MIL Publishing Engine 1

Source: European Banking Authority

The European Banking Authority (EBA) today published its 2024 Reports on the annual market and credit risk benchmarking exercises. For the first time, the EBA also released a specific Report on the fundamental review of the trading book Alternative Standardised Approach (FRTB ASA). These exercises aim at monitoring the consistency of risk weighted assets (RWAs) across all EU institutions authorised to use internal approaches for the calculation of capital requirements.

Regarding market risk, the decline in the dispersion in the various risk measure is confirmed for this exercise. For credit risk, the variability of RWAs remained stable compared to the previous year, but for some asset classes a reduction could be observed in the longer run for some asset classes and parameters.

Market Risk

The Market Risk Benchmarking IMA Report presents the results of the 2024 supervisory benchmarking and summarises the conclusions drawn from a hypothetical portfolio exercise (HPE) conducted in 2023/24.

The results confirm that most participating banks have seen a relatively low dispersion in the initial market valuation (IMVs), though slightly higher compared to 2023. However, a decline in the dispersion in risk measures submissions was noticed compared to the previous exercise.

In general, variability has declined constantly through past exercises. This is likely due to better data submissions by the participating banks, as a result of improved instructions, knowledge of the portfolios and the resolution of issues encountered in the previous exercise.

Regarding the single risk measures, the overall variability for value at risk (VaR) is lower than the observed variability for stressed VaR (sVaR) (14% and 21%, compared to 16% and 21% in 2023, and to 21% and 28% in the 2022 exercise). More complex measures, such as the incremental risk charge (IRC), show a higher level of dispersion (44%, it was 42% in 2023 exercise, 45% in the 2022).

The assessment by competent authorities of the over- and underestimation of RWAs was encouraging as the latter were aware of and able to explain the causes of almost all deviations. While most of the causes were identified and actions put in place in order to reduce the unwanted variability of RWAs, the effectiveness of these actions can be evaluated only by competent authorities via constant monitoring of the benchmarking results.

The benchmarking on the FRTB ASA will become even more critical in the future, as it will be extended to banks that apply the ASA methodology independently without the current requirement of having been granted permission to adopt internal models for market risk’s own funds requirements. One positive aspect of the ASA data collection is that the Own Funds Requirements (OFR) computed using this methodology is already significantly more consistent than the IMA methodology. On the other side, the Default Risk Charge (DRC), residual risk add-on (RRAO) and the validation portfolios highlighted some inconsistencies in the data submissions.

 

Credit Risk exercise

The relative share of the Exposure at Default (EAD) subject to the Internal Ratings Based (IRB) method appears slightly decreasing in the medium run but practically constant in the last years.

Furthermore, the share of approved material model changes has increased for all asset classes, indicating that the implementation of the IRB roadmap is progressing.

The Report shows a clear decreasing trend of variability, measured in terms of standard deviation, can be observed for the PD while for the LGD it more difficult to observe a clear trend. The Report also proves that, besides risk factors able to capture the underlying portfolio characteristics, prudential adjustments could potentially explain part of the variability.

A specific analysis regarding the Retail portfolio shows the role that the type and degree of collateralisation can play in explaining the variability of the Loss Given Default (LGD). 

 

Notes to the editors

These annual benchmarking exercises contribute to improving the regulatory framework, increasing convergence of supervisory practices and, thus, restoring confidence in internal models. For credit risk internal models, the EBA has followed its roadmap for the implementation of the regulatory review of internal models.

This exercise should be read in parallel with other efforts to reduce undue level of variability. In particular, the  EBA roadmap to Repair IRB models is a key component of the review of the IRB framework, along with the enhancements brought by the final Basel III framework assessed by the EBA in a set of recommendations as an answer to the call for advice of the European Commission.

The exercises provide a regular supervisory tool based on benchmarks to support competent authorities’ assessments of internal models and produce comparisons with EU peers.

