A Management Solutions compila novidades regulatórias publicadas durante as últimas semanas por diferentes órgãos reguladores e supervisores (com foco no setor financeiro).
Counterparty credit risk
(18/12/2019) EBA – Final draft on RTS on the standardised approach for counterparty credit risk (SA-CCR)
The European Banking Authority (EBA) has published the Final draft on RTS on the SA-CCR, based on the proposals included in the Discussion and Consultation Paper, which specifies key aspects of the SA-CCR and represents an important contribution to its smooth harmonised implementation in the EU. In particular, this final draft covers three-pronged methodology for the mapping of derivative transactions to risk categories: i) a qualitative approach; ii) a qualitative and quantitative approach; and iii) a fallback approach. The EBA also proposes to use, in line with Basel standards, a supervisory delta formula based on a shifted Black-Scholes model.
(17/12/2019) FSB – Work Programme for 2020
The Financial Stability Board (FSB) has published the Work Programme for 2020 to provide the ongoing and planned FSB initiatives in 2020. The key objectives of this work programme will be i) reinforce FSB’s forward-looking monitoring of developments to identify, assess and address new and emerging vulnerabilities; ii) finalise and operationalise the remaining elements of post-crisis reforms; and iii) monitor and assess the implementation of reforms and evaluate their effects in order to ensure that reforms work as intended.
(13/12/2019) Fed/FDIC/OCC – Final Rule on Regulatory Capital Treatment for High Volatility Commercial Real Estate (HVCRE) Exposures
The Fed, FDIC and OCC (the Agencies) have published the Final rule on Regulatory Capital Treatment for High Volatility Commercial Real Estate Exposures (HVCRE) with the aim of revising the HVCRE exposure definition of the capital rule to conform to the statutory definition of an HVCRE ADC loan. In particular, this final rule includes the scope of application, the revision on the definition of HVCRE, as well as the differences with respect to the previous regulation and the exclusions to it.
(12/12/2019) EBA – Draft Implementing Technical Standards amending Commission Implementing Regulation (EU) 2016/2070 with regard to benchmarking of internal models
The EBA has issued the Draft ITS amending EC Implementing Regulation (EU) 2016/2070 with regard to benchmarking of internal models with the aim to integrate the sub-set of templates dedicated to the IFRS 9 benchmarking, changing the reporting templates and instructions. The three major objectives of the EBA supervisory benchmarking are: i) providing a supervisory assessment of the quality of internal approaches; ii) providing a powerful tool to explain and monitor risk-weighted asset (RWA) variability over time and the resulting implications for prudential ratios ; iii) providing the banks with valuable information on their risk assessment compared to other banks assessment on comparable portfolios.
Sustainability in the EU
(12/12/2019) EBA – Action Plan on Sustainable Finance
The European Banking Authority (EBA) has issued the Action Plan on Sustainable Finance which explains EBA’s approach and timeline for delivering mandates related to environmental, social and governance (ESG) factors. The Action plan explains the EBA’s sequenced approach, starting with key metrics, strategies, risk management and moving towards scenario analysis and evidence for any adjustments to risk weights. The Action Plan also aims to communicate key messages on the EBA’s policy direction and the expectations from financial institutions on areas where action is needed now to support the move towards more sustainable finance in the EU. The EBA designed the Action Plan by taking in consideration the following mandates on ESG factors and ESG risks: i) EBA regulation; ii) Sustainability disclosure regulation; iii) EC action plan; iv) CRR and Interchange Fee Regulation (IFR); e v) CRD and Investment Firms Directive (IFD).
(11/12/2019) EC – The European Green Deal
The EC has published the European Green Deal which sets a new growth strategy that aims to transform the EU into a resource-efficient and competitive economy where there are no net emissions of greenhouse gases in 2050 and where economic growth is decoupled from resource use.
