Domestic

CBI publishes Central Credit Register data management review

On 12 November 2024, the Central Bank of Ireland (CBI) published an executive summary of the independent review of data management of its Central Credit Register (CCR).

In October 2023, the CBI committed to carrying out an independent review after identifying an archiving error that affected the retention period of certain borrower information held on the CCR. This led to some borrower information being retained on the CCR for an additional three months longer than permitted. However, no data was compromised or accessed by any unauthorised third parties, although this constituted a breach under data protection legislation.

Beyond the immediate resolution of the specific incident, the CBI initiated an independent review of broader data protection safeguards, management, controls and oversight measures in place with respect to the operation of the CCR.

The key findings and recommendations identified for managing and servicing of the CCR service included:

1. The operating model supporting the end-to-end CCR service across the CBI and involved parties is not fully aligned. It is recommended to evolve the operating model for the CCR service by undertaking and completing a comprehensive review of its capabilities covering processes, people, systems, data, controls, and governance to ensure alignment at each stage of the end-to-end CCR service.
2. Opportunities to improve the ongoing oversight of third-party risks and control effectiveness across the delivery of the end-to-end CCR service and it is recommended that the risk management capability is strengthened by enhancing first-line oversight within the CBI.
3. Third party risk management is not fully embedded in an integrated way across CBI and involved parties and it is recommended that a culture of ongoing third-party risk management be embedded, which means identifying appropriate controls and addressing potential risks associated with outsourcing services to third parties.

European

Statement by Eurogroup President on the 10th Anniversary of the Single Supervisory Mechanism

On 6 November 2024, Paschal Donohoe, President of the Eurogroup, delivered a speech on the 10th Anniversary of the Single Supervisory Mechanism (SSM). He noted that, under the supervision of the SSM, the resilience of European banks has improved considerably over the decade:

• the CET1 ratio of Significant Institutions has increased by over 3% since the SSM’s establishment
• non-performing loans have also declined dramatically from 7.5% in 2015 to 1.9% in 2024

He also noted that, following agreement by EU Finance Ministers in 2022, work on the Banking Union has predominantly focused on strengthening the common framework for bank crisis management and national deposit guarantee schemes (CMDI). He said he was pleased that inter-institutional negotiations are scheduled to begin this month. He added, “the CMDI review includes a comprehensive set of measures designed to improve the resolution process for small and medium-sized banks”.

EBA observes an improvement in competent authorities’ practices on the supervision of non-performing loans

On 7 November 2024, the European Banking Authority (EBA) published a follow-up to the 2022 peer review report on the supervision of the management of non-performing exposures (NPEs) by credit institutions (the report).

The findings of the report show improvements in competent authorities’ supervisory practices that reflect the significant focus given to the supervision of NPEs by the EBA and competent authorities and demonstrate that all competent authorities now fully or largely apply the EBA guidelines on management of non-performing and forborne exposures. The EBA noted that the findings of the follow-up report, therefore, do not require any further recommendations on the topic.

However, despite these positive results, and given the rise in NPEs as identified in the 2024 July EBA risk assessment report, the EBA cautioned against complacency and encourages competent authorities to remain mindful and vigilant of the need to keep NPE ratios under scrutiny.

Survey on the Access to Finance of Enterprises finds that firms report moderate tightening of financing conditions

On 7 November 2024, the European Central Bank (ECB) released the newest round of the survey on the access to finance of enterprises (SAFE). Among other things, the survey found:

• Firms reported little changes regarding the availability of bank loans. However, firms’ need for bank loans has declined moderately, partly due to high internal funds.
• Substantially fewer firms reported rising bank interest rates on loans, although many indicated a further tightening of other conditions.
• Firms’ inflation expectations continued to decline, with their median expectations for annual inflation in one, three and five years all standing at 2.9%.

The survey presents the main results of the 32nd round of the SAFE survey for the euro area and was conducted between 2 September and 15 October 2024.

The EBA consults on guidelines on proportionate retail diversification methods

On 12 November 2024, the EBA launched a consultation on its draft guidelines on proportionate retail diversification methods mandated by the Capital Requirements Regulation III (CRR3). In its draft guidelines, the EBA sets out criteria to assess under which circumstances, retail exposures can be considered as diversified under the credit risk standardised approach for determining capital requirements CRR3.

As a starting point, the EBA considers the 0.2% granularity criterion set out in the Basel framework, according to which no individual exposure in the retail portfolio should exceed 0.2% of the retail portfolio. Under the EBA’s proposal, institutions with exposures above the 0.2% granularity criterion will, however, still be considered sufficiently diversified, as long as no more than 10% of their retail portfolio exceeds the 0.2% threshold.

The consultation paper follows the recommendations from the EBA Advisory Committee on Proportionality for 2024 in the credit risk area. The EBA will hold a virtual public hearing on the consultation paper on 16 December 2024, from 15:00 to 16:00 CET.

The consultation runs until 12 February 2025.

The EBA publishes methodology, draft templates, and key milestones for its 2025 EU-wide stress test

On 13 November 2024, the EBA released the final methodology, draft templates, and template guidance for the 2025 EU-wide stress test, along with the milestone dates for the exercise. The methodology and templates cover all relevant risk areas and incorporate feedback received from the industry. The stress test exercise will formally start in January 2025, following the release of the macroeconomic scenarios, with the results scheduled for publication in early August 2025.

Key milestones for the 2025 EU-wide stress test:

• launch of the exercise: second half of January 2025
• first submission of results to the EBA: end of April 2025
• second submission to the EBA: early June 2025
• final submission to the EBA: early July 2025
• publication of results: beginning of August 2025

EBA Opinion in response to European Commission's proposed amendments to technical standards on supervisory reporting and Pillar 3 disclosures

On 14 November 2024, the EBA issued its opinion on the European Commission (the Commission) amendments to the draft ITSs on supervisory reporting and Pillar 3 disclosures under CRR3. The opinion proposes to transpose the amendments put forward by the Commission. These changes include incorporating the Commission’s suggestion that the templates of the ITS will be published as part of the ITS while the instructions will be embedded on the EBA’s website. The EBA noted in relation to this suggestion that the original proposal allowed for greater flexibility in the creation of IT solutions but agreed to the proposed approach referring to the agreement as an intermediate step on the basis of which the EBA and Commission would continue to cooperate.

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.