Financial Services Regulation and Compliance - Banking August 2019

DOMESTIC

CBI publishes Money and Banking Statistics July 2019

On 30 August 2019, the CBI published its Money and Banking Statistics for July 2019. The statistics covered a number of areas such as developments in household credit and revealed that:

  • annual growth in total bank lending slowed to 0.2 percent
  • credit institutions' holdings of Irish-issued debt and equity securities decreased by €1.1bn
  • lending to non-financial corporations declined by €328m
  • the annual growth in bank loans to households was 2 percent in the twelve months to end-July 2019

CBI publishes financial stability note on the landscape for London and other EU financial centres post Brexit

On 6 August 2019, the CBI published a financial stability note which examines the future of Global Financial Centres (GFC) from an EU perspective. The research discusses a series of scenarios for London and other financial centres in Europe after Brexit, and found that:

  • London is likely to remain a very large GFC even in and adverse Brexit scenario
  • London's status could be vulnerable to new trading arrangements, disruption in global value chains, and institutional reshaping
  • the impact of relocations on smaller centres like Amsterdam or Dublin could be significant

CBI publish Regulatory Service Standards Performance Report for H1 2019

On 1 August 2019, the CBI published its Regulatory Service Standards Performance Report for the first half of 2019. The report compares the Central Bank’s performance against deadlines it has committed to for the authorisation of financial service providers and fitness and probity applications. The report found that 34 out of 35 authorisation service standards which applied during the period were either met or exceeded by the CBI and that regulated financial services firms must prepare for all plausible Brexit scenarios.

CBI withdraws 'Valuation Processes in the Banking Crisis - Lessons Learned - Guiding the Future' regulatory notice

On 1 August 2019, the CBI withdrew its 'Valuation Processes in the Banking Crisis - Lessons Learned - Guiding the Future' regulatory notice. The notice, which was issued in 2012, was intended to provide guidance to credit institutions on the valuation frequency and standards for commercial property. The notice has been withdrawn as the legal and supervisory requirements for the valuation of immovable property collateral have been revised considerably. The withdrawal takes place with immediate effect.

EUROPEAN

Public consultation on draft Mobile Initiated SEPA Credit Transfer (MSCT) Interoperability Implementation Guidelines extended until 16 September 2019

On 28 August 2019, the European Payments Council extended the public consultation on draft Mobile Initiated SEPA Credit Transfer Interoperability Implementation Guidelines to allow more time for interested parties to submit comments. The guidelines aim to contribute to a competitive MSCT market by providing an insight into the different service, technical and security aspects involved. Interested stakeholders are invited to reply through the feedback questionnaire by 16 September 2019.

EBA publish annual update on EU banks' funding plans and asset encumbrance

On 28 August 2019, the EBA published its annual update on EU banks' funding plans and asset encumbrance. The update is used by EU supervisors to assess the sustainability of banks' main sources of funding. The update on funding plans shows that banks intend to increase debt issuances over the next three years, in particular unsecured debt instruments. The asset encumbrance report shows that the overall weighted average asset encumbrance ratio was stable in 2018.

Luis de Guindos gives speech at the ECB policy panel of the Annual Congress of the European Economic Association

On 27 August 2019, Vice-President of the ECB Luis de Guindos gave a speech at the Annual Congress of the European Economic Association. In his speech, the Vice-President discussed a number of topics, including:

  • the relationship between central banks and financial markets
  • market-based inflation expectations
  • the echo chamber effect
  • central bank communication with the general public

ECB revises supervisory expectations for prudential provisioning for new non-performing loans to account for new EU regulation

On 22 August 2019, the ECB decided to revise its supervisory expectations for the prudential provisioning of new non-performing exposures (NPEs). The decision was made following the adoption of a new EU regulation that outlines the Pillar 1 treatment for NPEs. The new regulation complements existing rules and requires a deduction from own funds when NPEs are not sufficiently covered by provisions. The update confirms that:

  • the scope of the ECB’s supervisory expectations for new NPEs will be limited to NPEs arising from loans originated before 26 April 2019
  • the relevant prudential provisioning time frames, the path to full implementation and the split of secured exposures, as well as the treatment of NPEs guaranteed by an official export credit agency, have been aligned with the Pillar 1 treatment of NPEs set out in the new EU regulation
  • supervisory expectations for the stock of NPEs remain unchanged

ECB publish report on the declared time commitment of non-executive directors in the single supervisory market (SSM)

On 14 August 2019, the ECB released a report on the time commitment of non-executive directors in the SSM for carrying out their functions such as oversight. The report contains the results of an ECB benchmarking exercise which was carried out to increase its knowledge of non-executive directors’ time allocation to their responsibilities and to inform upcoming bank and supervisor assessments. The report found the average declared time commitment was 22 days per year for regular non‑executive directors and 42 days per year for chairpersons. It is not intended for this data to lead to any definitions of what constitutes a sufficient time commitment.

