Management Solutions compiles new regulations published in recent weeks by different regulatory and supervisory authorities (with a focus on the financial industry).
The EBA has decided not to conduct an EU-wide stress test in 2017 but to start preparations for the next stress test in 2018. The EBA will start immediately to prepare the methodology for the 2018 stress test exercise, which will also include an assessment of the impact of IFRS 9. Further, the EBA has decided to perform its regular annual transparency exercise in 2017.
(19/12/2016) Fed – Final rule on LCR disclosure requirements
The Fed has adopted a final rule to implement public disclosure requirements regarding the LCR. Under this rule, a covered company will be required to publicly disclose on a quarterly basis quantitative information about its LCR calculation, as well as a discussion of the factors that have a significant effect on its LCR.
The EBA has launched a Qualitative survey on IRB models, in order to assess the impact of the EBA Guidelines on the IRB parameters in terms of expected amount and severity of model changes. In particular, this survey contains detailed questions about banks' modelling practices for estimating PD, LGD, LGD-in default and expected loss best estimate (ELbe).
Counterparty credit risk
The ECB has launched a public consultation on the Guide on materiality assessment (EGMA) of IMM and A-CVA. The EGMA provides assistance to significant institutions in their self-assessment of the materiality of changes and extensions to IMM and A-CVA models under the applicable legal framework, although is not intended to have legal effect.
(16/12/2016) FSB – Consultative document on Guiding Principles on the Internal TLAC of G-SIBs / Consultative document on Guidance on Continuity of Access to Financial Market Infrastructures for a Firm in Resolution
The FSB has published a Consultative document on the internal TLAC of G-SIBs, which proposes a set of high-level guiding principles to assist home and host authorities in the implementation of internal TLAC mechanisms consistent with the TLAC standard. Along with this consultative document, the FSB has also published a Consultative document on Continuity of Access to Financial Market Infrastructures (FMIs) for a Firm in Resolution.
LTD and TLAC
(15/12/2016) Fed – Final rule on LTD and TLAC requirements
The Fed has published a final rule to improve the resiliency and resolvability of global systemically important banks (G-SIBs) and thereby reduce threats to financial stability. Under this final rule, covered banks will be required to meet a new long-term debt (LTD) requirement and a new total loss-absorbing capacity (TLAC) requirement.
SSM supervisory priorities 2017
(15/12/2016) ECB – SSM supervisory priorities for 2017
The ECB has published its 2017 priorities for supervising significant banks in the euro area. In particular, the ECB specifies that the three areas that will guide banking supervision are: i) business models and profitability drivers; ii) credit risk, with a focus on non-performing loans (NPLs) and concentrations; and iii) risk management.
(14/12/2016) EBA – Final Guidelines on disclosure requirements under Part Eight of the CRR
The EBA has published Final Guidelines (GL) on disclosure requirements. These GL, while not changing the requirements of the CRR, provide further guidance to institutions in complying with both the CRR and the revised Pillar 3 framework (RPF) by the BCBS. In particular, they cover the entire content of the RPF, with the exception of securitisation requirements, and other disclosure requirements for which there are already EBA technical standards.
(14/12/2016) EBA – Final Report on the implementation and design of the MREL framework
The EBA has published the Final Report on the implementation and design of the MREL addressed to the EC, including a number of recommendations to reinforce the MREL framework and integrate the international standards on TLAC in the EU's MREL. Moreover, this report provides a quantitative analysis of the MREL stack and funding needs of 133 banking groups, and an analysis of the potential macroeconomic impact of the introduction of MREL.
Risk assessment report and transparency exercise
The EBA has published its ninth Risk Assessment Report (RAR), which includes aggregate results on capital position, return on equity (RoE), non-performing loans (NPL) ratio, and coverage ratio of NPLs. Moreover, the RAR also addresses other aspects such as information and communication technology related (ICT) risks. Moreover, the RAR is complemented with the EBA’s EU-wide 2016 transparency exercise.
IFRS 9 and reporting
(30/11/2016) EBA – Final draft ITS Commission Implementing Regulation (EU) 680/2014 on supervisory reporting of institutions with regard to FINREP following the changes in IFRS 9 / Annex I (FINREP Annex III - IFRS templates) / Annex II (FINREP Annex IV - nGAAP templates) / Annex III rev1(FINREP Annex V - Instructions)
Following the recent endorsement of IFRS 9 into EU law, the EBA has published the Final ITS amending the ITS on supervisory reporting with regard to FINREP, with the aim of aligning the reporting framework with the new IFRS 9 requirements.
