The European Banking Authority (EBA) published the final guidelines on transferability to support the resolvability assessment, updated the 2021 data for identifying a subset of banks as global systemically important institutions (G-SIIs), set out the Single Rulebook Question and Answer (Q&A) updates in September 2022, and updated its risk dashboard.
The key highlights of the aforementioned updates follow:
- The final guidelines on transferability aim at supporting the assessment of the feasibility and credibility of transfer strategies and include requirements relating to the implementation of transfer tools when considered as the preferred or variant strategies for institutions. Transferability is defined as the elements of resolvability that will facilitate the transfer of an entity, a business line or a portfolio of assets, rights and/or liabilities to an acquirer (“transfer perimeter”), a bridge institution, or an asset management company. The transferability guidelines provide guidance relating to the definition of the transfer perimeter, separability (that is, how to facilitate separation of an entity or a business from the rest of the group in resolution), and the steps to operationalize the implementation of the transfer. The transferability guidelines complement the resolvability guidelines, published on January 13, 2022. Institutions and resolution authorities should comply with these guidelines in full by January 01, 2024. The resolvability and transferability guidelines will be updated and complemented as progress is achieved on relevant policy topics, both at international and European Union levels. Moreover, EBA is currently consulting on publication of the bail-in mechanics by resolution authorities and working on the topics of resolvability testing and transparency.
- EBA, in the context of the G-SII identification methodology and buffer rates allocation, disclosed data items specific to the recognition of the Banking Union and of institutions that are part of the Single Resolution Mechanism. The published data covers 13 indicators including the recently added trading volume indicator and updated underlying data for the 30 largest institutions in the European Union whose leverage ratio exposure measure exceeds EUR 200 billion. Data from 27 institutions shows that the aggregate amount for total exposures increased by 3.3% to EUR 20.992 billion at the end of 2021. Intra-financial system assets, assets under custody and over-the-counter derivatives increased by 37.5%, 12.2% and by 9.6%, respectively, accounting for the largest increase since 2013. Payments activity increased by 9.4%, while level 3 assets showing the largest development across all indicators with an increase of 96.3%, rising to an aggregate value above EUR 258 billion. Cross-jurisdictional liabilities and claims both increased by 19.5% and 12.3%, respectively. The data shows that no indicators have observed a decrease since end of 2020 figures. EBA, acting as a central data hub in the disclosure process, updates the data on a yearly basis and provides user-friendly tools to aggregate it across the European Union.
- The EBA Single Rulebook Q&A tool updates for September 2022 include answers to 13 questions. The updates cover queries on topics such as credit risk, market risk, and liquidity risk. The overall objective of the Q&A tool is to ensure consistent and effective application of regulatory framework across the Single Market. Institutions, supervisors, and other stakeholders can use the Single Rulebook Q&A tool to submit questions on certain EU regulations and directives.
- The EBA Risk Dashboard offers an overview of the main risks and vulnerabilities in the banking sector in European Union. This version of the risk dashboard notes that banks have ample liquidity buffers, but future funding conditions are becoming more challenging. It indicates that operational risk remains high due to digitalization, cyber risk, and sanction compliance challenges while credit risk does not show major signs of deterioration but the outlook is grim. The risk dashboard also indicates the potential for adverse effects of extreme weather events on the balance sheets of banks. Banks might be underestimating those risks by engaging too much capital in activities that reinforce climate change or in companies and projects with an inadequate management of climate-related risks. They might also be securing loans with assets subject to increased transitional and physical risks. Meanwhile, premiums to insure these assets against physical risks might be going up, leading some obligors to discontinue their insurance policies.
- Press Release on Transferability Guidelines
- Final Report on Transferability Guidelines (PDF)
- Press Release on Data for G-SIIs Identification
- G-SII Data (PDF)
- Single Rulebook Q&A
- News Release on Risk Dashboard
Keywords: Europe, EU, Banking, Credit Risk, Transferability in Resolution, Resolvability Assessment, Disclosures, Systemic Risk, G-SIBS, Single Rulebook, Q A, Market Risk, Liquidity Risk, BCBS, FSB, Resolution Framework, Basel, Risk Dashboard, EBA
Across 35 years in banking, Blake has gained deep insights into the inner working of this sector. Over the last two decades, Blake has been an Operating Committee member, leading teams and executing strategies in Credit and Enterprise Risk as well as Line of Business. His focus over this time has been primarily Commercial/Corporate with particular emphasis on CRE. Blake has spent most of his career with large and mid-size banks. Blake joined Moody’s Analytics in 2021 after leading the transformation of the credit approval and reporting process at a $25 billion bank.
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