Featured Product

    EBA Consults on Role of Environmental Risks in Prudential Framework

    The European Banking Authority (EBA) is consulting on the incorporation of environmental risks in the prudential framework (Pillar 1) for credit institutions and investment firms until August 02, 2022. Meanwhile, the European Supervisory Authorities (ESAs) are also seeking feedback on the draft regulatory technical standards on sustainability disclosures for Simple, Transparent, and Standardized (STS) securitizations, with the comment period ending on July 02, 2022.

    The EBA consultation initiates the discussion on the appropriateness of the current prudential framework to address environmental risk drivers and considers the potential justification for a dedicated prudential treatment of exposures substantially associated with environmental and/or social objectives and those subject to environmental and/or social impacts. The consultation is issued in relation to the mandates in certain articles of the Capital Requirements Regulation (575/2013) and the Investment Firms Regulation (IFR or Regulation 2019/2033). EBA plans to publish the final report in 2023 and formulate its policy recommendations after considering feedback received and insights gained from available data and policy developments at the European Union and international levels. The consultation specifically:

    • provides an analysis of the extent to which environmental risks are already reflected in the Pillar 1 own funds requirements via internal and external ratings, valuation of financial instruments and collateral, and scenario analysis.
    • notes that the potential for the existing framework to capture environmental risks, but the way in which such risks translate into financial risks over time remains an area of significant uncertainty.
    • suggests as an alternative to recognizing environmental risks within the structure of the framework, the potential introduction of specific risk-weighted adjustment factors is considered. However, it is noted that the initial analysis indicates that targeted amendments to the existing prudential requirements would address these risks more accurately than such adjustment factors, given the various challenges associated with their design and implementation.
    • discusses the use of forward-looking methodologies and highlights the importance of reliable information collection environmental risks and their impact on financial losses of institutions.
    • highlights the broader work of EBA in the area of environmental, social, and governance (ESG) risks, including transparency, risk management, Pillar 2 supervision, and macro-prudential capital buffers.

    The ESAs' are also consulting on the draft regulatory technical standards, which lay down the content, methodologies, and presentation of principal adverse impacts on sustainability factors of the assets financed by the underlying exposures for both non-ABCP [Asset-Backed Commercial Paper] traditional securitizations and on-balance-sheet STS securitizations. The proposed standards aim to facilitate disclosures by the originators of the principal adverse impact of assets financed by STS securitizations on ESG factors. The proposed standards further aim to supplement the Single Rulebook under the Securitization Regulation, as amended by the Capital Markets Recovery Package (CMRP), and draw on the ESAs’ work in respect of sustainability-related disclosures under the Sustainable Finance Disclosure Regulation (SFDR). As required in the mandate for these draft regulatory standards, ESAs have aimed to ensure a high degree of consistency with the disclosure framework developed under SFDR and the associated regulatory technical standards. Following the consultation period, the draft standards will be finalized and submitted to the European Commission. 


    Related Links


    Keywords: Europe, EU, Banking, STS Securitization, Basel, Regulatory Capital, Reporting, ESG, Climate Change Risk, Disclosures, Pillar 1, Regulatory Technical Standards, Securitization Regulation, SFDR, CRR, IFR, EBA, ESAs, Headline

    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