Stress test UK
(30/11/2016) BoE – Stress testing the UK banking system: 2016 results
The Bank of England (BoE) has published the results of the 2016 stress test of the UK banking system. Performance in the test was assessed against the BoE’s hurdle rate framework, comprising elements expressed both in terms of risk-weighted capital and leverage ratios.
The European Commission has published the Regulation (EU) 2016/2067, transposing IFRS 9 into the EU framework. This Regulation amends the Annex to Regulation (EC) 1126/2008, and as a consequence of the adoption of IFRS 9, certain international accounting standards in the EU are also amended.
(25/11/2016) PRA – Consultation paper on the implementation of MiFID II: Part 2
The Prudential Regulation Authority (PRA) has published a Consultation Paper (CP) on the implementation of MiFID II, setting out its proposals for rules to transpose parts of MiFID II in the UK. This is the second PRA consultation on implementing MiFID II, and follows CP9/16, which consulted on implementation of the MiFID II passporting regime and algorithmic trading.
Cyclicality of capital requirements
(22/12/2016) EBA – Report on Cyclicality of capital requirements
The EBA has published a Report on cyclicality of banks' capital requirements aiming at clarifying whether risk-sensitive bank capital requirements as laid down in the CRR and CRD IV create unintended pro-cyclical effects by reinforcing the endogenous relationships between the financial system and the real economy. This Report may inform the European Commission's currently ongoing reviews of the EU micro- and macro-prudential frameworks.
(22/12/2016) BdE – Revista de estabilidad financiera
The Bank of Spain has published the Financial Stability Journal of November 2016. The Financial Stability Journal is a half-yearly publication that addresses any aspect relating to financial stability, with a particular focus on prudential regulation and supervision matters.
The EBA has published its third impact assessment Report for the liquidity coverage ratio (LCR). The Report shows a constant improvement of the average LCR across EU banks since 2011, and no strong evidence was found suggesting that the EBA should recommend an extension of the phasing-in period of the LCR.
Supervision of significant branches
(20/12/2016) EBA – Consultation Paper Draft Guidelines on supervision of significant branches
The EBA has launched a consultation on its draft Guidelines on the supervision of significant branches. In particular, these draft GL provide a framework for the identification of largest systemically important branches and outlines a coordinated approach to their supervision and the assessment of recovery planning facilitated through the framework of colleges of supervisors.
The EBA has published a Report including recommendations on how to harmonise the covered bond framework in the EU. In particular, the Report proposes a framework based on a ‘three step approach’: i) a new covered bond Directive should be developed; ii) the CRR should be amended; iii) convergence of national frameworks should be encouraged.
The EBA has launched a data collection for commodity derivatives firms that will support the European Commission in the calibration of the new prudential regime for investment firms. Moreover, a data template is provided to submit this data.
The European Supervisory Authorities (ESAs) have published the revised Joint Guidelines (GL) on the prudential assessment of acquisitions and increases of qualifying holdings in the banking, insurance and securities sectors.
The ESAs have published a report on good supervisory practices with the objective of proposing a common framework for the treatment of credit ratings, suggest potential alternative measures to credit ratings and outline how to address issues of proportionality arising from the differing nature scale and complexity of supervised entities.
(19/12/2016) FSB – Action plan to assess and address the decline in correspondent banking
The FSB has published its latest progress report on the implementation of its four-point action adopted in 2015 related to the decline in correspondence banking: further examining the dimensions of the problem, and its causes and effects; clarifying regulatory expectations; supporting coordination of domestic capacity building to improve the supervisory and compliance framework; and strengthening tools for due diligence by correspondent banks.
(19/12/2016) ESAs – Discussion Paper on the Use of Big Data by Financial Institutions
The ESAs have launched a public consultation about the potential benefits and risks of Big Data for consumers and financial firms to determine whether any further regulatory or supervisory actions may be needed.
The Prudential Regulation Authority (PRA) has published a quarterly statistical release which will show levels of capital and RWA for the UK banking sector, with breakdowns of the movements in different tiers of capital and risk exposure types, and overall capital ratios.
SREP and remuneration and dividend policies
The ECB has published its SREP Methodology Booklet of 2016 which covers, among others, an analysis of the SREP 2016 outcome. Moreover, the ECB has also published recommendations on dividend distribution and variable remuneration for 2017.
Insurance stress test
(15/12/2016) EIOPA – 2016 EIOPA Insurance Stress Test Report / Recommendations of 2016 EIOPA’s Insurance Stress Test
The EIOPA has published the results of its 2016 EU-wide stress test for the European insurance sector. Moreover, the EIOPA has issued recommendations to the National Supervisory Authorities in order to ensure coordinated supervisory actions.
