The European Banking Authority (EBA) published regulatory technical standards on the prudential consolidation of an investment firm group under the Investment Firms Regulation (IFR). The Authority also published a report on the convergence of supervisory practices for 2022, a report on the holdings of minimum requirement for own funds and eligible liabilities (MREL) instruments issued by the most systemic European banks, an interactive signposting tool for supervisory reporting to assist banks in identifying and understanding the reporting requirements that are applicable to them, and revised templates for reporting of deposits subject to Russian and Belarusian economic sanctions. Additionally, the European Supervisory Authorities (ESAs) published an interactive factsheet to help consumers understand how the recent increases in inflation and interest rates can affect their money.
Below are the key highlights of the aforementioned developments:
- The draft regulatory technical standards cover four key aspects of prudential requirements for consolidation of investment firms including the scope, methods and the methodology for prudential consolidation of the capital requirements and the rules applicable for minority interest and additional Tier 1 and Tier 2 instruments issued by subsidiaries in the context of prudential consolidation. The underlying principle for developing these draft standards has been alignment with the corresponding framework for credit institutions, but differences exist based on the legal texts. These draft standards are the final regulatory products of the EBA Roadmap on investment firms, released in June 2020. The draft regulatory technical standards will be submitted to the Commission for endorsement before being published in the Official Journal of the European Union. The technical standards will apply 20 days after the entry into force.
- The report on convergence of supervisory practices highlights that the common supervisory impetus across the European Union met its goal for most of the supervisory priorities set in the EBA European Supervisory Examination Program for 2022 (ESEP), although competent authorities are still in the process of building up their capacity to review the risks associated with the digital transformation and environmental, social, and corporate governance (ESG). The 2022 ESEP of EBA introduced five key topics for supervisory attention throughout the EU, namely the impact of the COVID-19 pandemic on asset quality, information and communication technology, digital transformation, as well as ESG and Money Laundering/Terrorist Financing (ML/TF) risks. The report found that the interactions and the organization of the supervisory colleges were overall of a high quality, though timely information exchange and cooperation should be enhanced. In addition, EBA concluded that supervisors consciously applied proportionality in their supervisory practices, either in the identification of the set of institutions to review or in the level of the assessment performed.
- The report covers holdings of eligible liabilities issued by global systemically important institutions (G-SIIs) and other systemically important institutions (O-SIIs) with total assets above EUR 5 billion, as of December 2021. The report highlights that more than half of the resolution banks in the sample have exposures to eligible liabilities issued by G-SIIs and O-SIIs below 2% of MREL and 0.6% of the total risk exposure amount (TREA). In particular, twenty-five banks report exposures above 8% of their MREL and six institutions report exposures above 20% of their MREL. In addition, the report finds that, overall, the largest EU banks do not rely on other banks to place their MREL instruments. As of December 2021, G-SIIs and O-SIIs had placed a limited 3.7% of their eligible liabilities with banks in the sample, with seven banks out of 72 placing more than 20%. The report neither captures issuances by non-systemic banks nor considers the impact on banks with balance sheets below EUR 5bn – which limits its conclusions.
- The signposting tool comes in response to one of the recommendations from the June 2021 EBA report on the cost of compliance with supervisory reporting requirements and aims at supporting banks in the compliance process, establishing a common business logic and reducing their compliance and reporting costs. The signposting tool helps institutions in identifying the reporting requirements and templates that are relevant for particular credit institutions considering their type and the scope of activities. Whilst the EBA makes all efforts to have the tool up to date, it is meant to be used solely for orientation purposes and has no legal effect. EBA does not assume any liability for its contents and advises institutions to always consult the authentic versions of the relevant legal acts for the reporting framework, including their preambles, as published in the Official Journal of the European Union.
- EBA has updated templates to be used for the second annual reporting of information on deposits subject to the Russia and the Belarus Economic Sanctions Regulations. EBA is making the template available for voluntary use by the relevant national competent authorities and by the EU Commission, with the aim to promote a convergent approach and to reduce any associated reporting costs, especially for cross-border banks. EBA informs that these templates are not part of the EBA reporting framework and will not be supported by any formal tools or legal documents. In addition, EBA will not be part of any data collections and will not provide a technical package for the template and reporting process.
- The interactive factsheet provides answers to frequently asked questions and steps consumers can take to deal with the impact of inflation and rising interest rates on their finances. ESAs developed the interactive factsheet in fulfilment of their mandate in Article 9(1)(b) of their respective Founding Regulations, which requires the authorities “to take a leading role in promoting transparency, simplicity and fairness in the market for consumer financial products or services across the internal market, including by reviewing and coordinating financial literacy and education initiatives by the competent authorities.” ESAs are working with national supervisory authorities to translate the factsheet into all EU languages and promote it across the European Union.
- Press Release on Prudential Consolidation of Investment Firm Group
- Draft Standards on Prudential Consolidation (PDF)
- Press Release on Convergence of Supervisory Priorities
- Report on Convergence of Supervisory Practices (PDF)
- Press Release on Holdings of Eligible Liabilities
- Report on Holdings of Eligible Liabilities (PDF)
- Press Release on Launch of Signposting Tool
- Signposting Tool for Supervisory Reporting (XLSM)
- Press Release on Templates for Reporting of Deposits
- Instructions for Templates for Reporting of Deposits (PDF)
- Revised Templates for Reporting of Deposits (XLSX)
- Press Release on Interactive Factsheet
- Interactive Factsheet for Consumers (PDF)
Keywords: Europe, EU, Banking, Basel, Reporting, MREL, Supervisory Reporting, Regulatory Technical Standards, Investment Firms, IFR, G-SII, O-SII, ESEP, ML TF Risk, ESG Risk, ICT Risk, Digital Transformation, Regulatory Capital, Credit Risk, EBA, ESAs
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