Featured Product

    DNB Announces Measures for LSIs to Alleviate Impact of COVID-19 Crisis

    March 27, 2020

    DNB announced the supervisory approach for Less Significant Institutions, or LSIs, in light of the COVID-19 crisis. These institutions will be allowed to temporarily operate below the level of capital defined by the Pillar 2 Guidance and the capital conservation buffer and below the required liquidity coverage ratio (LCR). Also, DNB is leaving the Countercyclical Capital Buffer (CCyB) at 0%. However, DNB communicated that eventually the CCyB will be built up to 2%. Furthermore, DNB supports the ECB recommendation for significant credit institutions not to pay out dividends for 2019 and 2020 until at least October 01, 2020. DNB also considers this recommendation to be applicable to the Less Significant Institutions that are under the direct supervision of DNB.

    In line with the measures taken by ECB, DNB has announced the following measures for Less Significant Institutions:

    • DNB may consider providing operational relief to the Less Significant Institutions. DNB may also adjust prudential timetables, processes, and deadlines on a case-by-case basis, depending on individual circumstances. DNB is, however, not planning to adjust essential data requests to monitor current developments, such as the daily liquidity monitoring requests or any data that DNB is required to request under law on this.
    • Pillar 2 requirements can partially be met by capital instruments that do not qualify as common equity tier 1 (CET1) capital. The Pillar 2 requirements no longer need to be composed entirely of CET1 capital, but can be a reflection of the minimal capital composition under Pillar 1 requirements—that is, at least 56.25% CET1, 18.75% Additional Tier 1 instruments (AT1), and 25% Tier 2 instruments. This change in capital composition under Pillar 2 requirements was initially scheduled to come into effect in January 2021, in line with the revised approach under the revised Capital Requirements Directive (CRD V), but is instead being brought forward now. However, DNB can still request banks to hold a different Pillar 2 requirements composition, depending on bank-specific circumstances.
    • DNB decided to lower the systemic buffers for the three largest Dutch banks (ING, Rabobank, and ABN Amro). This measure will remain in force as long as necessary. Once the situation is back to normal, DNB will compensate the systemic buffer reduction by gradually increasing CCyB to 2% of the Dutch risk-weighted exposures. This compensatory arrangement will work out to be more or less capital-neutral for the three large banks involved and the same effect is envisaged for the other banks, including the Less Significant Institutions.
    • DNB decided to temporarily postpone the introduction of a floor for mortgage loan risk-weighting. This forthcoming regulation would have obliged banks using internal models to apply a minimum floor to their risk-weighting of domestic mortgage loan portfolios. Implementation will be postponed for as long as necessary.
    • As part of the Pillar 2 supervisory requirements, DNB has, on a case-by-case basis, imposed limits on asset encumbrance. Given the current circumstances, DNB may allow (on a case-by-case basis) for some temporary relaxation of these asset encumbrance limits.

    These measures provide capital and liquidity relief to the Less Significant Institutions for use in support of the economy. Also, the Less Significant Institutions should continue to apply sound underwriting standards, pursue adequate policies regarding the recognition and coverage of non-performing exposures, and conduct solid capital and liquidity planning and robust risk management. DNB urges all Less Significant Institutions to stay in close contact with their account supervisor and swiftly raise any concerns or issues that may come up. As part of this, DNB still expects the Less Significant Institutions, in line with the most recent Supervisory Review and Evaluation Process (SREP) decisions, to immediately notify DNB of early warning signals, including if it is expected that the institution will fail to meet the Pillar 2 guidance. DNB will continue to monitor developments, also in close contact with the ECB. DNB may take further measures as necessary, depending on how the situation unfolds.


    Related Links

    Keywords: Europe, Netherlands, Banking, COVID-19, CCyB, Systemic Risk, Basel III, Dividend Distribution, Asset Encumbrance, Pillar 1, Pillar 2, Regulatory Capital, Less Significant Institutions, CRD, DNB

    Featured Experts
    Related Articles

    EBA Proposes Standards for IRRBB Reporting Under Basel Framework

    The European Banking Authority (EBA) proposed implementing technical standards on the interest rate risk in the banking book (IRRBB) reporting requirements, with the comment period ending on May 02, 2023.

    January 31, 2023 WebPage Regulatory News

    FED Issues Further Details on Pilot Climate Scenario Analysis Exercise

    The U.S. Federal Reserve Board (FED) set out details of the pilot climate scenario analysis exercise to be conducted among the six largest U.S. bank holding companies.

    January 17, 2023 WebPage Regulatory News

    US Agencies Issue Several Regulatory and Reporting Updates

    The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.

    January 04, 2023 WebPage Regulatory News

    ECB Issues Multiple Reports and Regulatory Updates for Banks

    The European Central Bank (ECB) published an updated list of supervised entities, a report on the supervision of less significant institutions (LSIs), a statement on macro-prudential policy.

    January 01, 2023 WebPage Regulatory News

    HKMA Keeps List of D-SIBs Unchanged, Makes Other Announcements

    The Hong Kong Monetary Authority (HKMA) published a circular on the prudential treatment of crypto-asset exposures, an update on the status of transition to new interest rate benchmarks.

    December 30, 2022 WebPage Regulatory News

    EU Issues FAQs on Taxonomy Regulation, Rules Under CRD, FICOD and SFDR

    The European Commission (EC) adopted the standards addressing supervisory reporting of risk concentrations and intra-group transactions, benchmarking of internal approaches, and authorization of credit institutions.

    December 29, 2022 WebPage Regulatory News

    CBIRC Revises Measures on Corporate Governance Supervision

    The China Banking and Insurance Regulatory Commission (CBIRC) issued rules to manage the risk of off-balance sheet business of commercial banks and rules on corporate governance of financial institutions.

    December 29, 2022 WebPage Regulatory News

    HKMA Publications Address Sustainability Issues in Financial Sector

    The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.

    December 23, 2022 WebPage Regulatory News

    EBA Updates Address Basel and NPL Requirements for Banks

    The European Banking Authority (EBA) published regulatory standards on identification of a group of connected clients (GCC) as well as updated the lists of identified financial conglomerates.

    December 22, 2022 WebPage Regulatory News

    ESMA Publishes 2022 ESEF XBRL Taxonomy and Conformance Suite

    The General Board of the European Systemic Risk Board (ESRB), at its December meeting, issued an updated risk assessment via the quarterly risk dashboard and held discussions on key policy priorities to address the systemic risks in the European Union.

    December 22, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8699