(10/12/2019) EP, Council – (10/12/2019) EP/Consejo – Regulation (EU) 2019/2088 on sustainability‐related disclosures in the financial services / Regulation (EU) 2019/2089 as regards EU Climate Transition Benchmark
The European Parliament (EP) and the Council have published two documents, the Regulation (UE) 2019/2088 on sustainability‐related disclosures in the financial services sector and the Regulation (EU) 2019/2089 amending Regulation (EU) 2016/1011 as regards EU Climate Transition Benchmarks, EU Paris-aligned Benchmarks and sustainability-related disclosures for benchmarks. In particular, the first regulation stablish harmonised rules on transparency with regard to the integration of sustainability risks and the consideration of adverse sustainability impacts in their processes and the provision of sustainability‐related information with respect to financial products and the second one introduces a regulatory framework setting minimum requirements for the benchmarks mentioned above.
(05/12/2019) EBA – Impact study and key recommendations on Basel III reforms: macroeconomic assessment, credit valuation adjustment and market risk
The EBA has published the Impact study and key recommendations on Basel III reforms: macroeconomic assessment, credit valuation adjustment (CVA) and market risk, which provides a detailed impact assessment and the key policy recommendations on the CVA and market risk reforms, as well as a macroeconomic impact assessment, and therefore completes the EBA’s advice on the implementation of the final Basel III framework in the EU.
(03/12/2019) BdE – Circular 4/2019 sobre normas de información financiera pública y reservada, y modelos de estados financieros
The Bank of Spain (BdE) has published Circular 4/2019 on public and reserved financial information standards and model financial statements, addressed to financial credit institutions (EFCs), with the aim of ending the transitional regime established since 2014. This Circular establishes certain simplified requirements with respect to Circular 4/2017, which applied only to credit institutions. In particular, this Circular establishes certain requirements relating to the publication of financial information, registered in Circular 4/2017, for EFCs, such as the characteristics and elements of the internal information or the recognition, valuation, presentation and information criteria to be included in the financial report.
(03/12/2019) BCBS – Consultation paper (CP) on revisions to the credit valuation adjustment (CVA) risk framework
The BCBS has published a Consultation paper (CP) on revisions to the CVA risk framework, which is seeking the views of stakeholders on a set of limited, targeted and final adjustments to the CVA risk framework. In particular, BCBS propose two main changes: i) reflecting the corresponding market risk revisions in the CVA risk framework; and ii) considering additional targeted revisions to the CVA risk framework.
(19/12/2019) EIOPA – Consumer Trends Report 2019
The European Insurance and Occupational Pensions Authority (EIOPA) has published a Report on Consumer Trends for 2019 with the objective of identifying risks for consumers arising from trends in the market. In particular, this Report provides: i) a description of the main market developments; ii) a focus on selected financial innovations and an analysis of trends in consumer complaints; and iii) an overview of national competent authorities’ (NCAs) consumer protection activities.
(19/12/2019) IAIS – Issues Paper on the Implementation of the Recommendations of the Task Force on Climate-related Financial Disclosures (TCFD)
The International Association of Insurance Supervisors (IAIS) has published a draft Issues Paper on the TCFD Recommendations with the aim of receiving feedback on it via public consultation. In particular, this paper provides an overview of practices that supervisors have considered in the development of climate related disclosure requirements within their markets, focusing on practices that can be implemented with limited direct regulatory intervention.
(18/12/2019) BoE – Discussion Paper: The 2021 biennial exploratory scenario on the financial risks from climate change
The Bank of England (BoE) has published a Discussion Paper on the 2021 biennial exploratory scenario (BES) on the financial risks from climate change. The objective of the BES is to test the resilience of the current business models of the largest banks, insurers and the financial system to climate related risks and therefore the scale of adjustment that will need to be undertaken in coming decades for the system to remain resilient. In particular, this discussion paper sets out the BoE’s proposal for the 2021 BES through the following sections: i) outlining of the key features; ii) describing the scenario narratives; iii) detailing the scenario specification; iv) setting out the modelling approaches; and v) setting out the approach to participants’ submissions.
