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Source: European Banking Authority

The European Banking Authority (EBA) today published a Report on the short to medium term objectives of its interest rate risk in the banking book (IRRBB) Heatmap, including observations and recommendations to institutions and supervisors.

Today’s Report addresses the main areas of scrutiny identified by the short to medium term objectives of the Heatmap following the EBA scrutiny on the IRRBB as published on January 2024. It also provides tools to support the assessment of IRRBB risks, without setting any new requirements or thresholds, so as to foster a common understanding of IRRBB risks. The key areas of focus are:

1. Non-maturity deposits (NMD) behavioural assumptions, where a non-exhaustive list of risk factors impacting NMD repricing behaviour is provided, and which could be considered by institutions when modelling the behaviour of their NMD. It also provides a toolkit to support supervisors in their analysis of NMD modelling.
2. A non-exhaustive set of complementary dimensions that supervisors could consider for institutions identified as outliers under the supervisory outliers test (SOT) on net interest income (NII). They reflect internal metrics commonly used by institutions without setting new requirements or thresholds. This builds on the EBA Opinion that SOTs are indicators to be taken into account with no automaticity under the Supervisory Review and Evaluation Process (SREP).
3. Commercial margins of NMD in the SOT on NII in the context of the constant balance sheet assumption. The Report clarifies that institutions should apply the same modelling assumptions on commercial margins as used in their internal measurement systems or, in their absence, consider a constant spread, across scenarios.
4. Hedging strategies, including a recommendation on the role of interest rate derivatives for prudent IRRBB management and specifying that the repricing modelling of NMD (and its role natural hedging) should be based on the specific features of NMD.

The EBA will continue its discussions with stakeholders on the various aspects identified in the medium to long term objectives of the Heatmap, such as monitoring the 5-year cap of the weighted average repricing maturity of NMD, credit spread risk arising from non-trading book activities (CSRBB) related aspects, and the Dynamic Risk Management (DRM) project of the International Accounting Standards Board (IASB).

Legal basis, background, and next steps

With the publication in the Official Journal of Commission Delegated Regulation (EU) 2024/856 (RTS on SOT) and Commission Delegated Regulation (EU) 2024/857 (RTS on SA) on 24 April 2024, and the publication of Commission Implementing Regulation (EU) 2024/855 (amending ITS on reporting) of 15 March 2024, the regulatory framework on IRRBB has been reinforced. In addition, the latest version of EBA’s Guidelines on IRRBB and CSRBB have been fully applicable in the EU since 31 December 2023.

The monitoring of the practical implementation of IRRBB standards is framed in the EBA monitoring duties, with a view to contributing to a consistent application of EU law and promoting common supervisory approaches and practices in this area.

The EBA will continue monitoring some specific aspects, following the publication of its IRRBB Heatmap in January 2024.

Source: European Banking Authority

Source: European Banking Authority

The European Banking Authority (EBA) today published its final draft Implementing Technical Standards (ITS) on reporting of data on charges for credit transfers and payments accounts, and shares of rejected transactions. The ITS deliver on the mandate in the Instant Payment Regulation (IPR) amending the SEPA Regulation, and aim at standardising reporting from banks, payment institutions and e-money institutions (i.e. Payment Service Providers – PSPs) to their National Competent Authorities. The reported data will help to ensure consumers benefit from access to instant credit transfers, and that the latter are no longer more expensive than regular credit transfers. Following its public consultation, the EBA has postponed the first harmonised reporting from PSPs by 12 months, from April 2025 to April 2026.

The ITS specify uniform reporting templates, instructions, and methodology for the purpose of reporting of charges for credit transfers, payment accounts and shares of rejected transactions due to the application of the EU sanctions regime.

In developing the ITS, the EBA has sought to find the appropriate balance between the competing aims of obtaining the data required for a robust analysis of the impact of the amended SEPA Regulation on the pricing of payment accounts and credit transfers, and the shares of rejected transactions, on the one hand, and the need to avoid an excessive reporting burden for the industry on the other.

The ITS will also support the European Commission in monitoring whether consumers benefit from access to instant credit transfers, and that instant credit transfers are not more expensive than regular credit transfers.