EBA updates data used for the identification of global systemically important institutions (G-SIIs)

On 12 August 2019, the EBA published 12 indicators and updated the underlying data from the 36 largest institutions in the EU, whose leverage ratio exposure measure exceeds €200bn. This end-2018 data helps decide the internationally agreed basis on which a smaller subset of banks will be identified as G-SIIs. The identification of a G-SII, which leads to a higher capital requirement, is the responsibility of national competent authorities and will be updated by 15 December 2019.

EBA updates Single Rulebook Q&A for Regulation (EU) No. 575/2013 (CRR/CRR2)

On 9 August 2019, the EBA updated its Single Rulebook Q&As for Regulation (EU) No. 575/2013 (CRR/CRR2) to include a response in relation to the static and dynamic phase in arrangements under the CRR, and how they should apply on a consolidated basis where there is a business combination between banks.

The answer states that under the static approach, the expected credit losses amount to be considered would not change as a result of the business combination. However, under the dynamic approach, the expected credit losses recognised by the subsidiaries that are now part of the consolidated figures are relevant for the calculation of the amount to be considered.

EBA publishes opinion on the implementation of the Deposit Guarantee Schemes Directive

On 8 August 2019, the EBA published an opinion on the implementation of the Deposit Guarantee Schemes Directive (DGSD). The opinion proposes a number of changes with the hopes of strengthening depositor protections, enhancing financial stability and improving operational effectiveness. This is the first of three opinions that the EBA plan to publish on the DGSD this year. The EBA has invited the European Commission to consider the opinion when preparing a report on the implementation of the DGSD to be submitted to the European Parliament and the Council.

ECB publishes Consolidated Banking Data for end-March 2019

On 7 August 2019, the ECB published its Consolidated Banking Data for end-March 2019. The results show that between the period March 2018 and March 2019:

  • total assets of credit institutions headquartered in the EU increased by 5.1%, from €32.7trn to €34.4trn
  • the non-performing loans ratio dropped by 0.8% to 3.1%

The data collected for the publication references 378 banking groups and 2,769 stand-alone credit institutions operating in the EU, covering nearly 100% of the EU banking sector balance sheet.

EBA publishes feedback on a review of the use, usefulness and implementation of the Single Rulebook Q&As

On 7 August 2019, the EBA published the findings of its review into the use, usefulness and implementation of the Single Rulebook Q&As. The review took place in the second half of 2018 and was addressed to competent authorities (CAs) and selected industry representatives. The findings show that:

  • CAs and institutions widely encourage the use of the Q&A process/tool
  • final answers are largely followed and play a considerable role in the application and implementation of regulations and directives

Overall, CAs and institutions are happy with the Q&A's tool and answers. They do however make some suggestions for improvement, which the EBA plan to consider with a view to developing proposals for changes.

EBA Publishes Advice on EU Implementation of Basel III

On 5 August 2019, the EBA published several documents setting out its advice to the European Commission on the impact and implementation of the Basel III reforms. The EBA has set out its advice across several documents, including a quantitative analysis of banks, as well as policy advice documents on security financing transactions, operational risk, the output floor and credit risk.

Overall, the EBA recommends that the Basel III framework is implemented without change to ensure the credibility of the EU banking sector and that the EU can follow the Basel III implementation timeframe.

Decision (EU) 2019/1312 of the European Central Bank of 22 July 2019 amending Decision (EU) 2016/810 (ECB/2016/10) on a second series of targeted longer-term refinancing operations (ECB/2019/22)

On 2 August 2019, the Decision (EU) 2019/1312 of the European Central Bank of 22 July 2019 amending Decision (EU) 2016/810 (ECB/2016/10) on a second series of targeted longer-term refinancing operations (ECB/2019/22) was published in the Official Journal of the European Union.

Decision (EU) 2019/1311 of the European Central Bank of 22 July 2019 on a third series of targeted longer-term refinancing operations (ECB/2019/21)

On 2 August 2019, Decision (EU) 2019/1311 of the European Central Bank of 22 July 2019 on a third series of targeted longer-term refinancing operations (ECB/2019/21) was published in the Official Journal of the European Union.

ECB publish Decision relating to oversight of SIPS

On 1 August 2019, the ECB published a Decision on the procedure and conditions for exercise by a competent authority of certain powers in relation to oversight of SIPS. The Decision addresses SIPS and Eurosystem central banks with primary oversight responsibility for these SIPS. The Decision:

  • enables the CAs to obtain information and documents from a SIPS operator in the format and within the deadline set by the competent authority
  • enables the competent authority to request the appointment of an independent expert for an investigation or independent review of the SIPS

EBA launches consultation on the methodology to determine the weighted average maturity of contractual payments due under the tranche of a securitisation transaction

On 1 August 2019, the EBA launched a consultation on draft guidelines on the determination of the weighted average maturity of contractual payments due under the tranche of a securitisation transaction, under the Capital Requirements Regulation. The main areas covered by the guidelines are:

  • the meaning of contractual payments due under the tranche
  • data and information requirements
  • methodologies for determining the contractual payments of the securitised exposures both for traditional and synthetic securitisations
  • implementation and use of the weighted average maturity model

The deadline for submissions is 31 October 2019.

For more information on this topic please contact any member of A&L Goodbody's Financial Regulation team.

Date published: 12 September 2019