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Central Bank of Ireland publishes new Frontier Statistics series - highlights new data on total domestic credit and mortgage rates
On 9 December 2024, the Central Bank of Ireland (CBI) published the first in a new series of Frontier Statistics.
The first new publication under the Frontier Statistics series looks at a new measure of total credit in the domestic economy. New insights include:
The second publication under the Frontier Statistics series looks at the distribution of mortgage interest rates.
European Union (Capital Requirements) (No. 2) (Amendment) Regulations 2024 signed into law
On 5 December 2024, the Minister for Finance signed into law the European Union (Capital Requirements) (No. 2) (Amendment) Regulations 2024 (the regulations), the text of which was published in Iris Oifigiúil on 10 December 2024. The regulations amend the European Union (Capital Requirements) (No. 2) Regulations 2014, which relate to the Capital Requirements Regulation.
The regulations come into operation on 1 January 2025.
Commission Implementing Regulation laying down implementing technical standards with regard to public disclosures by institutions of information under CRR
On 31 December 2024, Commission Implementing Regulation (EU) 2024/3172 of 29 November 2024 laying down implementing technical standards (ITS) for the application of the Capital Requirements Regulation (CRR) with regard to public disclosures by institutions of the information referred to in Part Eight, Titles II and III, of CRR, and repealing Commission Implementing Regulation (EU) 2021/637 was published in the Official Journal of the EU. The Commission Implementing Regulation will enter into force on the twentieth day following that of its publication in the Official Journal of the EU.
Commission Implementing Regulation laying down implementing technical standards with regard to supervisory reporting of institutions under CRR
On 31 December 2024, Commission Implementing Regulation (EU) 2024/3117 of 29 November 2024 laying down ITS for the application of CRR with regard to supervisory reporting of institutions and repealing Commission Implementing Regulation (EU) 2021/451 was published in the Official Journal of the EU. The Commission Implementing Regulation will enter into force on the twentieth day following that of its publication in the Official Journal of the EU.
Governing Council statement on macroprudential policies - the ECB’s framework for assessing capital buffers of other systemically important institutions
On 20 December 2024, the Governing Council of the European Central Bank (ECB) issued a statement concerning the ECB’s framework for assessing capital buffers of other systemically important institutions (O-SIIs) after the meeting of its Macroprudential Forum on 27 November 2024. The statement notes:
EBA publishes final draft technical standards on the conditions for determining whether an instrument attracting residual risk acts as a hedge
On 17 December 2024, the European Banking Authority (EBA) published its final draft regulatory technical standards (RTS) on the conditions for determining whether an instrument attracting residual risk acts as a hedge. These RTS are part of the Phase 1 deliverables of the EBA roadmap on the implementation of the EU banking package in the area of market risk.
One of the pillars of the standardised approach/ sensitivity-based method (SA/SbM) under the new fundamental review of the trading book (FRTB) framework is the residual risk add-on (RRAO). The EU Banking Package introduces a provision in the RRAO framework allowing the exemption from the RRAO charge for those instruments bearing residual risks that are, in turn, used to hedge instruments bearing residual risks.
The final report notes that in accordance with Commission Delegated Regulation (EU) 2024/2795 postponing the FRTB by one year, institutions are required to use the CRR2 version of the FRTB requirements. The RRAO exemption set out in the draft RTS will be applicable only once CRR3 FRTB implementation enters into force.
EBA reports that EU banks’ liquidity coverage ratio increased in June 2024, underpinned by growth in banks’ holdings of liquid assets
On 13 December 2024, the EBA published a report on liquidity measures, which monitors and evaluates the liquidity coverage requirements currently in place in the EU. The report found that between June 2023 and June 2024, EU banks’ liquidity coverage ratio (LCR) increased by 3% to reach 167%. Within that period, the EBA observed changes in the composition of banks’ funding deposits while banks’ holdings of liquid assets steadily increased.
The report found that EU banks’ average LCR in USD and in GBP improved during the period under review, to exceed 100% as of June 2024. The EBA findings noted that the ability of banks to access the market for currency swaps could become constrained during periods of stress. Therefore, it advised banks and competent authorities to be aware of any shortfalls in foreign currency LCRs to avoid unforeseen liquidity mismatches during volatile market conditions.
EBA reports that competent authorities have made significant progress in their approaches to tackling money laundering and terrorist financing
On 13 December 2024, the EBA published the findings from its fourth and final round of reviews of competent authorities’ approaches to tackling money laundering and terrorist financing (ML/TF) risks in the banking sector. With this round, the EBA has now assessed all competent authorities that are responsible for the anti-money laundering and counter terrorism financing (AML/CFT) supervision in thirty EU/EEA member states.
