Author: Selwyn Manning

Source: European Banking Authority

The three European Supervisory Authorities (EBA, EIOPA and ESMA – the ESAs) today issued their Spring 2024 Joint Committee update on risks and vulnerabilities in the EU financial system. The risk update shows that risks remain elevated in a context of slowing growth, an uncertain interest rate environment and ongoing geopolitical tensions.

In recent months, financial markets have performed strongly in anticipation of potential interest rate cuts in 2024 in both the EU and the US, despite the significant uncertainty surrounding these. This strong performance entails elevated risks of market corrections linked to unexpected events.​ Credit risk is also expected to continue to increase as refinancing needs grow, particularly for high-yield debt and real estate. While asset quality has remained robust in the banking sector, it is expected to deteriorate as economic growth slows further.​ The real estate slowdown could also drive impairments at banks.

The insurance sector maintained solid capitalisation in 2023, with solvency ratios well above 200%.  Defined benefit occupational pension schemes improved their financial position. The liquidity positions of insurers diminished slightly but remain ample. Challenges stemming from subdued growth and the potential repricing of risk premia  nevertheless persist.

In the banking sector, capital and liquidity positions are solid with CET1 ratio of 15.8% and a liquidity coverage ratio above 160% amid high profitability in 2023. However, the outlook is more challenging, as banks face the repricing of liabilities and assets with prospects of lower interest income, slower loan growth, high costs and the challenging macro environment.

Fund performance and flows have been volatile as the interest rate environment has changed. While funds have managed the transition to higher interest rates, concerns remain regarding the valuation of real-estate fund assets, and liquidity risks in these funds could have wider spillover effects.​

Heightened geopolitical instability and increased reliance on digital solutions are raising the stakes linked to cyber security. The number of attacks and cyber threats is increasing, and while the impact of these attacks so far has been limited, cyber-related insurance claims keep increasing, and the (re)insurance industry is further strengthening pricing techniques and risk-transfer mechanisms. In the banking sector, the findings from the cyber resilience testing currently underway will be important.

Notes to Editors

This Spring 2024 Joint Committee update on Risks and Vulnerabilities was presented to the EFC FST meeting on 29 April as input from the ESAs to the meeting.

Source: European Banking Authority

The European Banking Authority (EBA) published today an Opinion, in which it assesses payment fraud data that has recently become available to the EBA, identifies new types and patterns of payment fraud, and develops proposals to mitigate them. This Opinion aims at further strengthening the forthcoming legislative framework under the Third Payment Services Directive (PSD3) and Payment Services Regulation (PSR), as it will enshrine anti-fraud requirements for several years to come and needs to be as future-proof as possible.

In the Opinion, the EBA confirms that regulatory measures such as the Strong Customer Authentication (SCA) that the revised Payment Service Directive (PSD2) and the EBA’s Technical Standards have imposed on the payments industry have been successful in achieving the aim of significantly reducing fraud that involves the stealing of customers’ credentials. However, fraudsters have adapted their techniques and are using more complex types of fraud, such as those based on what is commonly referred to as ‘social engineering’.

To mitigate these dynamic new fraud types, the Opinion is proposing that new security measures are prescribed that are in addition to those articulated in the EU Commission’s welcome proposals for the PSD3 and a PSR as well as the provisions that recently entered into force through the Instant Payments Regulation (IPR). 

Legal basis

The competence of the EBA to deliver this opinion is based on Articles 1(5), 8(2)(g), 9(4) and 16a(1) of Regulation (EU) No 1093/2010, which mandate the EBA to ‘achiev[e] a coordinated approach to the regulatory and supervisory treatment of new or innovative financial activities’ and ‘upon a request from the European Parliament, from the Council or from the Commission, or on its own initiative, provide opinions to the European Parliament, to the Council and to the Commission on all issues related to its area of competence’. 
 

Source: European Banking Authority

The European Banking Authority (EBA) published today its Report on high earners for 2022. The analysis reveals an increase of the number of individuals working for EU banks and investment firms who have received a remuneration of more than EUR 1 million. This increase is linked to the overall good performance of institutions, expansion of business and salaries adjusted for inflation.

