ECB Announces Multiple Regulatory Updates for Banks

Below are key highlights of the aforementioned developments:

• ECB updated the list of supervised entities in the European Union, with the total number of significant supervised entities changing to 110. The outlined updates cover changes in names of certain entities, deletions from the list, and acquisition or merger of certain entities, also noting the withdrawal of the license of NBG Bank Malta Ltd (thus name was deleted from the list). The full list contains the significant supervised entities, which ECB directly supervises (Part A), and the less significant supervised entities, which ECB indirectly supervises (Part B). 
• ECB updated the AnaCredit Manual Annexes on “List of national identifiers” and “Guidance document on non-EU entities identifiers search.” Additionally, as part of AnaCredit Q&A, ECB clarified the distinction between interest payments and other charges and whether some of the cash flows in other charges should be taken into account when calculating the interest rate in AnaCredit.
• The Governing Council of ECB decided to recalibrate the conditions of TLTRO III as part of the monetary policy measures adopted to restore price stability over the medium term. From November 23, 2022 until the maturity date or early repayment date of each respective outstanding TLTRO III operation, the interest rate on TLTRO III operations will be indexed to the average applicable key ECB interest rates over this period. The existing interest rate calculation method will be maintained for the period from the settlement date of each respective TLTRO III operation until November 22, 2022, albeit with indexing to the applicable key ECB interest rates ending on that date. Furthermore, three additional voluntary early repayment dates will be introduced to provide TLTRO III participants with additional opportunities to partly, or fully, repay their respective TLTRO III borrowings before their maturity. The first additional voluntary repayment opportunity will coincide with the start of the new interest rate calculation method on November 23, 2022.
• The Executive Board of ECB adopted a Decision on the application of minimum reserves for entities located in Croatia, in context of the introduction of the euro in Croatia on January 01, 2023 (ECB/2022/36). As of January 01, 2023, credit institutions and branches of credit institutions  in Croatia will be subject to the minimum reserve requirements of the Eurosystem. Given that the regular reserve maintenance period runs from December 21, 2022 to February 07, 2023. The Decision, in line with decisions taken when other countries joined the euro area, provides for a transitional maintenance period from January 01, 2023 to February 07, 2023 for the imposition of minimum reserve requirements on institutions located in Croatia. Furthermore, the Decision sets out rules governing the application of minimum reserve requirements during the transitional period and describes the method for calculating the reserve base in relation to the transitional period for liabilities owed to institutions located in Croatia. 
• The ECB note on Pillar 3 information follows an annual reconciliation exercise, which reconciles a selection of Pillar 3 information published by banks with the supervisory reporting data. As part of this exercise, ECB assessed 108 banks, 55 of which re-published their Pillar 3 reports and 25 re-submitted supervisory reporting data to correct for discrepancies. ECB flagged the remaining 29 banks with mismatches in the Accompanying note to the 2021 Selected Pillar 3 information. Overall, the exercise resulted in notable improvements in the consistency between regulatory reporting and selected Pillar 3 information. 
• The ECB statement on macro-prudential policies notes that, in many countries participating in European banking supervision, macro-financial vulnerabilities have increased in recent years in the backdrop of the pandemic and the ware in Ukraine. To address medium-term risks stemming from the identified vulnerabilities, macro-prudential authorities in ten countries have announced or implemented a positive rate for the countercyclical capital buffer, seven countries have announced or implemented a positive rate for the (sectoral) systemic risk buffer, and 15 countries have applied some form of borrower-based measures. The statement highlights that macro-prudential policy response should consider the near-term headwinds to economic growth and to avoid that an increase in capital buffers results in an excessive tightening of credit conditions at the current juncture. ECB also emphasizes that financial stability risks in the non-bank financial sector should also be addressed from a systemic risk perspective. 
• The results of the financial stability review reveal that the euro area banking system is well-placed to withstand many risks, in part because of the regulatory and prudential policy reforms of the past decade. The asset quality outlook for banks has deteriorated significantly over the last six months and there are signs of increasing credit risks despite the declining non-performing loan (NPL) ratios. Bank profitability improved slightly in the first half of 2022, driven by higher operating income, albeit at a slower pace than in 2021. Banks’ solvency and leverage ratios declined in the first half of 2022, but they remained at robust levels. With regard to non-bank financial sector, non-bank financial intermediaries have started to sell riskier assets in response to rising yields and a worsening outlook for credit risk.

Related Links

• Update on List of Supervised Entities List (PDF)
• Changes to List of Significant Institutions (PDF)
• Updates on AnaCredit Q&A
• Update on TLTRO III
• Decision on Minimum Reserves for Croatia
• Details of Pillar 3 Reconciliation Exercise
• Accompanying Note to Pillar 3 Reconciliation (PDF)
• Selected Pillar 3 Information (XLSX)
• Statement on Macro-Prudential Policies
• Financial Stability Review

Keywords: Europe, EU, Banking, Financial Stability Review, Basel, Regulatory Capital, Credit Risk, TITRO III, Interest Rate Risk, Pillar 3, Anacredit, Q A, Significant Credit Institutions, Reporting, ALM, NBFI, Liquidity Risk, Cyber Risk, Disclosures, Macro Prudential Policy, ECB