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Source: European Banking Authority

The European Banking Authority (EBA) welcomes the entry into force of the new EU framework that will transform how Europe tackles money laundering and terrorist financing. The EBA is proud to be paving the way for the establishment of the new anti-money laundering and countering the financing of terrorism authority (AMLA) and is committed to facilitating a smooth transition, and making the EU a hostile place for financial crime.

Since 2020, the EBA has been leading, coordinating and monitoring the EU financial sector’s fight against money laundering (ML) and terrorist financing (TF). The new legislative framework marks a significant step forward in the EU’s fight against financial crime, with a harmonised and single AML/CFT rulebook, and the establishment of AMLA, a dedicated EU anti-money laundering authority.

The EBA will retain its AML/CFT powers and mandates until December 2025 to minimise disruption and provide continuity, and it will also continue working closely with AMLA going forward. In particular, after transferring the powers that are specific to AML/CFT to AMLA, the EBA will remain responsible for addressing ML/TF risk across its prudential remit.

Since its inception, the EBA has been working to ensure that financial institutions and their supervisors apply effective AML/CFT controls wherever they operate in the EU, providing a solid foundation for the new regime. The European Commission has asked the EBA to provide its technical advice on important aspects of the future EU AML/CFT framework to ensure that AMLA can begin to operate efficiently and effectively as of its establishment.

Over the course of 2024 and in 2025, the EBA’s priorities in the area of AML/CFT will focus on the following aspects:

• a methodology for selecting financial institutions for direct EU-level AML/CFT supervision;
• a common risk assessment methodology;
• information necessary to carry out customer due diligence;
• criteria to determine the seriousness of a breach of AML/CFT provisions.

The EBA will be providing its advice to the Commission in October 2025.

Throughout the transition phase, the EBA will also support national competent authorities getting ready for AMLA and will coordinate with the European Commission’s AMLA taskforce, which will be responsible for the establishment and initial operations of AMLA.

Note to the editors

In 2024, the co-legislators agreed on a new AML/CFT package to strengthen the EU’s fight against financial crime.

The Regulation establishing AMLA (2024/1620), the Regulation establishing a single AML/CFT Rulebook (2024/1624) and the revision of the AML/CFT Directive (AMLD6 – 2024/1640) were published in the Official Journal of the European Union on the 19 of June.

Once established, AMLA will directly supervise the cross-border credit and financial institutions exposed to highest money laundering and terrorist financing (ML/TF) risk. It will also draft AML/CFT standards and guidelines, oversee AML/CFT supervisors, and coordinate Financial Intelligence Units (FIUs). In accordance with Article 103 and 108 of Regulation 2024/1620, the EBA will transfer its AML/CFT mandates, powers and resources to AMLA by the end of 2025.

Source: Government of the Netherlands

News item | 24-06-2024 | 14:15

With these sanctions the EU has taken an important step towards a safer cyber domain. Because alongside cyber espionage and cyber sabotage, for the first time the EU is now also tackling cybercriminals who cause serious damage to our society for the sake of financial gain. Not only will these criminals now have to suffer the personal consequences of their malicious behaviour, but individuals and entities that do business with them are also targeted. Through effective expertise and knowledge sharing between the Ministry of Foreign Affairs, the Public Prosecution Service and the police, the Netherlands has been able to make a unique and important contribution to sanctioning within the EU. The Netherlands hopes that this approach will also inspire other member states, so that the EU can be even more effective in fighting cybercrime.

As a result of the sanctions, these individuals’ assets in the EU will be frozen, they will no longer be able to enter the EU, and transactions with them will be prohibited. This means that it will be against the law for EU citizens and companies to cooperate and do business with these prominent cybercriminals, directly or indirectly. The purpose of these measures, aimed at both the individuals concerned and their clients, is to deter and combat cybercrime. These sanctions will also send a clear signal to states that provide safe havens to cybercriminals, allowing them to operate without impunity.

Under the cyber sanctions regime established in 2019, sanctions have been imposed on 14 individuals and four entities from Russia, China and North Korea since 2020. These individuals and entities are responsible for cyberattacks on such institutions as the Organisation for the Prohibition of Chemical Weapons (OPCW), the German Bundestag, banks and hospitals.