As part of reducing the burden on the industry, and in response to comments received to the consultation, the draft final ITS postpone the deadline set in the amended SEPA Regulation for the first harmonised reporting by 12 months, to April 2026, and the subsequent reporting from the National Competent Authorities to the EBA and the European Commission to October 2026. The additional 12 months will provide sufficient time for the European Commission to adopt the EBA’s final draft ITS, and for the EBA to develop the taxonomy, datapoint model and validation rules, which the industry then needs to implement. Until the first reporting, National Competent Authorities should deprioritise collecting data from the PSPs, discourage institutions from providing unharmonised reporting prior to the availability of the EBA’s taxonomy, datapoint model and validation rules, and not take enforcement action in relation to PSPs that do not report in 2025.

Legal basis, background and next steps

Article 15(5) of the SEPA Regulation stipulates that “The EBA shall develop draft implementing technical standards to specify uniform reporting templates, instructions and methodology on how to use those reporting templates for the purposes of reporting as referred to in paragraph 3. 

Source: European Banking Authority

The European Banking Authority (EBA) today published an Opinion on the interaction between the output floor and Pillar 2 Requirements (P2R) in the context of the mandate set forth in the Capital Requirements Directive (CRD). The Opinion considers that the nominal amount of P2R is not to increase as a result of an institution becoming bound by the output floor and highlights the possibility of double counting in setting the P2R of risks already covered by the effects of a binding output floor.

Today’s Opinion describes how P2R  is to be calculated temporarily based on the unfloored, instead of floored, total risk exposure amount (TREA) when an institution first becomes bound by the output floor, applying the P2R percentage previously communicated following the last supervisory review and evaluation process (SREP) cycle.  The Opinion emphasises the importance of institutions informing early their competent authority of the potential impact so as to facilitate the review process.

The EBA expects competent authorities in their review on double counting of risks to only consider offsets regarding P2R add-ons in relation to “regulatory model deficiencies”. Furthermore, the EBA advises competent authorities using a methodology that calculates P2R amount based on a multiplication by TREA, to consider how they could ward off undue arithmetic effects from the output floor in the review on double counting.

The Opinion will be considered in the forthcoming comprehensive review of the EBA Guidelines on the SREP. Generally, and in line with what was highlighted in the July 2024 Report on the stacking order and capital buffers, the EBA’s efforts will continue to focus on clarifying, where necessary, the interactions of the different stacks, as well as interactions between P2R and the evolution of TREA in a wider manner.

Legal basis and background

As per article 104a(7) of Directive 2013/36/EU, the EBA is mandated to issue guidelines to further specify how to operationalise, in particular, the following aspects: how competent authorities are to reflect in their supervisory review and evaluation process the fact that an institution has become bound by the output floor; how competent authorities and institutions are to communicate and disclose the impact on supervisory requirements of an institution becoming bound by the output floor, as per paragraph 6 of the same article. The EBA’s competence to deliver this Opinion is based on Article 29(1)(a) of Regulation (EU) No 1093/2010 and the Opinion is without prejudice to the aforementioned mandate.            

Source: European Banking Authority

• The 2025 EU-wide stress test will assess EU banks’ performance under a baseline and adverse scenario during a three-year time horizon, from 2025 to 2027.
• The adverse scenario assumes a hypothetical aggravation of geopolitical tensions leading to a severe decline in GDP by 6.3% cumulatively. The adverse scenario is designed to ensure a significant severity of various macro-economic and financial shocks across all EU countries and depicts a breakdown of the shocks (on real gross value added) by economic sectors.
• The exercise will be conducted on a sample of 64 banks, thus covering 75% of total banking assets in the EU and Norway. 

The European Banking Authority (EBA) today launched its 2025 EU-wide stress test and released the macroeconomic scenarios. This year’s exercise is designed to provide valuable input for assessing the resilience of the European banking sector in the current uncertain and changing macroeconomic environment. The adverse scenario is based on a narrative of hypothetical worsening of geopolitical tensions, with large, negative, and persistent trade and confidence shocks having strong adverse effects on private consumption and investments, both domestically and globally. The severe nature of the adverse scenario reflects the purpose of the stress test exercise, which is to assess the resilience of the European banking system to a hypothetical severely deteriorated macroeconomic environment. The EBA expects to publish the results of the exercise at the beginning of August 2025.

Scope of the exercise

The stress test assesses the solvency of EU banks in a hypothetical adverse macroeconomic scenario over a three-year horizon (2025-27). The objectives of the stress test are to:

• assess and compare the overall resilience of EU banks to relevant severe economic shocks;
• assess if bank capital levels are sufficient to ensure banks can support the economy in periods of stress;
• foster market discipline through transparent publication of consistent, granular and comparable data at a bank-by-bank level;
• provide input to the Supervisory Review and Evaluation Process (SREP) conducted by competent supervisory authorities.