Source: European Banking Authority

The European Banking Authority (EBA) today published two Reports on the market share of subsidiaries of non-EU banks in the EU, as well as on EU banks’ assets and liabilities in foreign currencies. The market share of EU subsidiaries of third country banking groups amounts to 10.17% of total assets as of December 2023, mostly owing to exposures towards credit institutions and other financial corporations in the EU. Of the individual asset categories, the market share of third country players is highest in derivatives while their largest sources of income are fees and commission income and interest income from credit institutions and other financial corporations.

As of December 2023, the market share of third country players was 10.17% of total assets, and accounted for 33.73% in derivatives, 8.17% in loans and 6.06% in debt securities. More than 70% of loans and derivatives were granted to counterparties domiciled outside the home country. The market share of third country players mostly owed to exposures towards credit institutions and other financial corporations in the EU, amounting to 30.79% and 22.44% of total assets of all counterparties, respectively.

As of December 2023, the assets reported by subsidiaries of third country banking groups towards credit institutions and other financial corporations accounted for 78% of total assets. Moreover, 80% of these assets were located outside of the country where the subsidiaries were domiciled.

In relation to the P&L items, the market share of subsidiaries of third country banking groups represented 5.16% of interest income, 1.85% of dividend income, 12.22% of fee and commission income and 32.28% of other operating income. Subsidiaries of third country banking groups enjoyed a high market share on fee income originating from commodities (77.34%), fiduciary transactions (48.74%), central bank administrative services for collective investment (30.57%), corporate finance (30.19%), custody (25.68%) and foreign exchange (19.73%).

Finally, in terms of the assets involved in the services provided, the market share of subsidiaries of third country banking groups is high in central administrative services for collective investment (53.11%), fiduciary transactions (28.87%) and custody assets (20.55%).

The Reports also show that EU/EEA banks hold nearly 30% of their exposures in foreign currencies, while they receive 21% of total funding in foreign currencies (without including foreign subsidiaries of EU banks). Foreign currency funding consists of funding in Euro (4% of total funding), other EEA currencies (1.9% of total funding) and other foreign currencies (14.7% of total funding). The US dollar is the main contributor to funding in other foreign currencies (12% of total funding).

On wholesale funding, EU/EEA banks mainly tap markets of foreign currency funding. Unsecured wholesale funding represents two thirds of total foreign currency funding, followed by repurchase agreements (13% of foreign currency funding). More than half of unsecured wholesale funding in foreign currencies comes from financial customers, while non-financial customers provide less than a third of unsecured wholesale funding in foreign currencies.

On net stable funding ratio (NSFR), EU banks’ buffers remain comfortably above the minimum requirement both for the total NSFR ratio and for the NSFR in the main significant currencies. The average foreign currency NSFR is below 100% only for Norwegian krone and Japanese yen. The average NSFR in USD stood at 107.2% as of December 2023,  higher than the level observed in June 2021 (83%). However, the NSFR in USD remains below 100% for 60 banks out of the 267 banks reporting USD as a significant currency.

Note to the editors

1. The identification of non-EU entities and operators was made based on the country of domicile of the ultimate parent.
2. The EBA relied on different data sources to carry out the analyses included in the Report. The analysis on funding structure and assets and liabilities in foreign currency is based on EBA supervisory reporting data. The investigation of the market share relies mainly on FINREP templates, available at the EBA for banking groups (i.e. institutions that report on a consolidated basis). However, only a limited number of subsidiaries of third country banking groups have established a banking group in the EU and report on a consolidated basis, while the majority of the subsidiaries operate on a solo basis and report FINREP individual templates. 

Source: European Banking Authority

Source: European Banking Authority

On 25 March 2025, the Board of Supervisors of the European Banking Authority (EBA) renewed the mandate of François-Louis Michaud as EBA’s Executive Director for a second five-year term, until end-August 2030. The decision was based on the evaluation of his work during his first term of office, as well as on the Authority’s duties and requirements over the next five years.

Jose Manuel Campa, the Chairperson of the EBA, stated:

“I would like to congratulate François-Louis on this extension which is the result of an impressive first mandate where he ensured that the EBA was able to deliver consistently on its work programme whilst driving the EBA transformation into a modern organisation, ready to face its future challenges. I am convinced that François-Louis will continue to lead the EBA with the commitment, dedication and vision he has shown in the last four years and a half.”

