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Key Regulations

Basic regulations and standards for the industries in which we operate

This section lists, not exhaustively, some of the regulatory documents of particular interest for the financial sector.

 

Basel III: capital

Scope: Global | Regulator: BCBS | Industry: Banking | Topic: Capital; liquidity; leverage | Date of publication: June, 2011

Set of proposals for banking regulation reform that supplement BIS II, adding a capital buffer, leverage and liquidity requirements, and modifying the capital base as well as the calculation of minimum capital requirements.

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Basel III revision

Scope: Global | Regulator: BCBS | Industry: Banking | Topic: Credit risk; operational; CVA; leverage; floors | Date of publication: December, 2017

Revisions to the Basel III regulatory framework that will help restore credibility in the calculation of RWA by: i) enhancing the robustness and risk sensitivity of the standardised approaches for credit risk and operational risk, which will facilitate the comparability of banks' capital ratios; ii) constraining the use of internally modelled approaches; and iii) complementing the risk-weighted capital ratio with a finalised leverage ratio and a revised and robust capital floor.

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CRD IV/CRR

Scope: EU | Regulator: PE y C | Industry: Banking | Topic: Capital; Corporate governance | Date of publication: June, 2013

CRD IV/CRR transposes Basel III to European law. This text strengthens bank capital requirements, introduces a mandatory capital conservation buffer and a discretionary countercyclical buffer, and foresees a framework for new regulatory requirements on liquidity and leverage, as well as additional capital requirements for systemically important institutions.

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Reform package of the financial system

Scope: EU | Regulator: European Commission | Industry: Banking | Topic: Capital; liquidity; leverage; resolution | Date of publication: November, 2016

Reform package of the financial system, whereby the European Commission is proposing to amend the Capital Requirement Directive (CRD IV), the Capital Requirement Regulation (CRR), the Bank Recovery and Resolution Directive (BRRD), the Single Resolution Mechanism Regulation (SRMR), and the Regulation on EMIR. Some of the key elements of this reform are the leverage ratio (LR), the total loss absorbing capacity (TLAC) requirement, the net stable funding ratio (NSFR) and the capital requirements for market risk derived from the Fundamental Review of the Trading Book (FRTB).

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Standards on the regulatory treatment of accounting provisions for an interim period

Scope: Global | Regulator: BCBS | Industry: Banking | Topic: Credit risk; Capital; Provisions | Date of publication: March, 2017

Final standards that set out the regulatory treatment of accounting provisions for an interim period. Given the limited time until the effective date of IFRS 9, the BCBS retains the current treatment under the Basel framework that period. Further, the final standards set out the transitional arrangements that institutions may choose to implement from 1 January 2018, aiming to smooth any potential significant negative impact on regulatory capital arising from the introduction of expected credit losses (ECL) accounting.

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Changes to the IRB method

Scope: EU | Regulator: EBA | Industry: Banking | Topic: Credit risk; Capital | Date of publication: March, 2015

Deals with key actions that need to be implemented to improve the IRB approach framework.

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RTS on assessment methodology for IRB approach

Scope: EU | Regulator: EBA | Industry: Banking | Topic: Credit risk | Date of publication: July, 2016

RTS on the assessment methodology for IRB, which pretend to harmonise its implementation across all Member States in the EU. In particular, it rectifies the issues identified in this regard in the EBA Report on the comparability of the IRB models and provides enhanced clarity on various aspects of the IRB Approach application.

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Final Guidelines on PD and LGD estimation and the treatment of defaulted exposures

Scope: UE | Regulator: EBA | Industry: Banking | Topic: Credit risk | Date of publication: November, 2017

Guidelines on estimation of the IRB risk parameters (PD and LGD) and on the treatment of defaulted exposures, which are focused on the definitions and modelling techniques used in the estimation of risk parameters for both non-defaulted (PD and LGD) and defaulted exposures (best estimate of expected loss (ELbe) and LGD-in defaulted).

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Standards on the regulatory treatment of accounting provisions for an interim period

Scope: Global | Regulator: BCBS | Industry: Banking | Topic: Credit risk; Capital; Provisions | Date of publication: March, 2017

Final standards that set out the regulatory treatment of accounting provisions for an interim period. Given the limited time until the effective date of IFRS 9, the BCBS retains the current treatment under the Basel framework that period. Further, the final standards set out the transitional arrangements that institutions may choose to implement from 1 January 2018, aiming to smooth any potential significant negative impact on regulatory capital arising from the introduction of expected credit losses (ECL) accounting.

