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Source: European Banking Authority

The European Banking Authority (EBA) today published its final draft Regulatory Technical Standards (RTS) on the assessment methodology under which competent authorities verify institutions’ compliance with the requirements applicable to their internal models under the Fundamental Review of the Trading Book (FRTB) rules. These RTS are part of the phase 4 deliverables of the EBA roadmap on market risk and counterparty credit risk approaches. Today’s final draft RTS represent a significant milestone in the implementation of the FRTB internal models in the EU.

The RTS provide clarity on the assessment performed by competent authorities when granting an internal model approval under the FRTB framework. In particular, they set out a framework for competent authorities to assess the FRTB requirements and focus on three central themes: governance, the internal risk-measurement model – covering the expected shortfall, and the stress scenario risk measure – and the internal default risk model.

The RTS include assessment techniques that the competent authorities must apply, while other techniques remain optional depending on the situation of the institution, for example, on the basis of proportionality considerations. As a result, these RTS provide clarity regarding the nature of requests institutions can expect to receive from competent authorities during the investigation phase.

Legal basis and background

These draft RTS have been developed according to Article 325az(8)(b) of Regulation (EU) No 575/2013 (Capital Requirements Regulation – CRR), which mandates the EBA to specify the assessment methodology under which competent authorities verify an institution’s compliance with the requirements applicable to internal models.

One of the prerequisites for an institution to use the new internal model approach (IMA) for calculating its own funds requirements for market risk is the approval from its competent authority. To obtain such an approval, the institution is subject to a thorough and comprehensive assessment of its internal model by the competent authority to ensure it complies with the relevant regulatory provisions.

Source: Government of the Netherlands

News item | 21-11-2023 | 15:00

Minister Mark Harbers (Infrastructure and Water Management): “One of the big challenges in the North Sea is space. Every country wants space for ships, but also sustainable energy, sufficient space for sustainable fisheries and a healthy habitat for birds, fish and mammals. I see that together we can tackle these challenges much more efficiently, for example by ensuring that we do not build a wind farm at our border if Germany plans a shipping lane on their side. Today’s agreements are a first step towards optimizing the available space.”

International example

The Netherlands, Belgium, France, Germany, Denmark, Norway, Ireland, Sweden and the UK signed multiple working agreements. Under the name Greater North Sea Basin Initiative (GNSBI), they organize their government structures in such a way that both countries and sectors can find each other faster and better. This will make it easier to share knowledge. For instance about future prospects of fishing or about the combined effect of wind farms, sand extraction and shipping for the North Sea.

Previously, the European Commission indicated that GNSBI is an example to the rest of Europe on how spatial planning can be optimized internationally.

Source: Government of the Netherlands

News item | 20-11-2023 | 13:31

Participants of this yearly ministerial meeting are: Belgium, Denmark, France, Germany, Ireland, Luxembourg, the Netherlands, Norway, Sweden, and the European Commission. The United Kingdom attended as a guest. During the past year, the Netherlands, alongside the European Commission, was chairman of the North Seas Energy Cooperation (NSEC).

Actions

As co-chair, The Netherlands was keen to translate national ambitions to European actions. The agreements which are recorded in the Action Agenda bring the European Wind Power Package (recently presented by the European Commission) to the next phase. At the conference in the Hague, Minister Jetten handed the Action Agenda to the new NSEC chairman Denmark.

As part of this ambition, a collective NSEC tender planning is launched. The tender planning translates NSEC countries’ broad ambitions into tangible progress, auctioning around 15 GW every year, awarding almost 100 GW between this year and 2030. This will increase the predictability in the wind power sector and allow for better collaboration. For example, it will facilitate of better cooperation and coordination on cables, pipes, harbour infrastructure and access to resources. This helps the European wind power sector with their mid- and long-term (financial) planning. Moreover, the countries will better coordinate their infrastructure planning at sea. In January 2024 the European Network of Transmission System Operators for Electricity (ENTSO-E), will publish a shared plan for infrastructure in the North Sea, with input from NSEC countries. This is an important step on the road to a European integrated energy system in 2050. This plan takes into account the need for a fair balance with other sectors and users in the North Sea, such as the fishing- and transport industry.