The sanctions regime currently explicitly targets individuals and entities, not states. The Netherlands considers it important that the EU also has the tools to take more effective action against states that exhibit malicious cyber behaviour. That’s why the Netherlands is working with other member states to explore how the EU’s cyber sanctions toolbox can be strengthened further.

Source: European Banking Authority

The European Banking Authority (EBA) today published its final draft amending Regulatory Technical Standards (RTS) on the standardised approach for counterparty credit risk (SA-CCR). This regulatory product is part of the new roadmap on the Banking Package.

The amendments to the Capital Requirements Regulation (CRR3) have expanded the EBA mandate to specify the formula to calculate the supervisory delta of options under the SA-CCR framework. Alongside the supervisory delta formula for interest rate options compatible with negative interest rates, the mandate now also requires the specification of the supervisory delta formula for commodity options compatible with negative commodity prices. Therefore, the existing RTS on SA-CCR have been amended to include the formula for commodity options.

Legal basis and background

The draft RTS on SA-CCR have been developed according to Article 277(5) and 279a(3) of the CRR, as amended by Regulation (EU) 2024/1623 (CRR3), which mandates the EBA to specify:

• the method for identifying transactions with only one material risk driver or with more than one material risk driver and for identifying the most material of those risk drivers;
• the formulas to calculate the supervisory delta of call and put options mapped to the interest rate or commodity risk categories compatible with negative interest rates or commodity prices, and the supervisory volatility suitable for those formulas;
• 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 in the given risk category.

Source: European Banking Authority

• Today’s publication of draft implementing technical standards is a key milestone in the implementation of the latest Basel III disclosure reforms laid down in the new Banking Package.
• The new ITS implement the CRR 3 disclosure requirements on output floor, credit risk, market risk, CVA risk, operational risk and a transitional disclosure on exposures to crypto-assets.
• The alignment of the disclosure requirements with the Basel III framework and its integration with supervisory reporting will promote comparability and consistency of the information.

The European Banking Authority (EBA) published today a final draft implementing technical standards (ITS) on public disclosures by institutions that implement the changes in the Pillar 3 disclosure framework introduced by the amending Regulation (EU) 2024/1623 (CRR 3). These ITS will ensure that market participants have sufficient comparable information to assess the risk profiles of institutions and understand compliance with CRR 3 requirements, further promoting market discipline.

The amending Regulation (EU) 2024/1623 (‘CRR 3’) introduced new and amended disclosure requirements stemming from the latest Basel III Pillar 3 reforms, and a mandate for the EBA to develop IT solutions, including templates and instructions, for the disclosure requirements laid down in the banking regulation. The new ITS implement the CRR 3 prudential disclosures by including new requirements on output floor, credit risk, market risk, CVA risk, operational risk and a transitional disclosure on exposures to crypto-assets. In addition, they aim to provide institutions with a comprehensive integrated set of uniform disclosure formats while promoting market discipline.

These ITS constitute the first Pillar 3 deliverable included in the EBA Roadmap on strengthening the prudential framework published in December 2023. Later in 2024, the EBA will complement these ITS with the CRR 3 disclosure requirements that are not directly linked to Basel III implementation, in particular   the extension of the disclosure requirements on ESG risks to all institutions in accordance with the proportionality principle, and new disclosure requirements on shadow banking.

Following the mandate for the EBA to develop IT solutions, these ITS are designed to repeal the Commission Implementing Regulation (EU) 2021/637, with a view to make the technical standards more user-friendly for institutions. The IT solutions according to which disclosures have to be provided, including templates and instructions, can be found on the EBA website.

When developing these ITS, the EBA has sought alignment and integration between the disclosure and reporting frameworks, to facilitate institutions’ compliance with both requirements, and an updated mapping tool between the revised disclosure templates and the reporting templates is expected to be published at the beginning of July, together with the new ITS on supervisory reporting for the CRR 3 implementation  published for consultation, together with these ITS, in December 2024. The EBA will later publish a technical package, including DPM, validation rules and taxonomy, that shall be used by large and other institutions to submit this information to the EBA Pillar 3 data hub.