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Criteria for allowing the use of AMA methods

Scope: EU | Regulator: EBA | Industry: Banking | Topic: Operational risk; Capital | Date of publication: June, 2015

Regulatory Technical Standards (RTS) specifying the qualitative and quantitative requirements on which Competent Authorities should base their decisions as to whether to allow banks to use advanced methods (AMA) for the calculation of capital for operational risk.

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Minimum capital requirements for market risk

Scope: Global | Regulator: BCBS | Industry: Banking | Topic: Market risk; Capital | Date of publication: January, 2016

Final standards by the BCBS proposing a revised market risk framework, after conducting the Fundamental Review of the Trading Book. This revised market risk framework consists of the following key enhancements: i) revised boundary between the banking book (BB) and trading book (TB); ii) revised Standardised Approach (SA); and iii) revised Internal Models Approach (IMA).

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Consultative Document on the simplified alternative to the standardised approach to market risk capital requirements

Scope: Global | Regulator: BCBS | Industry: Banking | Topic: Market risk | Date of publication: June, 2017

Consultative Document on the simplified alternative to the SA to market risk capital requirements which facilitates the adoption of the SA by those institutions with a reduced and simple Trading Book (TB). This document sets out a reduced sensitivities-based method (R-SbM) that represents a simplified version of the sensitivities-based method (SbM), which is the primary component of the SA.

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RTS on the assessment methodology of IMA for market risk

Scope: EU | Regulator: EBA | Industry: Banking | Topic: Market risk | Date of publication: November, 2016

RTS that specify, among other aspects, the methodology that competent authorities shall apply to assess compliance of an institution with the requirements to use an Internal Model Approach (IMA) for market risk.

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Guide to Targeted Review of Internal Models (TRIM)

Scope: SSM | Regulator: ECB | Industry: Banking | Topic: Internal models | Date of publication: March, 2017

ECB guide to the TRIM, which aims at enhancing the credibility and confirming the adequacy of approved Pillar I internal models (for credit, market and counterparty credit risks) permitted for use by significant institutions when calculating own funds requirements. The Guide provides information on supervisory practices and the interpretation of the EU regulatory framework.

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Guides on ICAAP and ILAAP

Scope: SSM | Regulator: ECB | Industry: Banking | Topic: ICAAP and ILAAP | Date of publication: March, 2017

Multi-year ECB project to prepare comprehensive SSM Guides on ICAAP and ILAAP, aimed to encourage significant banks to develop and maintain high quality processes, and to clarify the type of information they should share with the SSM.

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Interest rate risk in the banking book

Scope: Global | Regulator: BCBS | Industry: Banking | Topic: Interest rate risk; Capital | Date of publication: April, 2016

Final standards which update the Pillar 2 Principles for the management and supervision of interest rate risk in the banking book (IRRBB). The BCBS also sets out a standardised framework which supervisors could mandate their banks to follow, or a bank could choose to adopt.

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Guidelines on identification and management of step-in risk

Scope: Global | Regulator: BCBS | Industry: Banking | Topic: Step-in risk | Date of publication: October, 2017

Final Guidelines on the identification and measurement of step-in risk, which is defined as the risk that a bank decides to provide financial support to an unconsolidated entity that is facing stress, in the absence of (or in excess of) any contractual obligations to provide such support.

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Basel III. The Liquidity Coverage Ratio (LCR) and liquidity risk monitoring tools

Scope: Global | Regulator: BCBS | Industry: Banking | Topic: Liquidity | Date of publication: January, 2013

Introduces significant changes to the short-term liquidity coverage ratio (LCR), to make requirements less stringent.

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Basel III. The Net Stable Funding Ration (NSFR)

Scope: Global | Regulator: BCBS | Industry: Banking | Topic: Interest rate risk; Capital | Date of publication: October, 2014

The BCBS has reinforced its liquidity framework through the development of two minimum standards for funding liquidity. The aim of the NSFR is to reduce funding risk over the longer term. For this, banks are required to fund their activities with stable sources of funding.