(18/12/2019) EBA – Report on undue short-term pressure from the financial sector on corporations
The EBA has published a Report on undue short-term pressures from the financial sector on corporations, with the objective of analysing the extent to which short-termism is present in the banking sector. In particular, this Report provides some policy recommendations for the European Commission and EU legislators, advocating that policy action should aim to provide relevant information and incentives to the banks to extend the time horizon in their strategies and governance. These recommendations are: i) maintaining a robust regulatory prudential framework; ii) fostering the adoption of longer term perspectives by institutions through more explicit legal provisions on sustainability; iii) continuing to enhance disclosures of long-term risks and opportunities by both corporations and banks; and iv) improving information flows and data access and support the role of the banking sector in raising awareness on sustainability challenges and environmental, social and governance (ESG) risks.
Interest rate benchmarks
(18/12/2019) FSB – Annual progress report on Reforming major interest rate benchmarks
The FSB has published its annual progress Report on implementation of recommendations to reform major interest rate benchmarks. In particular, this Report emphasises that the continued reliance of global financial markets on LIBOR poses risks to financial stability and it calls for significant and sustained efforts by the official sector and by financial and non-financial firms across many jurisdictions to transition away from LIBOR by end-2021.
(18/12/2019) ESMA – ESMA Newsletter - Nº10
The European Securities and Markets Authority (ESMA) has published its Newsletter Nº 10 on the news for December 2019. In this issue the ESMA takes a look at its full list of staff speaking appearances and it catches up on publications from November and December. Also, the newsletter includes information about the Board of Supervisors meeting in Paris on December 3, which was the first meeting in the ESMA’s new premises in Paris.
Financial stability report
(18/12/2019) EIOPA – December 2019 Financial Stability Report
The EIOPA has published the Financial Stability Report 2019 December where reports the European economic situation. The report is divided in two parts. In the first one EIOPA focus on: i) key developments, ii) European insurance sector, iii) European reinsurance sector, iv) European private pension funds sector and v) risk assessment. In the second one, the report highlights the climate risk assessment topic and the impact of variation margining on EU insurers´ liquidity analyzing the interest rate swaps positions. Finally, the report concludes that the global and European economic outlook has deteriorated in the past months with weakening industrial production and business sentiment and ongoing uncertainties about trade disputes and Brexit.
(17/12/2019) EIOPA – Updates representative portfolios to calculate volatility adjustments to the Solvency II risk-free interest rate term structures
The EIOPA has published updated representative portfolios that will be used for calculation of the volatility adjustments (VA) to the relevant risk-free interest rate term structures for Solvency II. The updated portfolios are based on the end-of-2018 annual reporting templates as reported by European (re)insurance companies to their national supervisory authorities, and also, enable more accurate reflection of the impact of market volatility under the Solvency II framework.
(17/12/2019) EIOPA – Annual Report on Long-Term Guarantees Measures (LTG) and Measures on Equity Risk
The EIOPA has published its 2019 Annual Report on Long-Term Guarantees Measures (LTG) and Measures on Equity Risk under Solvency II with the aim of reporting the impact of the application of the LTG measures and the measures on equity risk to the European Parliament, the Council and the Commission. The LTG measures are the extrapolation of risk-free interest rates, the matching adjustment, the volatility adjustment, the extension of the recovery period in case of non-compliance with the Solvency Capital Requirement, the transitional measure on the risk-free interest rates and the transitional measure on technical provisions. The equity risk measures are the application of a symmetric adjustment mechanism to the equity risk charge and the duration-based equity risk sub-module. This year report, consistent with the trends observed in the last years, availability of long-term guarantee products is mainly stable or decreasing across European Environment Agency, and also, national supervisory authorities have observed a decrease in the size and duration of guarantees.
Illiquidity and liabilities
(16/12/2019) EIOPA – Report on insurers’ asset and liability management in relation to the illiquidity of their liabilities
The European Insurance and Occupational Pensions Authority (EIOPA) has published a Report on insurers’ asset and liability management in relation to the illiquidity of their liabilities with the objective of answering a request from the European Commission (EC) in the context of the 2020 Review of Solvency II. In particular, this report provides information on: i) insurance liabilities; ii) the asset management of insurers; iii) long-term guarantee measures, including matching adjustment, volatility adjustment, actual yield and dynamic volatility adjustment; and iv) the market valuation of insurance liabilities.