In 2022, the number of high earners receiving a remuneration of more than EUR 1 million increased by 19.7%, from 1 957 in 2021 to 2 342 in 2022. The EBA’s analysis also includes data on the gender distribution among high earners, highlighting a persistent gender imbalance within the financial sector, and particularly the highest paid positions. 

The weighted average ratio of variable to fixed remuneration for all high earners of credit institutions stood at 85.3%, while it reached 489% for high earners of investment firms, for which the ratio between the variable and the fixed remuneration no longer applies as of 2021. 

Legal basis and next steps

This Report has been developed in accordance with Article 75(3) of Directive 2013/36/EU and Article 34 (4) of Directive (EU) 2019/2034, which mandates the EBA to collect information on the number of individuals per institution that are remunerated EUR one million or more per financial year (high earners) in pay brackets EUR one million, including the business area involved and the main elements of salary, bonus, long-term award and pension contribution.

The EBA collected data for 2022 based on revised Guidelines on the data collection exercises regarding high earners under Directive 2013/36/EU and Directive (EU) 2019/2034, which prolonged the period for the data collection compared to future years to allow for the implementation of the revised framework at institutions, investment firms and competent authorities.

The EBA will continue to publish data on high earners annually, to closely monitor and evaluate developments in this area. 

Notes to editors

Key figures have been visualised in a dynamic way. To facilitate the navigation, please find below the full list of key figures that you can find in the graphs:

Slide 1: Evolution in the number of high earners in EU27/EEA Member States

Slide 2: Number of high earners (data for 2022) by Member State (EU and EEA) and payment bracket  of one million Euro (e.g. EUR 1 mn to EUR 2 mn)

Slide 3: Number of high earners (data for 2022) by Member State (EU and EEA) and gender for institutions and investment firms

Slide 4: Percentage of female high earners for institutions and investment firms (data for 2022)

Slide 5: Ratio between variable and fixed remuneration of high earners by Member State

Source: European Banking Authority

The European Banking Authority (EBA) today launched a public consultation on its draft Regulatory Technical Standards (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 consultation runs until 24 July 2024.

The Capital Requirements Regulation (CRR) includes some derogations for the calculation of the capital requirements for market and counterparty credit risks, for small trading book business, derivative business or business subject to market risk. The CRR3 specifies that the size of the business shall be equal to the absolute value of the aggregated long position, summed with the absolute value of the aggregated short position. A position can be considered as long or short depending on how movements in its main risk driver affect the market value.

The proposed general method to identify the main risk driver hinges on sensitivities defined under the market risk standardised approach (FRTB-SA) or on add-ons defined under the standardised approach for counterparty credit risk (SA-CCR). For the determination of the direction of the positions, the methodology is aligned with the one set out in the RTS on SA-CCR.

Considering that small banks are, and have always been, exempted from using the FRTB SA or SA-CCR, a simplified method has also been included. The simplified method covers relatively simple instruments which are normally traded by small banks (fixed-rate bonds, floating-rate notes, stocks, forwards, futures, simple swaps and plain vanilla options).

Consultation process

Comments to this consultation can be sent to the EBA by clicking on the “send your comments” button on the consultation page. Please note that the deadline for the submission of comments is 24 July 2024.

The public hearing on these draft RTS will take place via conference call on 2 July 2024 from 15.30 to 17.00 CEST. The EBA invites interested stakeholders to register using this link by 28 June 2024 at 16:00 CEST.

Legal basis and background

The draft RTS on the specification of long and short positions have been developed according to Article 94(10) of Regulation (EU) No 575/2013 (CRR), as amended by the revised Capital Requirements Regulation (CRR3), which mandates the EBA to specify the method for identifying the main risk driver of a position and for determining whether a transaction represents a long or a short position as referred to in Art. 94(3), 273a(3) and 325a(2). In developing these draft RTS, the EBA shall take into consideration the method for determining whether a transaction is a long or short position in the primary risk driver or in the most material risk driver, developed for the RTS on SA-CCR in accordance with Art. 279a(3), point (b), of the CRR. 