Legal basis and background

Regulation (EU) No 575/2013 (‘the CRR’) as amended by Regulation (EU) 2024/1623 (‘CRR 3’) mandates the EBA, in articles 434a, to develop draft implementing technical standards to specify uniform disclosure formats, and IT solutions, including instructions, for disclosure requirements under Titles II and III of the CRR.

The CRR 3 implements the latest Basel 3 reforms, which strengthen the EU institutions’ prudential framework, including also the related new and amended disclosure requirements for institutions.

Following article 434a(1), new draft implementing technical standards have been developed that implement the CRR 3 changes to the Pillar 3 disclosure framework and replace the Commission Implementing Regulations (EU) 2021/637. The new ITS caters for possible developments related to the FRTB capital framework. 

Source: European Banking Authority

The European Banking Authority (EBA) today published its final draft Regulatory Technical Standards (RTS) on the conditions for assessing the materiality of model extensions and changes, as well as changes to the subset of modellable risk factors, applicable under the Fundamental Review of the Trading Book (FRTB) rules. With the submission of these final draft RTS to the European Commission, the EBA completes its roadmap on market and counterparty credit risk approaches published on 27 June 2019.

In line with the Capital Requirements Regulation (CRR), the final draft RTS differentiate between material extensions and changes under the internal models approach (IMA), to be approved by competent authorities (CA), and non-material extensions and changes, to be notified to CAs four weeks in advance. This last category is further divided into two sub-categories: extensions and changes notified with additional information, and extensions and changes with basic information.

For the categorisation of extensions and changes to the relevant categories and sub-categories, the final draft RTS set out a combination of qualitative and quantitative conditions. In particular, the quantitative conditions aim at assessing the effect of the extension or change on the IMA own funds requirements and on the relevant components of the FRTB IMA (Expected Shortfall, Stress Scenario Risk Measure and Default Risk Charge), before and after the planned extension or change. The final draft RTS also include guiding principles that institutions should follow in the categorisation process, provisions on the implementation of extensions and changes and documentation requirements.

Legal basis and background

These draft RTS have been developed according to Article 325az(8)(a) of Regulation (EU) No 575/2013 (Capital Requirements Regulation – CRR), which mandates the EBA to specify the conditions for assessing the materiality of extensions and changes to the use of alternative internal models and changes to the subset of the modellable risk factors.

The CRR allows institutions to calculate their own funds requirements for market risk using the alternative IMA, provided that permission from CAs is granted. According to the CRR, material changes to the use of the IMA, the extension of the use of the IMA and material changes to the institution’s choice of the subset of the modellable risk factors require separate permission from competent authorities. All other extensions and changes to the use of the IMA require notification to the competent authorities.

Source: European Banking Authority

The European Banking Authority (EBA) today published its Q1 2024 quarterly Risk Dashboard (RDB), which discloses aggregated statistical information for the largest EU/EEA institutions together with the Risk Assessment Questionnaire (RAQ) a bi-annual qualitative survey with banks’ expectations for future trends and developments. EU/EEA’s banks continue to benefit from wide interest margins improving further their profitability and capital position. However, credit risks have started materialising with an increase in non-performing loans during the first quarter. The majority of banks surveyed expect further asset quality deterioration in CRE, SMEs loans and consumer credit in the next 6-12 months. 