(16/12/2019) BoE – Financial Stability Report / Financial Policy Committee Record / Stress testing results - December 2019
The BoE has published the Financial Stability Report which sets out the Financial Policy Committee’s (FPC) view and actions on the stability of the UK financial system; also the Financial Policy Committee Record and the stress test results for December 2019 are published. In particular, this documents put their focus in the following aspects: i) 2019 annual cyclical scenario stress test; ii) global developments; iii) domestic vulnerabilities and Brexit; iv) bank capital requirements; v) review of FPC mortgage market Recommendations; vi) financial market liquidity; vii) vulnerabilities in open-ended funds; viii) ensuring that rapidly evolving payment systems support financial stability; and ix) the transition away from Libor.
(16/12/2019) EBA – 2020 EU-wide stress test templates
The EBA has published the templates for the 2020 EU-wide stress test, after the feedback received by banks during the testing phase. Although this version of the templates is for information only, so banks shall refrain from using it for the purposes of the exercise, it provides the main instructions and structure that banks should follow when they do the stress test.
(13/12/2019) EIOPA – Annual report on the use of capital add-ons under Solvency II
The EIOPA has published its annual Report on the use of capital add-ons by NCAs under Solvency II. The objective of the capital add-on measure is ensure that the regulatory capital requirements reflect the risk profile of the undertaking or of the group. In particular, this report analyses the 2018 year-end Solvency II data, showing that capital add-ons are barely used, in 2018 only 8 NCAs set capital add-ons to 21 solo undertakings, out of 2819 (re)insurance undertakings under the Solvency II Directive in the EEA, including 10 non-life undertakings, eight life undertakings, two reinsurers and one composite undertaking.
(13/12/2019) ESMA – Consultation Paper Procedural rules for penalties imposed on Third-Country CCPs, TRs and CRAs
The European Securities and Markets Authority (ESMA) has published a Consultation paper on the procedural rules regarding penalties for third-country central counterparties (TC-CCPs), trade repositories (TRs) and credit rating agencies (CRAs). In particular, this consultation paper seeks to obtain stakeholders’ input on ESMA’s proposals relating to penalties for TC-CCPs, TRs and CRAs, which builds on the existing enforcement framework regarding TRs and CRAs as well as on ESMA’s supervisory experience.
(12/12/2019) ESMA – Annual report on administrative and criminal sanctions and other administrative measures under MAR
The ESMA has published its annual Report concerning administrative and criminal sanctions as well as other administrative measures issued by NCAs under the Market Abuse Regulation (MAR). In particular, this Report provides an overview of the applicable legal framework and information on the criminal and administrative sanctions imposed on the basis of MAR, including measures to infringements like insider dealing and unlawful disclosure of inside information, and market manipulation, among others.
(12/12/2019) ESMA – Report of Penalties and measures imposed under the UCITS Directive in 2018
The ESMA has published a Report of Penalties and measures imposed by NCAs under the Undertakings for Collective Investment in Transferable Securities (UCITS) Directive in 2018. In particular, this Report provides the background and relevant regulatory framework for reporting on UCITS sanctions and information on the aggregated penalties and measures imposed, as well as three annexes providing an overview of the notifications, the number and amount of penalties and the number of measures imposed by NCAs during 2018.
(12/12/2019) ESMA – Final Report of Peer Review on the collection and use of STORs under the Market Abuse Regulation as a source of information in market abuse investigations
The ESMA has published a Peer Review Report on how NCAs handle suspicious transactions and order reports (STOR) under the Market Abuse Regulation (MAR). This Report shows a significant increase in suspicious transactions and order reporting, and makes some recommendations regarding measures to further strengthen STOR supervision. In particular it is recommended that NCAs ensure all financial players subject to the STOR requirements, including wholesale market participants such as asset managers, are complying with the STOR requirements; and enhance their focus on suspected non-reporting/poor-reporting of STORs including, where appropriate, enforcing and sanctioning non-compliance.