The EBA report indicates that AML/CFT supervisors have taken important steps to implement a risk-based approach to AML/CFT and, since the first round of reviews in 2018, the EBA has seen significant developments in competent authorities’ approaches to supervision.
However, the EBA notes that it continued to find weaknesses in competent authorities’ risk assessment methodologies and enforcement processes not being fully effective or deterrent. It also found divergent approaches in the way prudential supervisors consider and address ML/TF risks. In the absence of AML/CFT colleges, cooperation was limited, and remains lacking with tax authorities. Therefore, it recommended a number of actions tailored to each competent authority to support their approach.
Overall, the EBA noted that the progress made since the first round suggests that the effectiveness of AML/CFT supervision will facilitate the effective implementation of the new AML/CFT package. This is due to the actions taken by competent authorities following the EBA’s recommendations.
The EBA will conduct a final review in 2025 of all the actions taken by competent authorities to assess the current state of AML/CFT supervision of banks and publish a final report as part of the EBA’s handover to the new EU Anti-Money Laundering Authority.
EBA assesses potential benefits and challenges of tokenised deposits
On 12 December 2024, the EBA published a report to facilitate awareness of tokenised deposits, as well as assess their potential benefits and challenges. Up until now, the EBA has identified limited cases of tokenised deposits, however, the report notes that interest from credit institutions appears to be on the rise.
The EBA noted that potential benefits include programmability and automation of transfers, but that there are potential challenges which include issues relating to consumer protection, operational risk, and the application of the anti-money laundering and countering the financing of terrorism framework. In light of this, the EBA will continue to monitor market developments and promote discussion on both the potential benefits and challenges, as well as on issues relating to regulatory classification as compared to electronic money tokens.
EBA consults on draft technical standards that specify material changes and extensions to the Internal Ratings Based approach
On 9 December 2024, the EBA launched a public consultation on its draft RTS clarifying and enhancing the conditions for assessing material model changes and extensions following a review of the related Delegated Regulation.
The EBA review proposes updates that will align the RTS with the Capital Requirements Regulation (CRR 3). It will also enhance the supervisory effectiveness of the approval process of model changes and clarify a number of aspects related to the scope of the RTS. The proposed amendments focus primarily on the qualitative criteria for the material changes related to the definition of default, the validation framework, and the modelling approaches used for slotting exposures and purchased receivables.
The deadline for the submission of comments is 10 March 2025. A public hearing will take place via conference call on 15 January 2025. The deadline for registration for the public hearing is the 10 January 25.
EBA publishes final standards on the specification of long and short positions under the derogations for market and counterparty risks
On 6 December 2024, the EBA published its final draft RTS on the method for identifying the main risk driver and determining whether a transaction represents a long or a short position. These RTS are part of the Phase 1 deliverables of the EBA roadmap on the implementation of the EU banking package in the area of market risk.
The proposed general method to identify the main risk drivers will be based on sensitivities defined under the market risk standardised approach or on add-ons defined under the standardised approach for counterparty credit risk (SA-CCR). For the purposes of determining the direction of the positions, the methodology is aligned with the one set out in the RTS on SA-CCR. A simplified method which covers relatively simple instruments, such as fixed-rate bonds, floating-rate notes, stocks, forwards, futures, simple swaps and plain vanilla options, has also been included.
The draft RTS will be submitted to the European Commission for endorsement following which they will be subject to scrutiny by the European Parliament and the Council before being published in the Official Journal of the European Union.
ECB announces new timeline for harmonisation of banks’ statistical reporting
On 4 December 2024, the ECB announced an updated timeline for the Integrated Reporting Framework (IReF) programme. The IReF seeks to harmonise statistical reporting across euro area banks, reduce the reporting burden whilst also enhancing the quality of data available to policymakers and analysts.
IReF reporting is currently planned to start in the fourth quarter of 2029. The integration of statistical, prudential and resolution requirements will be further developed under the umbrella of the recently established Joint Bank Reporting Committee. The ECB advised that a one-year pilot reporting phase will take place before actual reporting begins to make the transition easier and more efficient for the banking industry and the authorities. The timeline is reflective of the feedback it received from the banking industry on the need to ensure that the IReF is implemented smoothly.
For more information on these topics please contact any member of A&L Goodbody's Financial Regulation Advisory team.
This publication provides an overview of certain legal and regulatory developments that may be of interest to certain entities. It does not purport to provide analysis of law or legal advice and is strictly for information purposes only.