Tracker, Financial Services Regulation & Compliance - Banking


DOMESTIC:

Central Bank publishes Thematic Inspection of Regulatory Reporting by International Banks

The Central Bank has published the results of its thematic inspection on the quality of regulatory reporting by banks categorised as Less Significant Institutions. It examined the extent to which the Central Bank can rely on the integrity of regulatory returns submitted. The extent of the reporting issues varied across institutions with only one institution inspected demonstrating appropriate controls in place for the production of regulatory returns.

Central Bank publishes Mortgage Switching Research

The Central Bank has published its research on mortgage switching for consumers to inform its approach as to whether any further intervention is required. The main findings were that consumers see mortgage switching as costly and a significant undertaking although those who had switched had positive experiences. The research found that a dedicated switching team would encourage mortgage switching and that improvements to the specified timelines for the mortgage switching process are also required. The Central Bank will publish a consultation in Q3 this year proposing further measures to assist consumers in switching their mortgage.


EUROPEAN:

European Central Bank Annual Report 2016 is presented to the EU Parliament's Committee on Economic and Monetary Affairs

Vice-President of the European Central Bank (ECB), Victor Constancio presented the 2016 ECB Annual Report to the European Parliament's Committee on Economic and Monetary Affairs on 10 April 2017.

He set out that there are two actions that must be taken at sectoral, national and European levels to move forward; banks need to continue adjusting their business models to better cope with the low interest rate environment and banks need to continue adjusting their business models to better cope with the low interest rate environment. Mr. Constancio also addressed the ECB's role from regulatory perspective; he set out that Basel Committee on Banking Supervision (BCBS) post-crisis reform package should be completed and that there is a need to complete the European banking union and Capital Markets Union (CMU) to cope with the changing landscape in the euro area financial system.

European Central Bank publishes Guidelines and Recommendations in relation to common specifications for the exercise of some options and discretions available in Union Law by national competent authorities in relation to Less Significant Institutions.

The ECB published final guidelines (EU) 2017/697 and final recommendations 2017/C120/02 following a public consultation addressed to national competent authorities concerning the exercise of options and national discretions for Less Significant Institutions (LSI). This effort, in relation to LSIs, follows the ECB’s harmonisation of the exercise of options and national discretions in the supervision of significant institutions under its direct responsibility.

Mario Draghi, President of the European Central Bank, reports on the decisions of the Governing Council of the European Central Bank, on 27 April 2017 (with Q&A)

It was decided by the Governing Council to keep the key ECB interest rates unchanged. Rates are expected to remain at present or lower levels for an extended period of time, and well past the horizon of their net asset purchases.

Regarding non-standard monetary policy measures, it was confirmed that the ECBs net asset purchases, at the new monthly pace of €60 billion, are intended to run until the end of December 2017 if necessitated, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim. The net purchases will be made alongside reinvestments of the principal payments from maturing securities purchased under the asset purchase programme.

Andrea Enria, Chairperson of the European Banking Authority, addresses the Committee on Economic and Monetary Affairs (ECON) of the European Parliament, on 25 April 2017

The speech, titled "Introductory statement by Andrea Enria, Chairperson of the EBA", focused on the proposals of the European Commission to amend the Capital Requirements Regulation (CRR), the Capital Requirements Directive (CRD), the Bank Recovery and Resolution Directive (BRRD) and the Single Resolution Mechanism Regulation (SRMR); the new banking legislation package. Mr. Enria set out that he was pleased that the Commission’s proposals were broadly accepted the EBA conclusions however he did acknowledge that there are a few areas in which the Commission’s proposals departed from the international standards and from the EBA’s recommendations, relaxing the requirements for some transactions or specific institutions.

European Banking Authority issues roadmap of its plan to update the 2017-2018 Supervisory Review and Evaluation Process

The Roadmap explains the multi-stage approach the EBA intends to follow in updating the EU Supervisory Review and Evaluation Process (SREP) framework in 2017-2018 and beyond, and summarises the ongoing policy initiatives affecting Pillar 2/SREP that will need to be reflected in the revised EBA guidelines on Pillar 2 topics.

European Banking Authority publishes its final draft Implementing Standards amending the Implementing Technical Standards on Supervisory Reporting Regulation (EU) No 680/2014 as mandated by the CRR

The implementing standards are updating the Implementing Technical Standards (ITS) on supervisory reporting due to new requirements in the reporting of information of sovereign exposures, the reporting on operational risk, the reporting of additional monitoring metrics on liquidity and reporting on COREP, IP losses and leverage ratio (technical amendments). The technical standards will apply from March 2018.

European Banking Authority publishes its final guidelines concerning the interrelationship between the BRRD sequence of writedown and conversion and CRR/CRD

The BRRD specifies the sequence in which the power to write down or convert liabilities in resolution should be applied. These guidelines provide general guiding rules which should be applied in cases where there is potential ambiguity about which category of the writedown sequence a particular instrument belongs to and discusses their application to particular cases.

European Banking Authority publishes its final guidelines on the treatment of shareholders in bail-in or the write-down and conversion of capital instruments, as laid down in the BRRD

The Guidelines are part of a series of EBA regulatory mandates which aim to clarify how valuation information should inform the use of the bail-in power to absorb losses and recapitalise banks in resolution. They clarify the circumstances which should guide the choice, when applying the bail-in tool or the writedown or conversion of capital instruments power under the BRRD, between the following possible actions:

(a) cancellation of existing shares or other instruments of ownership or transfer of them to bailed-in creditors; and/or

(b) dilution of existing shareholders and holders of other instruments of ownership as a result of the conversion of relevant capital instruments or eligible liabilities to equity.

