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Source: European Banking Authority

The European Banking Authority (EBA) today published final amendments to its Regulatory Technical Standards (RTS) on the fundamental review of the trading book (FRTB). The revisions mostly aim to align these RTS with the Capital Requirements Regulation (CRR3) and ensure stability in the applicable regulatory framework. The RTS are part of the roadmap on the Banking Package.

The CRR3 introduced a number of changes to the FRTB and included mandates for the EBA to amend existing RTS for them to fit with the new Level 1 text. In particular, the EBA has been mandated to review the RTS on the treatment of foreign-exchange and commodity risk in the banking book, the RTS on profit and loss attribution test and the RTS on risk factor modellability assessment

As regards the details on the profit and loss attribution test, the RTS remove the aggregation formula for computing the total own funds requirements for market risk for an institution using the alternative internal model approach as this formula has been now introduced in the CRR3.

As regards the risk factors’ modellability assessment, the RTS ensure that institutions are able to identify how far they rely on a third-party vendor for the purpose of assessing the modellability of a risk factor.

Finally, as regards the treatment of foreign exchange and commodity risk in the non-trading book, the RTS ensure that translation risk is duly captured by institutions.

Legal basis and background

The draft RTS have been developed according to Article 325(9), 325be(3) and 325bg(4) of Regulation (EU) No 575/2013 (CRR), as amended by the CRR3, which mandates the EBA to specify:

• how institutions are to calculate the own funds requirements for market risk for non-trading book positions that are subject to foreign-exchange risk or commodity risk;
• how institutions are to assess the risk factors’ modellability;
• technical details relating to the profit and loss attribution tests.

The EBA roadmap also outlines the EBA’s intentions and plan of action to ensure a smooth implementation of the new approaches across the EU. In particular, it reflects the prioritisation of the EBA’s work in four phases, which is broadly in line with the deadlines included in the CRR3, starting with the implementation of the essential parts of the framework.

Source: European Banking Authority

The European Banking Authority (EBA) today published its European Resolution Examination Programme (EREP) Report. It sets three priorities for resolution authorities and banks for 2025: operationalisation of their resolution tools, liquidity strategies in resolution, and management information system for valuation. The Report also looks at the progress achieved in 2023 and identifies areas of improvement.

The 2025 EREP priorities confirm and complement the areas of focus set for 2024, given their relevance and the fact that work takes time on those complex topics. New elements introduced for 2025 reflect policy and market developments, progress and expertise gained by resolution authorities and, overall, embed a testing dimension which is considered central for resolution readiness.

Compared to 2024, building up own funds and eligible liabilities is not a separate priority anymore, given that most banks have met their minimum requirement for own funds and eligible liabilities (MREL). However, to increase the effectiveness of the bail-in tool, MREL qualitative aspects are to be further monitored as part of the operationalisation of resolution tools, and quantitative aspects will be followed and disclosed by the EBA in its MREL Dashboard.

In 2023, convergence increased within the EU with regards to resolution planning practices and objectives.

On MREL, only four banks did not meet their target as of 1 January 2024. Resolution authorities have used their powers to impose sanctions and extended deadlines for 22 institutions. They have also increased their monitoring of MREL eligibility and quality, especially for contracts governed by third-country law.

On the operationalisation of the bail-in tool, most resolution authorities have now published their bail-in mechanics and consider that challenges concerning the identification of holders of instruments, suspension for trading or requirements of issuing prospectus for the new instruments persist and are particularly prominent in relation to third country stakeholders.

While some progress has been observed in the area of liquidity in resolution, resolution authorities plan to further increase the intensity of their testing and to challenge the severity of banks’ scenarios.

Finally, resolution authorities have performed more testing of management information systems for valuation as some banks showed significant gaps in data quality, automation, granularity and timeliness of report delivery. Further progress remains needed. Resolution authorities have put in place procedures for quickly appointing a valuer. The EBA supports the work of resolution authorities and is preparing a Handbook on the independence of valuers currently under public consultation.