Source: European Banking Authority

The European Supervisory Authorities (EBA, EIOPA and ESMA – the ESAs) launched today a public consultation on the draft Regulatory Technical Standards (RTS) on the conduct of oversight activities in relation to the joint examination teams under the Digital Operational Resilience Act (DORA).

The primary goal of the draft RTS is to lay out the criteria for determining the composition of the joint examination teams – ensuring a balanced participation of staff members from the ESAs and from the relevant competent authorities – as well as the designation of the members, their tasks, and working arrangements.

These draft RTS aim at ensuring maximum efficiency and effectiveness regarding the functioning of the joint examination teams, given their central role in the daily oversight of critical ICT third-party service providers (CTPPs). The proposed technical standards take into account the high technical complexity of the oversight activities and the scarce availability of the expertise needed to perform them.

Consultation process

The ESAs invite stakeholders to submit their comments on the draft RTS by 18 May 2024 using the links available on the consultation page.

All contributions received will be published following the end of the consultation, unless requested otherwise.

The Digital Operational Resilience Act (DORA) and the related RTS will apply from 17 January 2025.

Legal basis, background and next steps

These draft technical standards have been developed in accordance with Article 41(1) point (c) of DORA (Regulation (EU) 2022/2554). The ESAs expect to submit these draft technical standards to the European Commission by 17 July 2024.

These draft RTS complement those on which the ESAs consulted on 8 December 2023 (the consultation ended on 4 March 2024) aimed at harmonising the conditions enabling the conduct of oversight activities, in accordance with points (a), (b), and (d) of Article 41 of DORA. 

Source: Government of the Netherlands

News item | 16-04-2024 | 13:00

The chemical industry is a supplier of components for essential products such as medicines, plastics, paint, mattresses and batteries. At the moment, these products mainly consist of fossil raw materials, such as oil and natural gas. For circular and climate-neutral production by 2050, a switch to sustainable raw materials is needed. These raw materials are reusable or renewable and have less impact on the planet.

Examples of reusable and renewable raw materials are recycled plastics, sugar beets, gas from gasified waste streams or wood chips as a basis for new plastic and other products. These raw materials can replace fossil raw materials and drastically reduce CO2 emissions and boost the circular economy. In this way, the Dutch and European chemical industry can become a world leader in the field of green chemistry.

Need for EU policy

We now use far more raw materials than the Earth can handle. That is why we want to move towards a circular economy. This means that we use raw materials over and over again and that virtually no waste remains. The Netherlands also wants to be climate neutral by 2050.

Minister Heijnen: “With a switch from fossil to sustainable raw materials, we can make great steps towards these two goals. But we don’t want to and can’t do that alone as a country. By tackling this at the European level, we are stronger and achieve two aims at once, in terms of circularity and CO2 emissions. That is why today, together with France, the Czech Republic and Ireland, we are advocating for European policies that effectively stimulate the use of sustainable carbon sources in the chemical industry.”

Minister Micky Adriaansens (Economic Affairs and Climate Policy): “The chemical industry is indispensable for our medicines, paint, but also for our food and construction. We would therefore like to preserve this industry in the Netherlands and Europe. In fact, we want the chemical industry to become a global leader in green chemistry. I therefore think it is important that we work hard to make this sector more sustainable and at the same time strengthen its competitive position by working together in a European context.”

Competitiveness

An overarching European policy framework is also essential to ensure the long-term competitiveness of the European chemical industry and to reduce our dependence on (fossil) raw materials from abroad.

An EU policy package should help to create markets, the availability of sustainable carbon and tools to strengthen the competitiveness of the chemical industry.

Source: European Banking Authority

The European Banking Authority (EBA), the European Insurance and Occupational Pensions Authority (EIOPA) and the European Central Bank (ECB) set up a Data Point Model (DPM) alliance, establishing a common governance framework for the collaboration on the DPM 2.0 Standard. Together with the establishment of a Joint Bank reporting Committee (JBRC) between the EBA and ECB, this alliance is another step in the process of building an integrated reporting system.