• Profitability remained resilient for EU/EEA banks in the first quarter of 2024 with a return on equity (RoE) of 10.6% (10.4% one year ago). Net interest margins further widened to 1.69% (+3bps QoQ). Amid monetary easing and rate cuts, banks expect that going forward, their interest income and overall profitability will be affected negatively.
• EU/EEA banks’ CET1 ratio remained at 15.9% in Q1 2024, almost unchanged compared to Q4 2023, and 20bp above Q1 2023. Strong organic capital growth in the last year offset increasing capital requirements (mainly due to higher countercyclical capital buffer (CCyB).
• Net stable funding ratio (NSFR) marginally increased to 127.2% while the liquidity coverage ratio (LCR) decreased over the quarter from 168.3% to 161.4%, moving back to the levels reported in Q3 2023. The latter’s composition has continued to change, with declining cash components and rising central government debt.
• EU/EEA banks  further reduced their outstanding loans to households and non-financial counterparties (NFCs), which are down by 0.2% QoQ, and driven by loans to SMEs (-0.8%) and mortgages (-0.3%). This was partly offset by growing consumer credit and commercial real estate related loans. An increasing share of banks surveyed showed their intention to increase their loan exposure across all segments, apart from commercial real estate.
• EU/EEA banks reported a notable increase in the non-performing loans (NPLs) by 2% QoQ, +EUR 7bn, with a ratio of 1.86%. The increase in NPLs was broad based, yet the biggest increase was reported for SME segment. Cost of risk of EU/EEA banks was also reported higher, at levels not seen since the pandemic in 2020. Although stage 2 allocation declined slightly, in Q1 2024 (9.4%), it remained near its highest level reported in Q4 2023 (9.6%).
• Relevance of operational risk has grown further. Risk of fraud has become the third most relevant driver of operational risk in the RAQ. Cyber risks and data security rank the highest among operational risks. Indications are that cyber-attacks have been on the rise, including successful ones, and that their sophistication is also increasing.

The potential introduction of central bank digital currencies (CBDCs) creates concerns to the banks mainly relating to rising operational expenses and funding costs, as well as declining fee income. More than the direct effects from non-bank financial institutions, the concerns of EU/EEA banks seem to be about possible indirect connections that may influence the banking sector.

Note to editors

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

• Slide 1: Profitability of EU/EEA banks’ was still resilient in the first quarter of 2024, supported by further widening margins and lower DGS / resolution fund (RF) contributions [DOWNLOAD DATA]
• Slide 2: EU/EEA banks expect a slowdown in profits in the next 6-12 months amid interest rate cuts. In their assessment of central bank digital currencies (CBDCs) banks anticipate potential impact through costs and fee income [DOWNLOAD DATA]
• Slide 3: Capitalisation of EU/EEA banks remains solid as CET1 ratio, despite the slight decline, is reported close to its highest levels [DOWNLOAD DATA]
• Slide 4: EU/EEA banks’ reported ample liquidity, well above requirements. Share of cash in HQLA on a declining trend [DOWNLOAD DATA]
• Slide 5: Loan growth still subdued in the first quarter of the year. Banks expect loan growth to increase in the next 6-12 months [DOWNLOAD DATA]
• Slide 6: Asset quality deterioration gathers pace. Cost of risk rising but still at relatively lower levels [DOWNLOAD DATA]
• Slide 7: Operational risks are on the rise as cyber risks materialise with more successful cyber-attacks taking place [DOWNLOAD DATA]
• Slide 8: Majority of banks argue that direct links with non-bank financial intermediaries are of limited risks [DOWNLOAD DATA]

The figures included in the Risk Dashboard are based on a sample of 162 banks, covering more than 80% of the EU/EEA banking sector (by total assets), at the highest level of consolidation, while country aggregates also include large subsidiaries (the list of banks can be found here).

Source: European Banking Authority

The three European Supervisory Authorities (EBA, EIOPA and ESMA – ESAs) today published a joint Opinion on the assessment of the Sustainable Finance Disclosure Regulation (SFDR). The ESAs call for a coherent sustainable finance framework that caters for both the green transition and enhanced consumer protection, taking into account the lessons learned from the functioning of the SFDR.

The ESAs focus on ways to introduce simple and clear categories for financial products. The simplifications consist of two voluntary product categories, “sustainable” and “transition”, that financial market participants should use to ensure consumers understand the purpose of the products. The rules for the categories should have a clear objective and criteria to reduce greenwashing risks.

The ESAs recommend that the European Commission consider the introduction of a sustainability indicator that would grade financial products such as investment funds, life insurance and pension products.

In addition, the Opinion also covers the following areas:

• appropriate disclosures for products outside the two categories to reduce greenwashing,
• improvements to the definition of sustainable investments,
• simplification to the way disclosures are presented to investors,
• other technical suggestions including on which products should fall under the scope of SFDR and on how to improve disclosures regarding the negative impact of investments on people and the environment, and
• conduct consumer testing before putting forward any policy proposals to review the SFDR, such as to introduce a categorisation system and/or an indicator.