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Delegated Regulation to supplement the CRR with regard to the liquidity coverage ratio

Scope: EU | Regulator: Comisión Europea | Industry: Banking | Topic: Liquidity | Publication date; October, 2014

Delegated regulation detailing LCR.

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Basel III leverage ratio framework and disclosure requirements

Scope: Global | Regulator: BCBS | Industry: Banking | Topic: Leverage | Date of publication: January, 2014

Leverage ratio framework and disclosure requirements to ensure this objective is met.

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Delegated Regulation amending the CRR with regard to the leverage ratio

Scope: EU | Regulator: Comisión Europea | Industry: Banking | Topic: Leverage | Date of publication: October, 2014

Delegated regulation introducing changes to the LR framework

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Guidelines on SREP

Scope: EU | Regulator: EBA | Industry: Banking | Topic: SREP | Date of publication: December, 2014

Guidelines addressed to Competent Authorities and intended to promote common procedures and methodologies for the supervisory review and evaluation process (SREP) and for assessing the organization and treatment of risks. Competent Authorities must ensure that SREP covers bank classification, monitoring of key indicators, assessment of specific areas and supervisory measures.

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Guidelines on information and communication technology (ICT) risk assessment under SREP

Scope: Europe | Regulator: EBA | Industry: Banking | Topic: ICT; SREP | Date of publication: May, 2017

Final Guidelines on the assessment of the ICT risk under the Supervisory Review and Evaluation Process (SREP). These GL, addressed to competent authorities, are intended to promote common procedures and methodologies for the assessment of the ICT risk under the SREP.

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Guide to banking supervision

Scope: EU | Regulator: ECB | Industry: Banking | Topic: Supervision | Date of publication: November, 2014

Document explaining the operation of the Single Supervisory Mechanism (SSM) and providing guidance on SSM supervisory practices.

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ECB Comprehensive Assessment (CA)

Scope: EU | Regulator: ECB | Industry: Banking | Topic: Supervision | Date of publication: October, 2014

Comprehensive Assessment performed by the ECB, before fully taking charge of supervisory functions and bearing overall responsibility for prudential supervision in the euro area, regarding significant entities over which it would exert direct supervision, in order to have an overview of the status of these entities (balance sheets and risk profiles).

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Guidance on leveraged transactions

Scope: EU | Regulator: ECB | Industry: Banking | Topic: Credit risk | Date of publication: May, 2017

Guidance on leveraged transactions that summarises ECB key supervisory expectations concerning these transactions, and the ongoing monitoring of both syndication risk and the fundamental credit quality of leveraged exposures.

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Revised Pillar 3 disclosure requirements

Scope: Global | Regulator: BCBS | Industry: Banking | Topic: Disclosure | Date of publication: March, 2017

Final standards on Pillar 3 disclosure requirements that represent the second phase of the BCBS' review of the Pillar 3 framework, covering the consolidation of all existing BCBS disclosure requirements, enhancements to the Pillar 3 framework and revisions and additions to reflect ongoing reforms to the regulatory framework.

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RDA

Scope: Global | Regulator: BCBS | Industry: Banking | Topic: Information; Reporting | Date of publication: January, 2013

The RDA principles are a set of guidelines issued by the BCBS for effective risk data aggregation. Their main aim is for banks to be able to quantify their risk appetite levels and establish a robust infrastructure and control mechanisms to monitor and limit risk.

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COREP

Scope: EU | Regulator: EBA | Industry: Banking | Topic: Supervisory Reporting | Date of publication: June, 2014

COREP is the standardized reporting framework issued by the EBA for CRDIV reporting. It covers credit risk, market risk, operational risk, own funds and capital adequacy ratios.

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FINREP

Scope: EU | Regulator: EBA | Industry: Banking | Topic: Supervisory Reporting | Date of publication: June, 2014

Standard reporting framework covering Financial Reporting for supervisory purposes in relation to International Accounting Standards (IAS) / International Financial Reporting Standards (IFRS), as approved by the European Union.

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Regulation 2016/867 of the ECB on the collection of granular credit and credit risk data (AnaCredit)

Scope: EU | Regulator: ECB | Industry: Banking | Topic: Reporting | Date of publication: May, 2016

Regulation establishing a framework under which credit institutions in the euro area and foreign branches (in the euro area) of credit institutions shall report to the ECB, via their national central banks, information regarding their loans granted to legal entities, provided that the commitment amount of the debtor equals or exceeds €25,000.