Following the publication by the EBA and EIOPA of the DPM 2.0 standard in June 2023, the two ESAs together with the ECB have agreed on the common arrangements that will govern their cooperation on DPM 2.0 (the DPM alliance).

Under the DPM alliance, the EBA, EIOPA and ECB will together govern the DPM 2.0 standard and cooperate in the DPM methodology for modelling reporting requirements, the metamodel used for populating the reporting requirements and the associated documentation. 

The DPM alliance seeks to facilitate the definition and exchange of regulatory data within the financial sector; increase efficiencies and avoid duplication of efforts; promote more efficient processes for defining and communicating reporting requirements, and for collecting and exchanging data and metadata amongst reporting entities, national authorities and European authorities; and facilitate good practices in the definition and exchange of regulatory reporting data and information.

The DPM alliance is established through a Memorandum of Understanding that was signed by the EBA, ECB, and EIOPA.

Note to the editors

The Data Point Model (DPM) is the data dictionary providing the structured representation of the data required for regulatory purposes by the EBA. It encompasses its regulatory processes and integrates the data of different EBA Technical Standards and Guidelines. The DPM may include also other data definitions relevant to the common understanding of the EBA regulatory data – business concepts and their relations, as well as their validation and calculation rules.

Since its inception, the EBA has been using the same DPM Standard 1.0 and together with the European Insurance and Occupational Pensions Authority (EIOPA) has worked on a DPM Refit project aimed at achieving a common DPM Standard 2.0, which is better prepared to address the new challenges of regulation of financial sector.

At EBA the two models will coexist with the same integrated data during a transitional period in order to enable a smooth evolution to all stakeholders involved in regulatory processes.

Source: Government of the Netherlands

News item | 15-04-2024 | 18:00

Carbon capture and storage is a tool that can capture some of the emissions that are very difficult to prevent – and capturing those emissions is necessary in order to reach European climate goals. That makes carbon capture and storage an essential climate tool.

In 2021, Norway and the Netherlands signed an arrangement on energy cooperation around the North Sea, including carbon capture and storage. Similar arrangements are in place between Norway and Belgium (2022) and Denmark (2023), as well as a joint declaration with Sweden in 2022. In addition, in 2022 and 2023 Denmark, Belgium (the Federal State, Flanders and Wallonia) as well as Netherlands signed arrangements for the transport and storage of captured carbon across borders.

Today, Denmark, Belgium, the Netherlands and Sweden each established an arrangement on cross-border transport of CO₂ with Norway. Sweden and Denmark concluded a similar arrangement, too. This removes some of the obstacles on the way to a well-functioning carbon capture and storage-market in the wide North Sea region.

“Storage of CO2 is a cost-effective means of reducing emissions on time to reach the EU climate targets. This cooperation between Norway and the Netherlands on cross-border CO2 transport, is an important step in the development of an open European CCS market.It contributes to the EU climate goals and economic development. I am hopeful that this declaration will soon be followed by concrete project between the Netherlands and Norway,” says Rob Jetten Minister for Climate and Energy, the Netherlands.

“Norway has great potential to store CO₂ and I am pleased that other countries will store CO₂ in Norwegian storage sites. The capacity is enormous. The climate challenge transcends borders, and it is crucial that we put in place solutions for transport of CO₂ across national borders. This is an important day for the climate, for our industries and for the first full-scale European CCS project “Longship,” says Norway’s Minister of Energy Terje Aasland.

”In order to decarbonize hard-to-abate sectors, we need carbon capture and storage. In order to reach climate neutrality by 2050 in Europe, we need carbon capture and storage in a larger, international scale. Today’s arrangements are two great steps in the right direction. It’s all hands on deck – and I’m glad to see both Norway and Sweden joining our work towards an international industry for carbon capture and storage,” says Danish Minister for Climate, Energy and Utilities Lars Aagaard.