Note to the editors

According to Articles 25 and 29 of its founding Regulation, the EBA shall contribute to, and participate actively in, the development and coordination of effective, consistent and up-to-date recovery and resolution plans for financial institutions and shall also develop and maintain an up-to-date Union resolution handbook on the resolution of financial institutions in the Union.

The EBA fosters convergence in resolution practices by setting EREP priorities and publishing a report on an annual basis. The is the second edition of the EBA’s EREP priorities and report.

The EREP priorities highlights the topics on which EU banks and resolution authorities need to pay special attention in the next calendar year. They are selected based on the expertise of the EBA and its members in policy development, on the practical experience of resolution authorities, and of the resolution colleges in which the EBA participates. The EBA subsequently assesses whether and how the selected topics have been taken into account in resolution authorities’ priorities and activities.

Separately, as part of its convergence mandate, the EBA sets priorities for banks and their supervisors on an annual basis in its European Supervisory Examination Programme (ESEP), which includes the key topics for heightened supervisory attention across the European Union. In addition, following the entry into force of the Markets in Crypto-assets Regulation, the EBA also set out key topics for supervisory attention across the European Union in 2024/2025 for issuers of asset-referenced tokens (ARTs) and e-money tokens (EMTs), with the aim of promoting the timely and consistent application of MiCAR.

Source: European Banking Authority

Following the European Commission’s adoption of a Delegated Act postponing the application of the revised market risk framework in the EU, the so-called Fundamental Review of the Trading Book (FRTB), the European Banking Authority (EBA) today publishes a no-action letter on the boundary between the banking book and the trading book and shares its considerations on technical questions and issues arising from the postponement.

In its no-action letter, the EBA recommends that competent authorities should not prioritise any supervisory or enforcement action in relation to the amendments to the provisions setting the boundary between the banking and trading books, or those defining internal risk transfers between books. In that context, the EBA also clarifies that the points it made in another no-action letter on the same topic issued in 2023 should remain applicable.

The EBA is of the opinion that the front-loaded application of the revised provisions on the boundary and internal risk transfers, compared to the rest of the FRTB framework, which is not yet implemented in the Union for capital purposes, would subject institutions to an operationally complex, fragmented and costly two-step implementation. In addition, there are no jurisdictions at the global level that envisage such a two-step implementation of the FRTB framework. This means that a front-loaded application of the boundary provisions would lead to global institutions being subject to very different regulatory requirements depending on where the risk management is performed, thus resulting in a fragmentation of the regulatory framework.

The EBA also shares some considerations on a set of technical questions and implementation issues arising from the postponement, that were deemed material and relevant with a view to achieving a harmonised implementation of the market risk framework across institutions during the postponement period. The EBA also provides clarity on the supervisory benchmarking exercise.

Legal basis and background

The no-action letter is based on Article 9c of Regulation (EU) No 1093/2010 (EBA Founding Regulation). That article provides that the EBA may issue no-action letters, if it considers that the application of one of the relevant legislative acts is liable to raise significant issues, as provisions contained in such act may directly conflict with another relevant act, and if it considers on the basis of the information available that the application of the relevant provisions raises significant exceptional issues pertaining to market confidence and the orderly functioning and integrity of financial markets.

On 24 July 2024, the European Commission adopted a Delegated Act in accordance with Article 461a of Regulation (EU) 2024/1623 (‘CRR3’), which postpones the use of the alternative approaches for the calculation of the own funds requirements for market risk by a year to 1 January 2026. The publication of that Delegated Act by the European Commission was accompanied by a set of question and answers on some aspects of the postponement, including the application of the revised boundary between the banking and trading books, and the use of the alternative standardised approach in the context of the output floor calculations.