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Circular 1/2017, amending Circular 1/2013 on the Risk Information Centre

Scope: Spain | Regulator: BdE | Industry: Banking | Topic: Reporting | Date of publication: July, 2017

Circular 1/2017 on the Risk Information Center (CIR), which will supersede Circular 1/2013, aimed to adapt the CIR to the information requirements established by AnaCredit Regulation.

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Circular 5/2014, amending Circular 4/2004, Circular 1/2010 and Circular 1/2013

Scope: Spain | Regulator: BdE | Industry: Banking | Topic: Reporting | Date of publication: December, 2017

Circular 5/2014 amending Circular 4/2002 in order to adapt the content of public information and of reserved information to FINREP and to incorporate the new information requirement that must be provided to the ECB. Further, it amends Circular 1/2010 on interest rate statistics applied to household deposits and credits, and Circular 1/2013 on the Risk Information Centre.

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Corporate governance principles for banks

Scope: Global | Regulator: BCBS | Industry: Banking | Topic: Corporate governance | Date of publication: July, 2015

New corporate governance principles proposed by the BCBS concerning the Board, Senior Management, the three lines of defense, compensation, etc.

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Key Attributes of Effective Resolution Regimes for Financial Institutions

Scope: Global | Regulator: FSB | Industry: Banking | Topic: Resolution | Date of publication: October, 2014

Requires that G-SIFIs set up a recovery plan at the individual level, as well as resolution plans at both the individual and group level.

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Principles on Loss-absorbing and Recapitalisation Capacity of G-SIBs in Resolution and Total Loss-absorbing Capacity (TLAC) Term Sheet November 2015

Scope: Global | Regulator: FSB | Industry: Banking | Topic: Resolution | Date of publication: November, 2015

New requirement for G-SIBs to hold a proportion of liabilities that can be written off or converted to equity in the event of resolution. By January 2022, the TLAC percentage should have reached at least 18% of RWAs and 6.75% of the denominator of the leverage ratio set by Basel III.

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BRRD

Scope: EU | Regulator: PE y C | Industry: Banking | Topic: Recovery; Resolution | Date of publication: May, 2014

BRRD lays down rules and a standard procedure for the resolution of credit institutions of member States

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IAS 39

Scope: Global | Regulator: IASB | Industry: All | Topic: Provisions | Date of publication: February, 2011

Regulation that outlines the principles for the recognition and measurement of financial assets, financial liabilities and some contracts to buy and sell non-financial assets.

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IFRS 9

Scope: Global | Regulator: IASB | Industry: All | Topic: Provisions | Date of publication: July, 2014

The purpose of IFRS 9 is to establish the principles related to the reporting of financial assets and liabilities with the aim of improving and simplifying information on financial instruments.

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Circular 4/2017 on public and confidential financial information standards and formats

Scope: Spain | Regulator: BdE | Industry: Banking | Topic: Accounting | Date of publication: December, 2017

Circular 4/2017 on public and confidential financial information standards and formats, which supersedes Circular 4/2004, aimed to adapt the current accounting framework of Spanish credit institutions to the accounting standards IFRS 9 and IFRS 15, which amend the criteria for recognising financial instruments and revenues, respectively.

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Guidance on accounting for expected credit losses

Scope: Global | Regulator: BCBS | Industry: Banking | Topic: Accounting | Date of publication: December, 2015

Guidelines with the aim at setting out supervisory guidance on sound credit risk practices associated with the implementation and ongoing application of expected credit loss accounting frameworks.

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Final GL on definitions of NPE and forbearance

Scope: Global | Regulator: BCBS | Industry: Banking | Topic: Credit risk; Capital | Date of publication: April, 2017

Final Guidelines on the definitions of non-performing exposures (NPE) and forbearance, which are aimed to harmonise the scope, recognition criteria, and the level of application of both terms. These definitions have not been designed to replace those used for accounting purposes or the definitions of default which are used in the IRB approach or in the SA for credit risk, but to be used for other purposes (e.g. supervisory asset quality monitoring, Pillar 3 disclosure on asset quality, etc.).