“Beside extensive mitigation, the capture and storage of CO2 will be necessary to curb the climate crisis. CCS and BECCS will play a key role towards EU:s objective for climate neutrality 2050 and negative emissions thereafter. Sweden has a great potential för BECCS and we already have projects underway. These agreements are essential for Sweden and its industry in realizing a fossil free future,” says Sweden’s Minister for Climate and Environment Romina Pourmokhtari.

”Developing new methods to reduce CO2 emissions is crucial for the future of our planet. This is a promising climate technology. The sea can play a key role in this regard. Not only has it always been of great importance in regulating our climate, but it also offers opportunities for carbon capture and storage. Over the past 2 years, we have already concluded agreements with the Netherlands and Denmark. Today, we are taking another important step with Norway to store captured CO2 in their depleted oil and gas fields,” says Belgian Minister of the North Sea Paul Van Tigchelt.

“Like the rest of Europe, Wallonia is at a pivotal point in its development. The ques-tion of the resilience of our economy and, more broadly, of our society, has become central. If we are to achieve our climate objectives, the key factors are undoubtedly energy sobriety, energy efficiency and the development of renewable energies. How-ever, not all Walloon companies face the same challenges: their manufacturing pro-cesses vary and CO2 emissions are sometimes inherent to production processes. CO2 capture therefore becomes a vital solution for these enterprises. I welcome today’s signing of the Memorandum with Norway to enable the permanent storage of carbon dioxide, which takes on its full meaning in this context”, says Walloon Minister for Climate, Energy, Mobility, and Infrastructure of the Walloon Region Philippe Henry

“The capture, transport, storage and reuse of CO2 will play an important role in the future of Flanders, in addition to the continuation of our strong policy on renewable energy and well-thought-out energy efficiency measures. Various companies in Flanders are already focusing on the rollout of the CCUS to reduce their footprint. Since Norway has great potential for the storage of CO2, this intense cooperation between Flanders and Norway supports and stimulates the future development of the CCUS-value chain”, says Flemish Minister for Justice and Enforcement, Environment, Energy and Tourism Zuhal Demir.

Source: Government of the Netherlands

News item | 15-04-2024 | 17:05

We will continue to closely monitor the security situation at the missions, and it is possible that they may be closed again in the future. For obvious reasons the ministry cannot comment on security measures.

Now that the missions have been re-opened to the public, they can again provide consular services. People with appointments that had to be cancelled due to the temporary closure will be contacted to reschedule.

Source: Government of the Netherlands

News item | 15-04-2024 | 16:18

‘The International Red Cross and Red Crescent is right about this becoming a forgotten crisis,’ says Ms Schreinemacher. ‘Sudan rarely makes the front pages even though nearly 18 million people there are facing acute hunger. It is imperative that we step up the international pressure, because a ceasefire is vital. The millions of Sudanese who have sought refuge throughout the region need prospects for the future.’

Unrestricted access

In Sudan not only is there a shortage of food, water and medicine, it is also incredibly difficult to get aid to those who really need it. According to the UN, only 10% of people facing hunger are currently receiving food aid. ‘In conflict areas it’s always hard to deliver aid safely. But in Sudan the warring parties are actively obstructing emergency assistance. Aid workers and aid deliveries are being blocked at the borders, and NGOs have to contend with all sorts of red tape. The warring parties must significantly improve access.’

In very hard-to-reach areas, local people are playing an important role in delivering aid. Women and young people are in many cases rising to the challenge and offering food, protection and medical assistance. The UN and other aid organisations can use the Netherlands’ contribution to support these local initiatives.

Aid to Sudan

The additional contribution brings the Netherlands’ support for emergency aid to Sudan in 2024 to a total of over €42 million. The Netherlands is also helping the Sudanese in other ways. The UN Central Emergency Response Fund (CERF) has made $35 million available for assistance to Sudan, and the Netherlands contributes €55 million annually to CERF. The Netherlands also contributes to the reception of Sudanese refugees in neighbouring countries. Some 8 million Sudanese people have been internally displaced, and 2 million have fled to the surrounding countries.