Commissioner for Energy Kadri Simon: “Europe’s energy mix is becoming cleaner and greener, and offshore renewables will have an indispensable part in the future energy mix. The North Sea is leading the way in their deployment, and has the potential to become Europe’s “Green Power Plant”. Our discussions today showed the joint determination and commitment to continue the work to deliver on our offshore ambitions, and to take the work forward to boost the competitiveness of this vital sector. I want to thank the Netherlands for hosting this year’s meeting in the Hague, and for the impressive work brought forward under the NSEC co-presidency.”

Minister for Climate and Energy Rob Jetten: “In recent years, North Sea countries shared ambitious plans for sustainable offshore wind energy development. Now, it is time to bring these ambitions into action. We all share the responsibility to develop the North Sea offshore energy plans in a responsible manner, in coordination with other North Sea-users and minimizing ecological impact. Close collaboration is the only way to successfully reach our energy ambitions. Today we start with the joint actions to take the sector to the next phase.”

Challenges

The development of offshore wind energy must take place in balance with other sea users and minimize negative ecological impact. Furthermore, the offshore wind sector increasingly experiences challenges such as high inflation and increased resource prices, limited availability of labour, and complex licensing systems. For a healthy offshore energy sector and an energy-independent Europe, closer cooperation amongst Member States and the industry is required.

This is echoed by a new study carried out by Royal HaskoningDHV (commissioned by NSEC), highlighting the critical role harbours take in the development, maintenance, and system integration of offshore wind energy. The study indicates that without additional common action, the current and planned capacity of harbours surrounding the North Seas is insufficient to reach the targets of 2030. It shows the bottlenecks for harbour development and makes several concrete recommendations. One of these recommendations is working on a shared European tender planning, as foreseen under the European Wind Power Action Plan.

Source: European Banking Authority

The EBA publishes final templates to collect climate-related data from EU banks

17 November 2023

Source: European Banking Authority

• Expected credit loss (ECL) models now lead to timelier recognition of loss provisions. However, most findings confirm previously raised issues and some divergence with the EBA’s expectations on IFRS 9 implementation.
• Overlays are becoming an integral part of the ECL framework and therefore, more efforts are needed to reduce the high degree of judgment for their calibration. Their usage under robust methodological and sound governance frameworks needs to be better framed.
• Backtesting is a key area that requires further investments by institutions to enlarge scope and robustness of the analysis and to improve the use of the backtesting results for the periodic review of IFRS 9 models.

The European Banking Authority (EBA) today published its second Report on the International Financial Reporting Standard (IFRS) 9 implementation by EU institutions complementing the observations already included in the last IFRS 9 Monitoring Report, published in November 2021. This Report focuses on high default portfolios (HDPs) and aims to promote further improvements in the ECL model practices among EU institutions by providing transparency on the major areas of concern identified by the EBA.  In line with the IFRS 9 Roadmap, the EBA will continue monitoring and promoting the consistent application of IFRS 9.

Main observations

Since the date of the first implementation of IFRS 9, institutions have made significant progress in the implementation of their ECL impairment models despite a challenging environment. According to benchmarking analyses, the existence of a variety of practices – as a result of the principle-based nature of the standard – might explain part of the variability observed among institutions on the final ECL fig­ures of HDPs. Some of these practices continue to raise prudential concerns and are expected to be promptly addressed by EU institutions.

The EBA reiterates the importance of relying on a robust and broad set of significant increases in credit risk (SICR) indicators to assess staging transfers. The persistent lack of collective SICR as­sessment and the different approaches followed by some institutions to determine the SICR quantitative thresholds continue to be areas of concern from a prudential perspective.

Overlays, being temporary or more permanent, have allowed institutions to account for risk factors or specific circumstances not adequately captured by models. Different practices have been ob­served in terms of risks consideration, approaches followed for their calibration and level at which these overlays are applied. This may prevent reflecting any additional sources of risk.

The impact of forward-looking information and non-linearity effect remains generally modest across portfolios. Among others, this may stem from the fact that the assump­tions underlying the macroeconomic fore­casts, the use of excessively long forecasting period and some smoothening practices prevent reflecting the point in time and forward looking nature of IFRS figures.

Finally, the EBA has observed that while institutions have generally de­veloped backtesting methodologies for their ECL models, there are important differences among banks with reference to the state of their implementation, the scope of risk factors under consideration (including overlays) and the type of anal­ysis performed.  A lack of proper follow-up actions on backtesting results raises prudential concerns, es­pecially when tests performed reveal underperformances and low predictive pow­ers of the model estimates.