European Banking Authority publishes its final guidelines on the rate of conversion of debt to equity in bail-in, as laid down in the BRRD

The Guidelines provide guidance to resolution authorities on the setting of conversion rates of debt to equity in accordance with Article 50 of the BRRD for liabilities eligible for bail-in. Article 50 requires the EBA to produce guidelines which indicate, in particular, how affected creditors may be appropriately compensated by means of the conversion rate, and the relative conversion rates that might be appropriate to reflect the priority of senior liabilities under applicable insolvency law.

European Banking Authority publishes questions and answers in relation to the CRR (EU) No 575/2013  in the Single Rulebook Q&A on the following topics:

  • Netting of Exposures arising from CIUs;
     
  • Treatment of negative accrued interests in the credit risk;
     
  • Gross-up calls on Tier 2;
     
  • Validation rules v2817_m & v2823_m between the Finrep conso & AE-CON conso reportings (Annexes III, IV and XVI);
     
  • Validation rule v1384_mc (Annex III);
     
  • Template C 05.01 column 060 positive or not (Annexes I and II);
     
  • Maturity Bucket of Call Deposits for Large Exposure Reporting;
     
  • Forbearance ITS;
     
  • Classification of institution in LR5 (Annex XI);
     
  • Template C 12.00 – validation rule v0519_m (Annexes I and II);
     
  • Reporting of cash collaterals included in repurchase agreements in Template F 08.01 (Annex V);
     
  • Thresholds for Common Equity Tier 1;
     
  • Treatment of CCP Default fund contributions in Leverage Ratio reports;
     
  • Validation Rule v3688_s (Blocking Rule) (Annexes I and II);
     
  • Exposures towards QCCPs under CRR Art. 306(c) under standardised method;
     
  • Clarifications/ remediation on EBA LCR specified taxonomy mapping for Annex XXIV and Annex XXV templates;
     
  • Own Credit Spread (Annex V);
     
  • FinRep validation rules v3079_m and v3080_m (Annex V);
     
  • Repurchase Agreements in template F 08.01 versus assets encumbered in template F 15.00 - EBA validation v0912_m (Annex III);
     
  • Validation rule v2819_m - Cross-check between FINREP and Asset Encumbrance (Annexes III, IV and V);
     
  • Template C 47.00, rows 270 and 280 (Validation rule v4452_s) - treatment of Cash Flow Hedge reserves (Annex XI);
     
  • Reporting of percentage values in LE reports;
     
  • Hedging derivatives;
     
  • Derivatives not shown in the Balance Sheet and Derivatives shown as Liabilities;
     
  • Correct reporting in COREP Credit Risk Standardised Approach (CRSA) template of repo / SFT Positions with Cash Collateral CRM Substitution Effects;
     
  • Validation rule 1740_m (Annex V);
     
  • Inconsistent validation rules of asset encumbrance templates (F 32.01, F 32.04, F 36.01) (Annex XVI);
     
  • Reported overshooting in C 24.00 (Annexes I and II);
     
  • Reference period for items reported on a cumulative basis;
     
  • COREP LE template C 28.00, C29.00 (Annex VIII);
     
  • Validation rule on Leverage ratio templates - v4462_m;
     
  • Deduction from CET1 of significant holdings in financial sector entities (FSE) and protection acquired to limit downside investment exposure;
     
  • Cross-Product Netting; and
     
  • Approach specified in Article 134(5) CRR regarding the risk weight to be applied to assets purchased on a forward basis also apply to assets sold on a forward basis.

European Banking Authority publishes questions and answers in relation to the BRRD 2014/59/EU in the Single Rulebook Q&A on the following topic:

  • Eligible Liabilities in the context of Articles 27(1) and 45(4).

European Banking Authority publishes questions and answers in relation to the CRD 2013/36/EU in the Single Rulebook Q&A on the following topics:

  • Capital buffer for other systemically important institutions;
     
  • Basis of risk exposures to take in consideration for calculation of the countercyclical buffer (CcyB); and
     
  • Implementation of the provisions on the shorter transitional period for a countercyclical capital buffer, as provided under Article 160 of the Directive 2013/36/EU.

Danièle Nouy, Chair of the Supervisory Board of the European Central Bank, gives introductory statement at the public hearing on "Updating CRR, CRD, BRRD and SRMR: the new banking legislation package" in the ECON Committee of the European Parliament, on 25 April 2017

Mr. Nouy outlined prominent issues for the ECB such as the proposal to implement a series of international supervisory standards, changes introduced in the resolution framework, the introduction of a harmonised category of non-preferred senior debt, the provisions which will facilitate a closer prudential supervision of financial holding companies and of significant third country banking groups located in the EU and the proposal to grant capital waivers within a banking group on an EU cross-border basis. He did however set out that there is still for substantial improvement in the proposal.

Peter Praet, Member of the Executive Board of the ECB, set out the 'Priorities for relaunching the Eurozone' in the magazine of the Eurofi conference, on 4 April 2017

In his contribution, Mr. Praet set out the importance of completing a banking union but set out that several legal, institutional and political problems need to be addressed prior to achieving this this including private risk-sharing, public risk sharing, ensuring that both supervisory responsibility and the fiscal backstop are at European level and the integration through harmonized implementation of national options and discretions.

For further information please contact a member of the Financial Regulation team.

Date published: 09 May 2017