The EU-wide stress test will be conducted on a sample of 64 banks – thereof 51 from countries which are members of the Single Supervisory Mechanism (SSM) – covering roughly 75% of total banking sector assets in the EU and Norway.

Key elements of the scenarios

The adverse scenario is designed to ensure a significant severity of various macro-economic and financial shocks across all EU countries. It is based on a hypothetical severe escalation of geopolitical tensions, accompanied by increasingly inward-looking trade policies globally, that cause an increase in energy and commodity prices, disruptions in the supply chain and adverse effects on private consumption and investment coupled with a worldwide economic contraction.

The worsening of economic prospects is associated with a sustained drop in EU GDP by 6.3% cumulatively, in the period 2025-2027. At the end of the horizon, unemployment in the EU is projected to be 6.1 percentage points (ppts) above its baseline level. Inflation shifts upwards to 5.0% and 3.5% respectively in 2025 and 2026, before falling back to 1.9% in 2027.

As in the 2023 EU-wide stress test, this year’s scenario includes information on the growth of Gross Value Added (GVA) in 16 sectors of economic activity. Such break-down will help better assess EU banks’ performance depending on their business model and sectoral exposures.

Note to the editors

1. The exercise will be run at the highest level of consolidation. The scope of consolidation is the perimeter of the banking group as defined by the Capital Requirements Regulation/Capital Requirements Directive (CRR/CRD). This exercise will involve close cooperation between the EBA and the competent authorities (including the Single Supervisory Mechanism – SSM, the European Central Bank – ECB, and the European Systemic Risk Board – ESRB).
2. The convention used in the calibration of the adverse scenario is one of “no policy change”. This means that no other monetary policy and fiscal policy reactions other than the ones considered under the baseline scenario are assumed under the adverse scenario.
3. The baseline scenario for EU countries is based on projections from the national central banks of December 2024. The adverse scenario assumes the materialisation of the main financial stability risks that have been identified by the ESRB in the fourth quarter of 2024, including recent risks assessments done by the EBA and the ECB.
4. The new EU banking package, which applies from 1 January 2025, is reflected in the 2025 EU-wide stress test methodology and templates, which should however continue being understood as a risk exercise, and not as an exercise that assesses the impact of regulatory changes.
5. Detailed information about the adverse scenario can be found in the note produced by the ESRB.
6. The EBA’s 2025 stress test methodology to be applied to the scenarios released today can be found on the EBA website.
7. The full sample^[1] of 64 banks participating in this year exercise can be found in Annex 1 of the EBA methodology.
    

Source: Government of the Netherlands

News item | 17-01-2025 | 15:30

Ysleta del Sur Pueblo is a federally recognised tribe by the United States government that was colonised first by Spanish settlers in the 17^th century. In the late 19th century the objects in question (including a shield and musical instruments), which are of great importance to the Ysleta del Sur Pueblo, were wrongfully brought to the Netherlands.

On the basis of a provenance investigation conducted by the Wereldmuseum, the Colonial Collections Committee advised the minister to return these objects in line with colonial collections policy. The investigation revealed that the collector of these objects used force, threats and bribery to obtain items for his collection.

The Committee’s advisory report, which was drawn up in dialogue with representatives of the Ysleta del Sur Pueblo, is available on the Committee’s website. Arrangements for the swift return of the objects will be made in consultation with representatives of the United States and the Ysleta del Sur Pueblo.

Source: European Banking Authority

The three European Supervisory Authorities (EBA, EIOPA and ESMA – the ESAs) published today a report on the feasibility of further centralisation in the reporting of major ICT-related incidents by financial entities according to Article 21 of the Digital Operational Resilience Act (DORA).

In line with the DORA mandate, the ESAs’ joint report explores the potential for further centralisation regarding financial entities’ reporting of major ICT-related incidents to competent authorities.

The report assesses the feasibility of three different models: the baseline model, a model with enhanced data sharing arrangements and a fully centralised model. It considers the potential burden and cost reductions, as well as the efficiency and effectiveness gains that each model would bring for cross-sector supervisory practices.

Next steps

The joint report has been submitted to the European Parliament, the European Council and the European Commission, which will consider its findings for potential future developments in relation to the further centralisation of major ICT-related incident reporting in the financial sector.

Background

The report, prepared jointly by the ESAs in accordance to Article 21 of DORA, is based on input received from Competent Authorities and the ESAs’ Stakeholders Groups. The ESAs also drew on the expertise of a renowned IT strategy firm and consulted the ECB and ENISA while drafting the report.