François-Louis Michaud stated:

“I am honoured by the continued trust from EBA’s Board of Supervisors. I look forward to building upon recent years’ efforts to enhance our organisation so that it can tackle its evolving responsibilities and promote efficient and effective regulation and risk assessments.”

Note to the Editors

The Executive Director is in charge of the management of the EBA. He is responsible for preparing and implementing its work programme and budget, and manages staff matters.

François-Louis Michaud previously held senior positions at the European Central Bank, the Bank for International Settlements and Banque de France. 

Source: European Banking Authority

The three European Supervisory Authorities (EBA, EIOPA and ESMA – the ESAs) today published their Spring 2025 Joint Committee update on risks and vulnerabilities in the EU financial system, which focuses on the challenges linked to geopolitical tensions and cyber risks.

The ESAs warn that growing geopolitical tensions and rising cyber risks present significant challenges to financial stability. These include trade disputes, rapidly shifting policies, ongoing international conflicts and the prospect of economic fragmentation which are reshaping global markets, requiring heightened vigilance and adaptability from supervisors and financial entities alike.

Financial institutions must navigate growing uncertainties, including exposure to international markets, liquidity risks and the evolving role of artificial intelligence (AI). Ensuring resilience in the face of these developments is crucial.

The ESAs, therefore, emphasise the need for proactive risk management, stronger cyber resilience and a close monitoring of global financial linkages. As financial markets continue to evolve, international cooperation and regulatory preparedness will be key to maintaining stability. Against a background of high geopolitical risks, the ESAs recommend that supervisors and financial entities prepare for continued market volatility, consider the potential materialisation of liquidity risks and stand ready to adapt to adverse developments, including by provisioning adequately.

To better manage cyber and digitalisationrisks, supervisors and financial institutions should continue to strive for robust data governance, critically assess AI solutions and their compliance with the AI Act, and support the timely implementation of the Digital Operational Resilience Act’s provisions.

Background

This Spring 2025 Joint Committee update on Risks and Vulnerabilities was presented at the meeting of the Financial Stability Table of the EU’s Economic and Financial Committee (FST-EFC) on 27-28 March 2025 as input from the ESAs.

Source: European Banking Authority

The Joint Committee (JC) of the European Supervisory Authorities (ESAs) has today published its evaluation report on the functioning of the EU Securitisation Regulation (SECR). The report puts forward recommendations to strengthen the overall effectiveness of Europe’s securitisation framework through simplification, while ensuring a high level of protection for investors and safeguarding financial stability.

This report identifies areas where the regulatory and supervisory framework can be enhanced, supporting the growth of robust and sound securitisation markets in Europe.

Key recommendations

Clarifying the scope of the Securitisation Regulation

The ESAs recommend specifying that the application of SECR is triggered where at least one party to the securitisation — whether on the sell-side or buy-side — is established in the European Union. This aims to ensure legal certainty and consistent supervision.

Broadening the definition of public securitisation

The report proposes reviewing the definition of public securitisation to include transactions where securities are:

• Issued with a prospectus approved under the EU Prospectus Regulation; or

• Admitted to trading on EU-regulated markets or multilateral trading facilities (MTFs); or

• Marketed broadly with non-negotiable terms and subject to a market test requiring EU originators or sponsors to demonstrate that transactions are not offered to an undefined public.

Introducing proportionality in due diligence requirements

The report calls for more proportionate and practical due diligence requirements, enabling institutional investors to receive data in formats that support meaningful risk assessment, along with commitments from sell-side parties to provide ongoing information throughout the life of the transaction.

Simplifying transparency and reporting requirements

Recommendations include streamlining reporting templates for public securitisations, improving data standardisation and introducing flexibility to use aggregated or stratified data for certain asset classes. The report also suggests targeted exemptions to reduce compliance burdens for small and medium-sized reporting entities.

Targeted changes to the STS framework

The report proposes focused adjustments to improve the efficiency of the Simple, Transparent, and Standardised (STS) framework, particularly in relation to on-balance-sheet (OBS) securitisations introduced under the Capital Markets Recovery Package (CMRP).