Source: European Banking Authority

The European Banking Authority (EBA) today published its final draft Implementing Technical Standards (ITS), amending the Implementing Regulation on the benchmarking of credit risk, market risk and IFRS9 models for the 2025 exercise. The most significant change is in the area of market risk framework, where the EBA is proposing to expand to all asset classes the alternative standardised approach (ASA) validation portfolios compared to the 2024 exercise. In the area of credit risk, the EBA suggests only minor changes.

In the area of market risk, the templates based on the alternative internal model approach (AIMA) have not been implemented because of the adoption of a Delegated Act by the European Commission that postpones the implementation of the Fundamental Review of the Trading Book (FRTB) in the EU. Therefore, both the content and the sample of banks for the data collection in the area of market risk remain the same as in the 2024 exercise. Compared to the 2024 exercise, the data collection deadlines have been postponed to allow participating banks some more time as a result of the delay in the publication of this amending ITS.

In the area of credit risk, the few amendments clarify, on the one hand, the mandatory nature – if available – of reporting the probability of default (PD) and loss given default (LGD) risk parameters in relation to the margin of conservatism (MoC), regulatory add-ons, and downturn components, and, on the other hand, the use of internal model IDs used by the competent authorities.

Legal basis and background

This draft ITS have been developed in accordance with article 78 of the Capital Requirements Directive (CRD), which requires the EBA to specify the benchmarking portfolios, templates, and definitions to be used as part of the annual benchmarking exercises. These are used by competent authorities to conduct an annual assessment of the quality of internal approaches used for the calculation of own funds requirements.

The EBA annual benchmarking exercise forms the basis for both the supervisory assessment and the horizontal analysis of the outcome of internal models. It ensures consistent monitoring of the variability of own funds requirements resulting from the application of internal models as well as on the impact of the several different supervisory and regulatory measures which influence the capital requirements and solvency ratios in the EU.

Source: European Banking Authority

The Joint Board of Appeal (“The Board”) of the European Supervisory Authorities (ESAs) – the (the EBA, ESMA, EIOPA), unanimously decided that the appeal brought by Euroins Insurance Group AD (“Euroins”) against the European Insurance and Occupational Pensions Authority (EIOPA) is inadmissible.

The appeal was brought in relation to the EIOPA Chairperson’s decision not to start an investigation into an alleged breach or non-application of Union law regarding the withdrawal of the license of a subsidiary insurance undertaking of Euroins by the national competent authority in Romania.

In its decision, the Board finds that EIOPA’s power to initiate an investigation is of an entirely discretionary nature. Furthermore, the Board also asserts that the EIOPA Chairperson’s decision to initiate an investigation is not subject to the Board’s review. Finally, the decision clarifies that the Board does not have the power to order EIOPA to re-assess an appellant’s request to open an investigation.

Following the adoption of the decision, two orders on its publication were also adopted. The first order dismissed Euroins’ request not to publish the decision and its request for redaction. Yet, it agreed to delay publication to a date allowing Euroins to file an appeal against that order at the General Court. The second order came upon request from the President of the Court of First Instance, seeking to grant additional time to analyse the case and consider interim measures requested by Euroins. That second order postponed the publication of the decision until 7 August 2024.

Source: European Banking Authority

The European Banking Authority (EBA) and the European Central Bank (ECB) published today a joint Report on payment fraud data. The report assesses payment fraud reported by the industry across the European Economic Areas (EEA), which amounted to €4.3bn in 2022 and €2.0bn in the first half of 2023. The Report confirms the beneficial impact of strong customer authentication (SCA) on fraud levels.

The Report examines the total number of payment transactions and the subset of fraudulent transactions in terms of value and volume. In addition to the aggregated values, the Report also presents data based on volumes and also sorted by type of payment instruments, i.e. credit transfers, direct debits, card payments, cash withdrawals, and e-money transactions.

SCA-authenticated transactions featured lower fraud rates than non-SCA transactions, especially for card payments, both in terms of values and volumes. Furthermore, fraud shares for card payments, both in terms of values and volumes, were 10 times higher when the counterpart is located outside the EEA, where the application of SCA is not legally required and may therefore not have been requested. Hence, the report confirms the beneficial impact of the SCA requirements that were introduced by the PSD2 and the supporting technical standards that the EBA had issued in 2018 in close cooperation with the ECB.