Source: European Banking Authority

The European Banking Authority (EBA) today repealed its Guidelines on major incidents reporting under the Payment Services Directive (PSD2) due to the application of harmonised incident reporting under the Digital Operational Resilience Act (DORA) from 17 January 2025. The repeal of the Guidelines aims at simplifying the reporting of major incidents by payment service providers (PSPs) and providing legal certainty to the market.

DORA, which will start applying from 17 January 2025, introduces harmonised incident reporting requirements that apply to financial entities across the banking, securities/markets, insurance and pensions sectors. This includes most PSPs, namely credit institutions, payment institutions, e-money institutions and account information service providers. DORA also disapplies the incident reporting requirements under PSD2 for those PSPs.

In that regard, to ensure legal clarity and certainty for the payment service providers covered by DORA, and to simplify the overall reporting of major incidents by PSPs, the EBA has decided to repeal its Guidelines on major incident reporting under PSD2.

It is important to note that incident reporting requirements under PSD2 still apply for other types of PSPs (e.g. post-office giro institutions and credit unions) that are not covered by DORA. However, the EBA has decided to repeal the Guidelines in their entirety because:

• the number of such institutions is very low with no sizable market share at EU level;
• these PSPs operate in less than half of the EU Member States and provide services at national level only;
• the number and significance of incident reports received from these PSPs at EU-level is negligible.

Finally, the EBA notes that those PSPs that are still subject to incident reporting requirements under the PSD2 can be subject to national incident reporting requirements, regardless of the existence of the EBA Guidelines. Competent authorities willing to retain the incident reporting approach included in the EBA Guidelines for those PSPs can continue to do so under their national legal framework or supervisory measures. 

Source: European Banking Authority

​Legal basis and next steps

Source: European Banking Authority

The European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) today published a Joint Report on recent developments in crypto-assets, analysing decentralised finance (DeFi) and crypto lending, borrowing and staking. This publication is the EBA and ESMA’s contribution to the European Commission’s report to the European Parliament and Council under Article 142 of the Markets in Crypto-Assets Regulation (MiCAR).

EBA and ESMA find that DeFi remains a niche phenomenon, with value locked in DeFi protocols representing 4% of all crypto-asset market value at the global level. The report also sets out that EU adoption of DeFi, while above the global average, is lower than other developed economies (e.g. the US, South Korea).

The EBA and ESMA observe that the number of DeFi hacks and the value of stolen crypto-assets has generally evolved in correlation with the DeFi market size. Since flows on decentralised exchanges represent 10% of spot crypto trading volumes globally, DeFi protocols present significant risks of money laundering and terrorist financing (ML/TF).

The EBA and ESMA find the implications of maximal extractable value (MEV) on DeFi markets are widespread in DeFi and negative externalities of MEV would require technical solutions.

On the lending, borrowing and staking of crypto-assets, the report contains an analysis of the main types and typical features of the business models observed in the market, in both centralised and decentralised forms. These services are offered by a number of crypto-asset service providers (CASPs) in EU jurisdictions which in some cases also offer regulated crypto-asset services.

Based on the existing (limited) evidence, there appears to be limited engagement of EU consumers and financial institutions with crypto lending, borrowing and staking services. The report sets out and assesses the specific risks associated with each of them, such as excessive leverage, information asymmetries, exposure to ML/TF risks, and systemic risks arising from re-hypothecation and collateral chains, procyclicality and interconnectedness. In particular, some users may receive insufficient information on the terms and conditions of these services in areas such as fees, interest rates paid or yields, changes to collateral requirements, among other relevant disclosures. However, the EBA and ESMA have not identified current risks from a financial stability perspective. 

Background and next steps

Article 142 of MiCAR mandates the European Commission (EC) to submit, after consulting the EBA and ESMA, a report to the European Parliament and Council on recent developments in crypto-assets. On the basis of that provision, the EC is mandated to assess, among others, a) the development of DeFi in crypto-asset markets and the appropriate regulatory treatment of decentralised crypto-asset systems without an issuer or CASPs, including an assessment of the need for and feasibility of regulating DeFi; and b) the feasibility and necessity of regulating the lending and borrowing of crypto-assets. In a letter dated 9 February 2024, the EC requested that EBA and ESMA provide a contribution focusing on certain elements related to DeFi and the lending and borrowing of crypto-assets, including staking.

The EBA and ESMA will continue to assess market developments as part of their ongoing mandate to monitor innovative activities in the EU banking, payments and securities sectors.