Information and communication technology
(12/12/2019) EIOPA – Consultation paper on the proposal for Guidelines (GL) on information and communication technology (ICT) security and governance
The EIOPA has published a Consultation paper on the proposal for GL on ICT security and governance with the objective of receiving comments on the proposals. In particular, this Consultation paper sets out 24 GL on ICT, some compliance and reporting rules and a series of annexes assessing the impact of these GL.
Indices and exchanges
(11/12/2019) ESMA – Final Report amending ITS on main indices and recognised exchanges under CRR
The European Securities and Markets Authority (ESMA) has published the Final Report amending ITS on main indices and recognised exchanges under CRR with the aim of ensuring that the most relevant criteria are applied to specify the main indices and that the list of recognised exchanges is updated to reflect legislative changes and modifications in market structures. Amendment will provide credit institutions and investment firms the option to use, as eligible collateral, instruments traded on new European exchanges and third-country exchanges, from those jurisdictions for which the European Commission (EC) has adopted equivalence decisions under MiFID II and CRR II. Besides, the final report contains annexes that take into account alternative scenarios in the context of the United Kingdom and Northern Ireland leaving the Union.
Greenhouse gas emissions trading systems
(11/12/2019) The Council – Decision (UE) 2019/2106 on the Agreement between the European Union and the Swiss Confederation on the linking of their greenhouse gas emissions trading systems
The Council has published the Decision (UE) 2019/2106 on the Agreement between the European Union and the Swiss Confederation on the linking of their greenhouse gas emissions trading systems. This decision includes the modifications on two annexes: Annex I modifications on the essential criteria for aviation, stationary installations, registries and auction platforms and activities, and Annex II modifications on linking technical standards (LTS).
Non-bank financial intermediation
(10/12/2019) CNMV – Informe de la CNMV sobre la intermediación financiera no bancaria (IFNB) en España
The Comisión Nacional del Mercado de Valores (CNMV) has published a report on the non-bank financial intermediation (IFNB) in Spain, with the aim of analysing the activity of the entities that form part of the IFNB. In particular, it is reported that, following the methodology of the Financial Stability Board (FSB), the assets that make up the IFNB in Spain stood at 296 billion euros in 2018, which represents 6.7% of the Spanish financial system. Furthermore, the assessment of the risks associated with the IFNB reveals that, in general terms, it does not represent a significant threat to financial stability; however, the CNMV is paying special attention to the evolution of certain risks, such as the liquidity conditions of the assets in the portfolios of investment funds.
(10/12/2019) CNMV – Circular 2/2019, de 27 de noviembre, de la Comisión Nacional del Mercado de Valores, por la que se modifica la Circular 1/2017, de 26 de abril, sobre los contratos de liquidez
The CNMV has published the Circular 2/2019 that modifies the Circular 1/2017 on liquidity contracts, revising the accepted market practice. In particular, two modifications have been introduced: the first one aims to obtain access to the liquidity contracts of a greater number of issuing companies, especially those whose shares have lower liquidity, and the second one aims to modulate certain restrictions on the actions of the financial intermediary in auction periods.
(09/12/2019) EBA – Guidelines (GL) on harmonized definitions and templates for funding plans of credit institutions under Recommendation A4 of ESRB/2012/2
The EBA has published a final report which updates the GL on harmonised definitions and templates for funding plans of credit institutions under Recommendation A4 of ESRB/2012/2 issued on 19 June 2014. In particular, this update includes: i) a detailed set of instructions to facilitate harmonised implementation and reduce implementation burden; ii) an update and revision of the templates for reflecting the lessons learnt in analysing and validating banks’ funding plans and in order to better align with the definitions used in the Reporting Regulation; and iii) a new template for forecasting the statement of profit or loss has been introduced, with the intention of monitoring trends over time in firms’ profitability and their impact in funding.