Background

The ESAs deliver this Opinion on their own initiative. The Opinion is published in the context of a comprehensive review of the SFDR framework by the European Commission, which includes the SFDR regulation and Delegated Regulation. Going forward, the ESAs are ready to support the European Commission in future policy considerations on any review of the SFDR framework. 

Source: European Banking Authority

During the Board of Appeal Annual Meeting on 13 June 2024, the three European Supervisory Authorities (EBA, EIOPA and ESMA – ESAs) renewed the President and elected the Vice-President of the Board of Appeal, for a term of 2.5 years.

Michele Siri, Professor of Insurance and Financial Markets Law, University of Genoa, Italy, was renewed as Board of Appeal’s President and Margarida Lima Rego, Associate Professor and Vice-Dean at NOVA School of Law, NOVA University, Portugal, was appointed as Board of Appeal’s Vice-President.

The President and Vice-President are designated among the Board of Appeal’s members. The President’s role is to direct the business and the administration of the Board of Appeal, while the Vice-President will perform the functions of the President in the event of the incapacity of the President or other exceptional reasons.

The Board of Appeal is composed of six members and six alternates, appointed by the ESAs. The members are individuals with a proven track record of professional experience in the fields of banking, insurance, occupational pensions and securities markets or other financial services, and with the necessary legal expertise to provide expert legal advice in relation to the activities of the Authorities.

The Board of Appeal is a joint body of the ESAs, introduced to protect effectively the rights of parties affected by decisions adopted by the ESAs. It is an independent and impartial body, responsible for deciding on appeals against certain ESA decisions.

More information on the Board of Appeal is available here.

Source: Government of the Netherlands

News item | 14-06-2024 | 10:57

Building on a foundation of long-standing friendship and continued cooperation, this new MOU facilitates further collaboration between Canada and the Netherlands across a spectrum of STI initiatives in trade, investment and technology. Together, the 2 nations will reinforce existing partnerships and develop new ones to ensure better access to leading technologies and scientific advances.

Key areas outlined in the MOU include:

• collaborating across borders to address global challenges, such as climate change, food security and energy security
• promoting international collaboration in research projects, multilateral initiatives and joint scientific endeavours
• encouraging businesses to participate in STI initiatives, invest in research and contribute to addressing priority global challenges
• facilitating increased access to scientific research, technologies, markets and talents

This MOU promotes integrity and ethical research standards as well as diversity, inclusion and gender equality in research. It also supports efforts to integrate Canadian and Dutch stakeholders into global value-chain and research projects, strengthening broader European Union-Canada partnerships in STI.

Quotes

This MoU is another milestone in the excellent bilateral relationship between the Netherlands and Canada. We are both at the forefront of Science, Technology and Innovation developments. At this very moment, a Dutch semiconductor mission with 30 Dutch companies and R&D institutions is visiting Toronto to identify opportunities for collaboration with the Canadian ecosystem. This MoU will help to further deepen these types of cooperation for the benefit of both our nations and solving global challenges together. 

– Liesje Schreinemacher, Minister for Foreign Trade and Development Cooperation

This MOU marks an exciting milestone in our relationship with the Netherlands. By working together more closely, we can leverage our respective strengths and expertise to tackle today’s global challenges and drive competitiveness to the advantage of both our nations.

– Mary Ng, Minister of Export Promotion, International Trade and Economic Development

Quick facts

• In May 2018, the Netherlands and Canada signed the Memorandum of Understanding between the National Research Council of Canada and the Netherlands Organization for scientific research on research and innovation partnership. This MOU promoted bilateral and multilateral activities and established a framework for cooperation in research, development and innovation.
• In 2021, a strategic dialogue between the Netherlands and Canada solidified the partnership on STI with a focus on 3 priority areas: energy, food systems and agricultural technologies, including critical raw materials and key enabling technologies such as semiconductors, photonics and quantum. Talent and equity, diversity and inclusion were also crosscutting themes.
• Canada is one of the Netherlands’ most significant trade, investment and innovation partners. The Netherlands was Canada’s top merchandise export destination in the European Union in 2023.  