Clarifying risk retention rules

Clearer guidance on risk retention is recommended to reduce interpretation challenges, particularly for Collateralised Loan Obligations (CLOs) and including the term “predominant source of revenues”.

Promoting greater supervisory consistency across Europe

The need for stronger supervisory convergence is highlighted to prevent fragmentation and ensure consistent application across Member States. In the short term, this could be achieved through stronger coordination at the ESAs Joint Committee Securitisation Committee. In the longer term, the ESAs suggest exploring more consolidated European supervisory arrangements, especially for cross-border transactions.

Next steps

These recommendations will feed into the European Commission’s legislative review of the securitisation legislative framework, contributing to the development of well-functioning, resilient and transparent securitisation markets across the European Union.

Source: Government of the Netherlands

News item | 20-03-2025 | 15:15

Leading scientists

Minister Bruins: “The world is changing. Tensions are on the rise. We are seeing an increase in the number of scientists looking for another place to continue their work. I want more top international scientists to do so here in the Netherlands. After all, leading scientists are of immense value to the Netherlands and to Europe as a whole.”

A new NWO fund

Mr Bruins has asked the Dutch Research Council to establish a new fund as soon as possible to encourage outstanding researchers and talented scientists to come to the Netherlands to pursue their ambitions. For example, a financial package could be made available in the form of a grant. The aim is to ensure that scientists have the resources to live and work in the Netherlands and continue their research at a Dutch knowledge institution.

Details of the fund have yet to take shape, but the minister is eager to announce it at this early stage to scientists who are currently considering the next step in their career. It is important that they include the Netherlands in their deliberations. Other European countries such as France, Germany, Spain and Belgium are also taking initiatives to bring leading international scientists into the fold.

Truly international

A number of guiding principles of the fund have already been made clear. Eligibility is not restricted to Dutch nationals working abroad. Mr Bruins wants to open up the scheme to the full spectrum of top international talent, regardless of nationality. He also wants the fund to launch as soon as possible, sending a strong signal that leading researchers are welcome in the Netherlands. The ambition is that the fund will bring several dozen top scientists to the Netherlands. In close consultation with the Dutch Research Council, the minister expects to clarify the financial details in the coming weeks, along with the start date for the fund and the exact conditions that candidates will have to meet.

Source: European Banking Authority

The European Banking Authority (EBA) published today a draft technical package for version 4.1 of its reporting framework. This publication aims to provide an early version of the 4.1 release to facilitate the implementation for the reporting entities. The final version is expected to be released in end May 2025.

The draft technical package provides the standard specifications that include the validation rules, the DPM and the XBRL taxonomies to support the following reporting obligations:

• Pillar 3 templates included in the comprehensive ITS on Pillar 3 disclosures, for the purpose of the Pillar 3 data hub.
• Own initiative guidelines on reporting of data that competent authorities will need for the purpose of their supervisory tasks and for significance assessment (MiCAR reporting Guidelines).
• Integration of Instant Payments reporting ITS into DPM and taxonomy
• In addition, a series of validation rules have been added to the ESG ad-hoc data collection module.

Background and next steps

The final version of the technical package for the 4.1 reporting framework will be published in end May 2025 and will include possible corrections coming from the revision of the technical package by various stakeholders.

In June 2024, the EBA published its plan for the implementation of DPM 2.0. The draft technical package for version 4.1 published today, continues the transition to DPM 2.0 and to the new glossary, as announced in June. This draft technical package includes a version of the data dictionary contents in both formats the DPM 1.0 and the new format DPM 2.0.

The FAQs published by EBA in December 2024 providing additional explanations on the transition to DPM 2.0 and new glossary period remain a good source of information and can be found here.

We welcome comments and suggestions for identified issues with the draft technical package 4.1 by 15 April 2025 or on the DPM new glossary at any time until the revision is finalized. Please send them through this form. 