BigTech and Cloud services
(09/12/2019) FSB – BigTech in finance: Market developments and potential financial stability implications / Third-party dependencies in cloud services: Considerations on financial stability implications
The Financial Stability Board (FSB) has published two reports that consider the financial stability implications from an increasing offering of financial services by BigTech firms, and the adoption of cloud computing and data services by financial institutions. In particular, the first report focuses on the benefits and risks of the entry of BigTech firms into finance, along with the characteristics of their offered financial services and the issues of their regulation. The second report focuses on how the recent adoption of cloud computing and data services through a range of functions at financial institutions raises new financial stability implications.
Macroprudential solvency stress testing
(06/12/2019) IMF – Sovereign Risk in Macroprudential Solvency Stress Testing
The International Monetary Fund (IMF) has published a working paper on Sovereign Risk in Macroprudential Solvency Stress Testing with the objective of explaining the treatment of this sovereign risk based on the experiences in the Financial Sector Assessment Program (FSAP). In particular, four essential steps are discussed in assessing the system-wide impact of sovereign risk: scope, loss estimation, shock calibration and capital impact calculation. This paper also presents a flexible, closed-form approach to calibrating haircuts based on changes in expected sovereign defaults affecting bank solvency during adverse macroeconomic conditions.
(06/12/2019) ESMA – Latest double volume cap data (DVC)
The ESMA has published its updated public register with the latest set of double volume cap (DVC) data and calculations for the period 1 November 2018 to 31 October 2019 as well as updates to already published DVC periods. Furthermore, the ESMA also includes consolidated information on the ISINs subject to a suspension, as well as up-to-date statistics on the suspensions.
(05/12/2019) OCC – CRA performance evaluations: November 2019
The Office of the Comptroller of the Currency (OCC) has published a list of Community Reinvestment Act (CRA) performance evaluations for November 2019. The list contains only national banks, federal savings associations, and insured federal branches of foreign banks that have received ratings. Of the 22 evaluations made public this month, 12 are rated satisfactory, and ten are rated outstanding.
(29/11/2019) CoR – Opinion: A Clean Planet for All
The European Committee of the Regions (CoR) has published an opinion on “A Clean Planet for All”, addressed to the EU bodies, which sets out the long-term strategic vision of a prosperous, modern, competitive and climate-neutral economy by 2050. The main measures to achieve zero net emissions of greenhouse gases by 2050 include climate neutrality of the energy and economic system, its financing and implementation of emission absorption and offsetting strategies.
(29/11/2019) CoR – Opinion: Sustainable Development Goals
The CoR has published an opinion on “Sustainable Development Goals (SDGs)”, addressed to the EU bodies, calling for the recognition and implementation of the 2030 Agenda for Sustainable Development as the EU's long-term strategy for a sustainable Europe by 2030. The CoR calls for the SDGs to be set as a priority on the political agenda and as a global objective of the next EU strategic plan 2019-2024. In addition, it underlines the need for a common vision among all actors on sustainable development and the SDGs in order to fully implement them for the well-being of people and future generations.
(29/11/2019) ESMA – 2019 CRA market share calculation in the EU
The European Securities and Markets Authority (ESMA) has published its annual market share calculation for EU registered credit rating agencies (CRAs) for 2019. The results have shown that the three largest CRAs – S&P Global Ratings, Moody’s Investor Service and Fitch Ratings – account for 92.1% of the market for credit rating agencies in the EU representing a 2.7% increase on 2018, and the remaining 7.9% of the market is shared between 23 registered CRAs.
© GMS Management Solutions, S.L., 2020. Todos os direitos reservados. A informação contida nesta publicação tem caráter geral e não constitui opinião profissional e nem serviço de assessoramento de nenhuma espécie. Os dados utilizados nesta publicação proveem de fontes de informação públicas. A GMS Management Solutions, S.L. não assume responsabilidade alguma sobre a veracidade ou correção de tais dados.