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    ECB Updates Policy on Options and Discretions Under Basel Rules

    March 30, 2022

    The European Central Bank (ECB) published the findings of its commissioned research on payment preferences as part of the digital euro project. Findings reveal that safety and security are a concern among respondents, who sought guarantees against fraud and hacking as well as secure and reliable payment authentication methods. The research findings will feed into the ongoing digital euro investigation phase, which is expected to conclude in October 2023. ECB also updated the policy documents on the exercise of options and discretions when supervising banks, following a public consultation which ended on August 30, 2021.

    European banking rules grant supervisors the authority to exercise more than 100 options and discretions when supervising banks. Such options and discretions led to national supervisors taking different approaches before ECB Banking Supervision developed its policy framework in 2016. The now updated policies relate to many aspects of day-to-day supervision. They include how to calculate the net stable funding ratio, for instance how banks should treat off-balance sheet exposures for which the regulation does not already provide a dedicated treatment, how the ECB assesses applications from banks seeking to reduce their capital or to exempt third-country intragroup exposures from the large exposure limits, and what documentation banks need for such applications. The guide on options and discretions has been revised and updated to reflect changes to the Capital Requirements Directive and Regulation (CRR and CRD) introduced since the Guide’s publication in 2016. The guide aims to provide coherence, effectiveness, and transparency regarding the supervisory policies that will be applied in supervisory processes within the Single Supervisory Mechanism (SSM) as far as the significant credit institutions are concerned. It aims to assist the Joint Supervisory Teams in the performance of their tasks with regard to the principles the ECB intends to follow in supervising significant credit institutions. Among the published documents is a guideline document addressed to national competent authorities about the exercise of options and discretions in relation to the less significant institutions. In addition to the several policy documents, ECB published a feedback statement providing an overview of the comments received and the ECB assessment of these comments.


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    Keywords: Europe, EU, Banking, Basel, Reporting, Digital Euro, Cyber Risk, CBDC, Suptech, Options And Discretions, CRR 2, CRD 5, Regulatory Capital, Liquidity Risk, Large Exposures, Regtech, ECB, Subheadline

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