In response to the impact of COVID-19 outbreak, EBA published statements that provide guidance on the use of flexibility in supervisory reporting, clarify expectations in relation to dividend and remuneration policies, and outline the necessary measures to prevent money laundering and terrorist financing. EBA provides details on its call for competent authorities to offer leeway on reporting dates, urging one-month flexibility for reports with remittance dates between March and the end of May 2020. However, there has been no delay for reporting in accordance with the reporting framework version 2.9. EBA also called for flexibility in assessing deadlines of Pillar 3 disclosures of institutions and decided, in coordination with BCBS, to cancel the Quantitative Impact Study (QIS) based on June 2020 data.
In its statement on supervisory reporting, EBA highlighted that, in general, institutions should be allowed up to one additional month for submitting the required data. Each competent and resolution authority should clarify the precise terms for institutions in their jurisdiction. Such exception should not apply to
- Information on the liquidity coverage ratio (LCR) and the Additional Liquidity Monitoring Metrics (ALMM) and to the data sets identified as priority by the competent or resolution authority. These data should be reported in accordance with the deadlines specified in the applicable reporting standard.
- Reporting for resolution planning purposes. Information on the liability structure of an institution, including intra-group financial connections, should be reported to resolution authorities by the set date in the applicable reporting standard (April 30, 2020 or earlier if set by the resolution authority).
From March 2020 onward, the reporting framework version 2.9 will gradually replace its predecessor version 2.8. EBA is of the view that prolonging the application of version 2.8 would not provide a significant relief to institutions or authorities. Reporting in accordance with version 2.9 should therefore start, as envisaged by the adopted Implementing Act amending Regulation, with the reference date March 31, 2020. EBA also e encouraged competent authorities to be flexible when assessing the institutions’ compliance with the deadlines for the publication of their Pillar 3 reports. The statement adds that the competent authorities and institutions should assess the need for additional Pillar 3 disclosures on prudential information that may be necessary to properly convey the risk profile of the institution in the context of the COVID-19 outbreak. In addition, in its statement on actions to mitigate financial crime risks during the COVID-19 pandemic, EBA calls on competent authorities to support ongoing efforts of financial institutions by sharing information on emerging money laundering and terrorist financing risks, setting clear regulatory expectations, and using supervisory tools flexibly.
In its statement of dividend distribution and remuneration policies, EBA emphasizes that the capital relief resulting from the measures adopted by competent authorities in response to COVID-19 crisis are to be used to finance the corporate and household sectors and not to increase the distribution of dividends or make share buybacks for the purpose of remunerating shareholders. EBA, acknowledging that some banks have already communicated a postponement of their decisions, urges all banks to refrain from dividend distribution or share buybacks. Banks should revert to their competent authorities in case they consider themselves legally required to pay-out dividends or make share buybacks. EBA also considers that ensuring the efficient and prudent allocation of capital within banking groups is crucial and should be monitored by competent authorities. Furthermore, competent authorities should ask banks to review their remuneration policies, practices, and awards to ensure that they are consistent with, and promote, sound and effective risk management, also reflecting the current economic situation. Remuneration and, in particular, its variable portion should be set at a conservative level. To achieve an appropriate alignment with risks stemming from the COVID-19 pandemic a larger part of the variable remuneration could be deferred for a longer period and a larger proportion could be paid out in equity instruments.
- Press Release
- Statement on Supervisory Reporting (PDF)
- Statement on Dividend and Remuneration Policies (PDF)
- Statement on Mitigating Financial Crime Risks (PDF)
Keywords: Europe, EU, Banking, COVID-19, Reporting, Framework 2.9, Pillar 3, LCR, QIS, Resolution Planning, Disclosures, BCBS, EBA
Previous ArticleBoM Issues Guideline on Measurement of Credit Impairment for Banks
The European Banking Authority (EBA) has published the final templates, and the associated guidance, for collecting climate-related data for the one-off Fit-for-55 climate risk scenario analysis.
The European Banking Authority (EBA) recently published a report that recommends enhancements to the Pillar 1 framework, under the prudential rules, to capture environmental and social risks.
As a follow on from its prudential standard on the treatment of crypto-asset exposures, the Basel Committee on Banking Supervision (BCBS) proposed disclosure requirements for crypto-asset exposures of banks.
The Basel Committee on Banking Supervision (BCBS) and the European Banking Authority (EBA) have published results of the Basel III monitoring exercise.
The Prudential Regulation Authority (PRA) recently issued a few regulatory updates for banks, with the updated Basel implementation timelines being the key among them.
The U.S. Department of the Treasury has recently set out the principles for net-zero financing and investment.
The European Commission (EC) launched a stakeholder survey on the draft International Guiding Principles for organizations developing advanced artificial intelligence (AI) systems.
The finalization of the two sustainability disclosure standards—IFRS S1 and IFRS S2—is expected to be a significant step forward in the harmonization of sustainability disclosures worldwide.
Decentralized finance (DeFi) is expected to increase in prominence, finding traction in use cases such as lending, trading, and investing, without the intermediation of traditional financial institutions.
The Basel Committee on Banking Supervision (BCBS) published reports that assessed the overall implementation of the net stable funding ratio (NSFR) and the large exposures rules in the U.S.