal models approach for master netting agreements. EBA believes that fulfilling these three mandates, instead of undertaking an analysis of the overall CRM framework, would run the risk of having disproportionate regulation with limited benefits. Furthermore, EBA recommends that the RTS on liquid assets mandate be deleted from the CRR while EBA will continuously monitor the need to deliver on the other two RTS mandates also, in light of international developments in this regulatory area.

     

    Related Links

    Keywords: Europe, EU, Banking, CRR, Credit Risk Mitigation, IRB Approach, SA Approach, EBA

    Related Articles
    News

    BoE Provides Reporting Update on Form AS and Form FV

    BoE updated the known issues document for the statistical reporting Forms AS and FV.

    August 10, 2020 WebPage Regulatory News
    News

    EBA Provides Clarity on Implementation of Guidance on COVID Reporting

    EBA updated the report on the implementation of selected COVID-19 policies.

    August 07, 2020 WebPage Regulatory News
    News

    OSFI Provides Update on Implementation of IFRS 17 in Canada

    OSFI published a letter that provides an update on the milestones for the implementation of the IFRS 17 standard on insurance contracts.

    August 07, 2020 WebPage Regulatory News
    News

    FSI Note Discusses Challenges Associated with COVID Relief Measures

    The Financial Stability Institute (FSI) of BIS published a brief note that examines the supervisory challenges associated with certain temporary regulatory relief measures introduced by BCBS and prudential authorities in response to the COVID-19 pandemic.

    August 06, 2020 WebPage Regulatory News
    News

    BCBS Consults on Principles for Operational Risk and Resilience

    BCBS is consulting on the principles for operational resilience and the revisions to the principles for sound management of operational risk for banks.

    August 06, 2020 WebPage Regulatory News
    News

    BoE Updates Template and Definitions for Form ER

    BoE updated the reporting template for Form ER as well as the Form ER definitions, which contain guidance on the methodology to be used in calculating annualized interest rates.

    August 05, 2020 WebPage Regulatory News
    News

    MAS Announces Key Initiatives to Support Adoption of SORA

    MAS announced several initiatives to support adoption of the Singapore Overnight Rate Average (SORA), which is administered by MAS.

    August 05, 2020 WebPage Regulatory News
    News

    HKMA Announces Repayment Deferment Under Payment Holiday Scheme

    HKMA, together with the Banking Sector Small and Medium-Size Enterprise (SME) Lending Coordination Mechanism, announced a ninety-day repayment deferment for trade facilities under the Pre-approved Principal Payment Holiday Scheme.

    August 05, 2020 WebPage Regulatory News
    News

    ESRB Paper Presents Alternative Approach to EBA Stress Test Proposal

    The Advisory Scientific Committee of ESRB published a response, in the form of an Insights Paper, to the EBA proposals for reforms to the stress testing framework in EU.

    August 05, 2020 WebPage Regulatory News
    News

    FASB Simplifies Accounting for Certain Financial Instruments

    FASB issued a new Accounting Standards Update (2020-06) to improve financial reporting associated with accounting for convertible instruments and contracts in an entity’s own equity.

    August 05, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 5642