The Report also finds that losses due to frauds were distributed differently among liability bearers depending on the payment instrument.

The EBA and the ECB will continue to monitor fraud data and going forward, will publish the aggregate data on an annual basis. This initial rReport presents observations in a descriptive way, while future editions will also include explanations of the data and observed trends.

Background and legal basis

The EBA and the ECB, in their respective roles as supervisory authority of payment service providers and overseer of payment systems, instruments, schemes and arrangements, closely monitor developments in payment fraud. Both the EBA and the ECB thereby rely on statistical information on the volumes and values of payment transactions and corresponding fraud reported by payment service providers (PSPs) located in the EU/EEA.

In accordance with Article 96(6) of PSD2, PSPs are required to report statistical data on fraud relating to different means of payment to their competent authorities (NCAs). NCAs, in turn, are required to provide both the EBA and the ECB with this data in aggregated form. In support of these provisions, the EBA Guidelines on fraud reporting under PSD2 (EBA/GL/2018/05, hereafter “EBA Guidelines”), which apply since 1 January 2019, specify the data that should be reported under the PSD2. In addition, Regulation (EU) No 1409/2013 of the European Central Bank on payments statistics (ECB/2013/43), as amended (hereafter ‘ECB Regulation on payments statistics’), requires PSPs located in the euro area to report inter alia detailed information on payment fraud to their national central banks, which in turn shall share the data in aggregated form with the ECB.  Data under both the EBA Guidelines and the ECB Regulation on payments statistics is reported on a semi-annual basis. 
This Report, jointly prepared by the EBA and the ECB, presents a comprehensive overview of the latest data collected under the above-mentioned frameworks.
 

Source: European Banking Authority

The European Banking Authority (EBA) today launched a public consultation on its draft Implementing Technical Standards (ITS) for uniform reporting templates in relation to the level of charges for credit transfers and share of rejected transactions under SEPA Regulation. These templates aim to standardise reporting from Payment Service Providers (PSPs) to their National Competent Authorities (NCAs). With such standardisation, the European Commission will be able to monitor the effects of changes to Single Euro Payments Area (SEPA) Regulation on the fees paid by customers of PSPs for payment accounts, as well as instant and non-instant credit transfers. The consultation runs until 31 October 2024.

In these draft ITS, the EBA is proposing that Payment Service Providers (PSPs) report the level of charges for regular credit transfers and instant credit transfers with breakdowns by type of transfer (domestic or cross-border), type of payment service users, type of payment initiation channels, and the party subject to the charge. The EBA is also proposing that PSPs report charges for payment accounts, as well as the share of instant transfers, both domestic and cross-border, that were rejected due to the application of EU-wide restrictive measures.

With this public consultation the EBA is seeking stakeholders’ feedback on the proposed approach to standardising the reporting requirements, including the clarity of the draft templates and instructions to complete them. The EBA is also seeking feedback on whether the draft ITS strike the right balance between the need to obtain the data required for a robust analysis of the impact of the changes to the SEPA Regulation and the need to avoid excessive reporting burden for the industry.

The draft ITS is accompanied by a preparatory statement addressed to the PSPs, where the EBA stresses that PSPs are expected to record and store information on the level of charges for credit transfers and payment accounts, and numbers of rejected transactions, to comply with future reporting requirements under the revised SEPA Regulation.

Consultation process

Comments to the consultation paper can be sent by clicking on the “send your comments” on the EBA’s consultation page. The deadline for the submission of comments is 31 October 2024 at 23:59 CET. The EBA will consider the feedback received to this consultation when finalising the ITS.

A public hearing on the technical standards for uniform reporting under the Single Euro Payments Area Regulation will take place via online meeting on 9 October 2024 from 10:00 to 11:30 CET. Please register for the hearing here by 7 October 16:00 CET.