The EBA has published its final draft RTS specifying the framework for cooperation and exchange of information between Competent Authorities for passport notifications under the revised Payment Services Directive (PSD2).
Countercyclical capital buffer
(14/12/2016) BdE – Colchón de capital anticíclico
The Bank of Spain (BdE) has decided to maintain the countercyclical capital buffer (CCB) at 0% for credit exposures in Spain, during the first quarter of 2017.
(12/12/2016) PRA – Regulatory reporting for the banking sector
The Prudential Regulation Authority (PRA) has issued several publications on regulatory reporting for the banking sector on several aspects, such as the amendments for completion of the Mortgage Lenders & Administration Return (MRAL), certain targeted changes on templates for firms that apply IFRS 9, etc.
(09/12/2016) EBA – Revised list of ITS validation rules
The EBA has issued a revised list of validation rules in the ITS on supervisory reporting, highlighting those which have been deactivated either for incorrectness or for triggering IT problems.
The EIOPA has published a Discussion Paper with the aim of reviewing the Solvency Capital Requirement (SCR) standard formula and ensuring a proportionate but technically robust, risk-sensitive and consistent supervisory regime.
Basel III implementation assessment
The BCBS has published several documents that assess the implementation of Basel standards in Indonesia, Japan and Singapore. With this publication, the BCBS has completed its review of the implementation of the risk-based capital framework by all of its members.
The EBA has published a consultation paper on its draft Guidelines under the revised Payment Services Directive (PSD2) which specifies the criteria for classifying operational or security incidents, the template to be used by payment service providers, and the indicators CAs need to use when assessing the relevance of such incidents.
The Financial Conduct Authority (FCA) has published a consultation paper proposing stricter rules for firms selling ‘contract for difference’ (CFD) products to retail customers to improve standards across the sector and ensure consumers are appropriately protected.
2017 ICAAP and IFRS 9
(06/12/2016) PRA – Clarification on IFRS 9 for 2017 ICAAP stress testing and capital planning
The Prudential Regulation Authority (PRA) has published a clarification on its website on how firms should incorporate IFRS 9 into stress testing and capital planning carried out as part of their ICAAP obligations in 2017.
Systemic risk buffer
(05/12/2016) PRA – The PRA’s approach to the implementation of the systemic risk buffer
In line with the review of the BoE’s framework regarding the systemic buffer (SRM) of May 2016, the PRA has published a Statement of Policy (SoP) that sets out its approach to the implementation of the systemic risk buffer (SRB). In particular, this document covers the SRB capital implications, the application of the framework in 2019, the application of the framework following the initial SRB rates, as well as the recognition of European Economic Area (EEA) buffer rates.
(29/11/2016) BdE – Circular 7/2016, de 29 de noviembre, del Banco de España, por la que se desarrollan las especificidades contables que han de aplicar las fundaciones bancarias, y por la que se modifican la Circular 4/2004, de 22 de diciembre, a entidades de crédito, sobre normas de información financiera pública y reservada, y modelos de estados financieros, y la Circular 1/2013, de 24 de mayo, sobre la Central de Información de Riesgos
The BdE has published the Circular 7/2016 which aims to regulate the annual, individual and consolidated accounts regime of banking foundations, as well as the regime of the confidential statements that banking foundations should submit to the BdE.
(01/12/2016) EBA – List of CET1 instruments
The EBA has published its fourth updated list of capital instruments that Competent Supervisory Authorities (CAs) across the EU have classified as Common Equity Tier 1 (CET1).
(30/11/2016) European Payments Council – SEPA Instant Credit Transfer (SCT INST) scheme rulebook
The European Payments Council (EPC) has finalised the framework for pan-European instant payment solutions: the SEPA Instant Credit Transfer scheme. This framework enters into force on 21 November 2017.
Financial stability report
(30/11/2016) BoE – Financial Stability Report
The Financial Stability Report sets out the Financial Policy Committee’s (FPC) view of the outlook for UK financial stability, including its assessment of the resilience of the UK financial system and the current main risks to financial stability.
(30/11/2016) PRA – Amendments to the PRA’s rules on loan to income ratios in mortgage lending
This CP sets out the Prudential Regulation Authority’s (PRA) proposed amendments to the Housing Part of the PRA Rulebook in respect of the Financial Policy Committee’s (FPC) Recommendation on loan to income (LTI) ratios in mortgage lending in the owner occupied market.
(29/11/2016) BdE – Boletín Económico
This monthly publication of the BdE includes economic articles, as well as monetary, financial and real indicators.
© GMS Management Solutions, S.L., 2017. 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.