Source: European Banking Authority

The European Banking Authority (EBA) published today the 9th edition of its biennial Consumer Trends Report for 2024/25. The Report has identified payment fraud, indebtedness, and de-risking as the most important issues affecting EU consumers. The Report is based on information provided by the national authorities of the 27 EU Member States, selected national and EU consumer associations, EU industry associations, national ombudsmen, as well as quantitative data from a variety of sources, including for the first time the EBA’s new Retail Risk Indicators, which the EBA publishes separately since 2022 with a view to identify potential consumer harm.

The Report summarises the input the EBA has received to conclude that payment fraud is still the most significant issue for EU consumers. This also reflects the emergence of new types of fraud, such as social engineering techniques. In this type of scams, payers are manipulated into making a payment to the fraudsters, who have adapted their techniques to elude the application of the strong customer authentication requirements imposed by EU law.

Indebtedness emerges as the second most relevant issue reported to the EBA, with a significant rise of what is commonly referred to as ‘Buy-Now-Pay-Later’ credit and other types of small, fast, accessible and short-term credit. Inadequate creditworthiness assessment practices of lenders and poor disclosure of pre-contractual information are found to be key drivers to indebtedness.

De-risking is the third most relevant issue reported to the EBA, with more consumers facing increased difficulties in opening and retaining payment accounts, access to which is a prerequisite for residents in the EU to be able to participate in the EU economy. This issue is reported to materialise in the form of refused onboarding of new and the offboarding of existing consumers and seems to be affecting mostly specific categories of consumers, i.e., migrants, refugees, the homeless, cross-border workers, and individuals with poor financial histories.

Following these findings, the EBA will consider which actions to take in 2025/26 to address the topical issues identified in 2024/25 and with the aim of further enhancing consumer protection across the EU.

Legal basis and background

The Consumer Trends Report 2024/25 has been developed in fulfilment of the EBA’s mandate set out in Article 9(1) of its founding Regulation, which requires the Authority to take a leading role in promoting transparency, simplicity and fairness in the market for consumer financial products or services across the internal market, including by collecting, analysing and reporting on consumer trends.

Source: European Banking Authority

The European Banking Authority (EBA) published today the 9th edition of its biennial Consumer Trends Report for 2024/25. The Report has identified payment fraud, indebtedness, and unwarranted de-risking as the most important issues affecting EU consumers. The Report is based on information provided by the national authorities of the 27 EU Member States, selected national and EU consumer associations, EU industry associations, national ombudsmen, as well as quantitative data from a variety of sources, including for the first time the EBA’s new Retail Risk Indicators, which the EBA publishes separately since 2022 with a view to identify potential consumer harm.

The Report concludes that payment fraud is still the most significant issue for EU consumers. This also reflects the emergence of new types of fraud, such as social engineering techniques. In this type of scams, payers are manipulated into making a payment to the fraudsters, who have adapted their techniques to elude the application of the strong customer authentication requirements imposed by EU law.

Indebtedness emerges as the second most relevant issue, with a significant rise of what is commonly referred to as ‘Buy-Now-Pay-Later’ credit and other types of small, fast, accessible and short-term credit. Inadequate creditworthiness assessment practices of lenders and poor disclosure of pre-contractual information are found to be key drivers to indebtedness.

Unwarranted de-risking is the third most relevant issue, with more consumers facing increased difficulties in opening and retaining payment accounts, access to which is a prerequisite for residents in the EU to be able to participate in the EU economy. This issue materialises in the form of refused onboarding of new and the offboarding of existing consumers and seems to be affecting mostly specific categories of vulnerable consumers, i.e., migrants, refugees, the homeless, cross-border workers, and individuals with poor financial histories.

Following these findings, the EBA will consider which actions to take in 2025/26 to address the topical issues identified in 2024/25 and with the aim of further enhancing consumer protection across the EU.

Legal basis and background

The Consumer Trends Report 2024/25 has been developed in fulfilment of the EBA’s mandate set out in Article 9(1) of its founding Regulation, which requires the Authority to take a leading role in promoting transparency, simplicity and fairness in the market for consumer financial products or services across the internal market, including by collecting, analysing and reporting on consumer trends.