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Guidelines on credit risk management practices and accounting for expected credit losses (ECL)

Scope: Global | Regulator: EBA | Industry: Banking | Topic: Credit risk; accounting; provisions| Date of publication: May, 2017

Final Guidelines on credit institution’s credit risk management practices and accounting for ECL with the aim of harmonizing the criteria established by the BCBS and ensuring consistent interpretations and practices according to IFRS 9.

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Guidance to banks on non-performing loans

Scope: SSM | Regulator: ECB | Industry: Banking | Topic: Credit risk; Capital; Provisions | Date of publication: March, 2017

Guidance to banks on how they should tackle non-performing loans (NPLs). The guidance provides recommendations to banks and sets out a number of best practices that will constitute the ECB’s supervisory expectations going forward.

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MiFID II

Scope: EU | Regulator: PE y C | Industry: Banking | Topic: Consumer protection | Date of publication: May, 2014

Directive aimed at ensuring that financial markets are safer and more efficient and that investors are better protected.

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General Data Protection Regulation

Scope: UE | Regulator: EP y C | Industry: Various | Topic: Personal data protection | Date of publication: April, 2016

Regulation on the protection of natural persons with regard to the processing of personal data and on the free movement of such data. Among others,this regulation includes new rights for the natural persons (e.g. right to be forgotten), and a set of obligations for the controller and processor of personal data.

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Proyecto de Ley Orgánica de Protección de Datos (PLOPD)

Scope: Spain | Regulator: Government | Industry: Banking | Topic: Data protection | Date of publication: November, 2017

Proyecto de Ley Orgánica de Protección de Datos, which will repeal the current LOPD and will adapt the Spanish law to the EU General Data Protection Regulation (GDPR), introducing amendments and enhancements in the regulatory framework of this fundamental right.

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Guidelines on remuneration policies and practices related to the sale and provision of retail banking products and services

Scope: EU | Regulator: EBA | Industry: Banking | Topic: Remuneration | Date of publication: September, 2016

Guidelines on remuneration of sales staff specifying requirements for the design and implementation of remuneration policies and practices, in relation to the offering or provision of banking products and services to consumers.

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Ley 5/2015 de fomento de la financiación empresarial

Scope: Spain | Regulator: Cortes Generales | Industry: Banking | Topic: Funding | Date of publication: April, 2016

Law on promoting corporate funding, which includes a set of measures to make SMEs financing more accessible and flexible, and to move forward in the development of alternative mechanisms of financing. Further, it also covers aspects regarding crowdfunding, securitisations, etc.

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Solvency II

Scope: EU | Regulator: PE y C | Industry: Insurance | Topic: Insurance | Date of publication: November, 2009

EU Directive that governs and harmonizes insurance regulations in Europe. It deals mainly with the amount of capital that EU insurance companies must hold to reduce the risk of insolvency.

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Regulation 648/2012 on OTC derivatives, central counterparties and trade repositories (EMIR)

Scope: EU | Regulator: EP and C | Industry: Stock market | Topic: Stock market | Date of publication: July, 2015

Regulation that sets out rules regarding over-the counter (OTC) derivative contracts, central counterparties (CCPs) and trade repositories aiming to reduce systemic risk, increase transparency in the OTC market and preserve financial stability.

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Ley del Mercado de Valores (texto refundido)

Scope: Spain | Regulator: CNMV | Industry: Stock market | Topic: Stock market | Date of publication: October, 2015

Real Decreto Legislativo 4/2015, which approves the texto refundido of the Ley del Mercado de Valores aiming to clarify the law applicable to the stock market through the integration and consolidation of such law, including amendments to the Law 24/1988 on the Stock market.

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Código de buen gobierno de las sociedades cotizadas

Scope: Spain | Regulator: CNMV | Industry: Stock market | Topic: Governance | Date of publication: February, 2015

Governance code of the CNMV including a set of voluntary principles and recommendations to ensure firm’s good governance. However, the Spanish Corporate Law requires listed companies to include in their annual report on Corporate Governance whether they comply with the recommendations or, where not-compliant, to justify the deviation from such recommendations.

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© GMS Management Solutions, S.L., 2018. All rights reserved. The information contained on this publication is of a general nature and does not constitute a professional opinion or an advisory service. The data used in this publication come from public sources. GMS Management Solutions, SL assumes no liability for the veracity or accuracy of such data.