Associated links

Source: European Banking Authority

The European Banking Authority (EBA) publishes today the package of technical standards and guidelines under MiCAR on prudential matters, namely own funds, liquidity requirements, and recovery   plans. These products are part of the EBA’s ongoing efforts to foster a well-regulated market for asset-referenced and e-money tokens in the EU.

The package of EBA regulatory products comprises:

• Final draft regulatory technical standards specifying adjustment of own funds requirement and minimum features of stress testing programmes of issuers of asset-referenced tokens (ARTs) and of e-money tokens (EMTs) subject to such requirements. These standards specify: i) the criteria for the assessment of ‘higher degree of risk’, ii) the procedure for competent authorities to determine the period of time considered appropriate for issuers to increase the own funds amount to the higher own funds requirements and the measures to be taken to ensure the timely compliance thereof and iii) a minimum set of requirements to issuers for the design and implementation of their stress-testing programmes.
• Final draft regulatory technical standards specifying the procedure and timeframe for an issuer to adjust the amount of its own funds to 3% of the average amount of the reserve of assets when the relevant issuer is issuing an ART or EMT classified as ‘significant’. Considering the feedback received on both RTSs, following the consultation period, the timeframe for the issuer to provide an implementation plan to increase the own funds requirements has been changed to 25 working days. Additionally, the maximum amount of time that the competent authority may grant to the issuer to comply with the plan has been adjusted upwards to 6 months maximum.
• Final draft RTS further specifying the liquidity requirements of the reserve of assets. The draft RTS set specific minimum percentages of the reserve of assets according to daily and weekly maturities. They also establish the minimum amount of deposits in each official currency referenced. Furthermore, they envisage overall techniques of liquidity management to seek minimum creditworthiness, liquidity soundness and minimum diversification of bank deposits counterparties in the reserve of assets as well as to ensure minimum overcollateralisation to seek correlation between the reserve of assets and the assets referenced.
• Final draft RTS to specify the highly liquid financial instruments. These draft RTS set the highest quality liquid assets in the liquidity coverage ratio (LCR) as eligible highly liquid financial instruments. At the same time, and in order to seek for correlation between the highly liquid financial instruments and the assets referenced, in the case of ARTs referencing assets other than official currencies, financial instruments tracking the value of the assets referenced by the token or derivatives relating to them, are deemed eligible as highly liquid financial instruments. Furthermore, the draft RTS set concentration limits of highly liquid financial instruments by issuer.
• Final draft RTS to specify the minimum content of the liquidity management policy and procedures. These draft RTS envisage procedures for identifying, measuring and managing liquidity risk, a contingency policy and mitigation tools as well as minimum aspects of liquidity stress testing.
• Guidelines on recovery plans specifying the format and the content of the recovery plan that issuers need to develop and maintain. Considering the feedback received during the consultation period, the Guidelines further specify the content of the communication and disclosure plan. A number of targeted amendments were also made to streamline the wording and provide further clarity, inter alia by adding new definitions and by introducing a new paragraph to clarify that any provision regarding certain requirements applicable to the reserve of assets (e.g. certain recovery plan indicators and scenarios) does not apply to issuers of EMTs that are not subject to hold a reserve of assets in accordance with MiCAR.

Legal basis and next steps

The draft RTS relating to own funds have been developed in close cooperation with the European Securities and Markets Authority (ESMA) and the European Central Bank (ECB), in accordance with Article 35(6) and Article 45(7)(c) of Regulation (EU) 2023/1114 on Markets in Crypto-assets (MiCAR), and specify the procedure and timeframe for own funds adjustments.

The draft RTS on liquidity have been developed, in close cooperation with ESMA and the ECB, to further specify the liquidity requirements of the reserve of assets, to specify the highly liquid financial instruments in the reserve of assets and to specify the minimum content of the liquidity management policy and procedures, in accordance with Articles 36(4), 38(5) and 45(7)(b) of MiCAR respectively.

The Guidelines on recovery plans have been developed in accordance with  Article 46(6) of MiCAR after consultation with ESMA. The Guidelines specify the format of the recovery plan and the information to be provided therein.