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

Legal basis and background

Article 15(3) of the amended SEPA Regulation requires that “PSPs shall report to their competent authorities on: (a) the level of charges for credit transfers, instant credit transfers and payment accounts; (b) the share of rejections, separately for national and cross-border payment transactions, due to the application of targeted financial restrictive measures.“ Article 15(5) of the amended 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 launched a public consultation on its draft ITS overhauling the EBA resolution planning reporting framework. The consultation runs until 30 October 2024.

•    These draft Implementing Technical Standards (ITS) on the provision of information for the purposes of resolution plans aim to ensure that resolution authorities have the data they need, thus improving the usability of this reporting framework and enhancing a consistent monitoring of resolution planning.
•    These draft ITS will further harmonise reporting requirements in the EU and avoid duplication of data requests, thus reducing the cost of compliance with resolution planning reporting obligations by institutions. 
•    Proportionality is a key driver of this regulatory product. Therefore, the streamlining of datapoints to avoid overlaps is based on the size and complexity of institutions.

The main proposals included in this consultation paper include bringing forward the submission deadline for reporting from April 30 to March 31, an extension of the scope of entities for which data is collected, and an expansion of the information requested on some topics, in particular organisational structure, granular liability data, critical functions, financial markets infrastructures data, critical services and critical information systems. The changes reflect some of the information that resolution authorities are already, and separately, collecting from their institutions, notably that collected by the Single Resolution Board.

Consultation process and next steps

Comments to the consultation paper can be sent to the EBA by clicking on the “send your comments” button on the consultation pages. Please note that the deadline for the submission of comments is 30 October 2024. All received contributions will be published at the end of the consultations, unless requested otherwise.

A public hearing on the draft ITS will take place via online meeting on 12 September 2024 from 10:00 to 11:30 CET. Please register for the hearing here by 9 September 16:00 CET.

Following the consultation period, the draft ITS will be finalised and is expected to be submitted to the European Commission by March 2025.

Legal basis and background

The Bank Recovery and Resolution Directive (BRRD) requires resolution authorities to draw up resolution plans that outline the actions to be taken in case an institution meets the conditions for resolution. The ITS on procedures, standard forms and templates for the provision of information for the purpose of resolution plans sets out a procedure that should be followed when resolution authorities require information about an institution for the purpose of drawing up a resolution plan. 

Source: European Banking Authority

The European Banking Authority (EBA) published today final Guidelines that extend the existing Joint Committee Guidelines on complaints handling (JC Guidelines) to credit servicers under the new Credit Servicers Directive. When handling complaints from borrowers, credit services are now required to apply the same effective and transparent procedures that have been applied for more than a decade to other firms in the banking, insurances and securities sectors.

The Guidelines cover the complaints management policy, the complaints management function, the registration of complaints, the reporting to the competent authorities or ombudsman, the internal follow-up, the provision of information to the complainant, and the procedures for responding to complaints (e.g. investigation of the complaint, communication of the decision and delay to do so).

In addition to the extension of the scope of the Guidelines to credit servicers, the EBA has introduced some non-substantive changes so as to align the Guidelines with the amendments made to the EBA Regulation in 2020. The latter changes allow the EBA to delete procedural requirements addressed to national authorities and which are now no longer required.

The EBA Guidelines, and the consolidated version of the JC Guidelines (see Annex of the final Report), will be published in all 24 languages in 2025, once the proposed EU Payment Services Regulation enters into force and the EBA Regulation is amended accordingly.

Background and legal basis

The EBA developed these Guidelines in support of the transposition of Article 24 (1) of the Directive (EU) 2021/2167 on credit servicers and credit purchasers (Credit Servicers Directive, also referred to as the ‘NPL Directive’ or ‘Loan Servicers Directive’), which provides that “Member States shall ensure that credit servicers establish and maintain effective and transparent procedures for the handling of complaints from borrowers”.

Source: European Banking Authority