Next steps

The EBA will continue monitoring and promoting the consistent application of IFRS 9. The observations reported in the current and past monitoring reports will also feed future exchanges with all concerned stakeholders on IFRS 9 implementation – including any further debates on the post implementation review of IFRS 9. The benchmarking exercise will continue to be used to foster a consistent implementation of the standard. Supervisors will continue to ensure a high quality and consistent application of IFRS 9 implementation and a follow up of the main findings of the EBA reports.

Legal basis and background

This Report has been published by the EBA in line with its intention to continue scrutinising the implementation of IFRS 9 in the EU, as communicated in the IFRS 9 Roadmap, published in July 2019. In this context, this report summarises the findings from monitoring activities conducted by the EBA, specifically on HDPs. The publication complements the main findings of the previous IFRS 9 Monitoring Report, published in November 2021.

Source: Government of the Netherlands

News item | 15-11-2023 | 09:00

Expedited liquidations allow entrepreneurs to close down their business in time when the business no longer contains anything of value, for example, to sell the last stocks and use these proceeds to pay off as many debts as possible. In this way, an entrepreneur can prevent debts from mounting further if, for example, they can no longer be paid due to the loss of income. The alternative is often bankruptcy where creditors get much less of their money back. New measures should prevent potential abuse of expedited liquidations, increase transparency and offer creditors more legal protection. For example, entrepreneurs must actively inform creditors about the termination of the business.

In addition, in the event of an expedited liquidation, entrepreneurs will be required to submit financial accounts to the Chamber of Commerce. This makes it clear what the last proceeds were spent on and why more debts could not be paid. Greater transparency also makes it possible for creditors to take action against the expedited liquidation, for example by demanding access to the records, holding directors liable, or having the expedited liquidation reversed by the court. Abusing an expedited liquidation is punishable under the Economic Offenses Act and can lead to an administrative ban of up to five years. 

To quickly introduce the measures for greater transparency and legal protection, an interim act has been chosen by which the measures will apply for two years. After this period, the measures can be extended.  

Source: Government of the Netherlands

News item | 10-11-2023 | 14:48

Now that the Council of State has deliberated on the bill, it will be put to the vote in the House of Representatives. The bill focuses on participants of terrorist organisations who commit terrorist crimes punishable by life imprisonment. This includes, for example, committing acts of terrorism and other severe terrorism-related violence.

Minister Yeşilgöz-Zegerius: “Increasing the maximum sentence from 15 to 20 years sends an important signal to people who intend to join terrorist organisations that aim to impose their ideology on others through the most brutal and destructive violence. Participants are jointly culpable. As far as I am concerned, this should be accompanied by a punishment that further clarifies this message.”

The role of participants

Participants are of great importance to terrorist organisations. To achieve their objectives, terrorist organisations depend on participants. Participants in terrorist organisations make an indispensable – and indisputable – contribution to that organisation’s criminal objectives. They do so by preparing, supporting or committing acts of terrorism, for example.

Maximum penalty

At present, a maximum sentence of 15 years applies for participation in a terrorist organisation. That maximum sentence has remained unchanged since 2004, despite developments over roughly two decades. Accordingly, the Minister of Justice and Security now seeks to amend the maximum sentencing.

The maximum sentence for leading a terrorist organisation will not be increased. This is, after all, already subject to the highest maximum sentence (life imprisonment or temporary imprisonment of up to 30 years).

House of Representatives

After the House of Representatives has debated the bill, it is still to be passed through the Senate.

Source: Government of the Netherlands

News item | 08-11-2023 | 16:30

Minister Weerwind: “With this one-time compensation, the merits of legal aid in 2023 match the costs they incur in their important work. Legal aid lawyers and mediators working legal aid cases allow the most vulnerable in our society to access the law. High inflation has hit all of society, including legal aid providers. I clearly heard the call in the Sneller motion. I want to support this profession whenever possible.”

Automatically paid out

Legal aid providers do not have to submit an application themselves. The Legal Aid Board pays out the compensation automatically in December. The amount to be received is determined based on the number of legal aid cases issued, duty lawyer notifications and additional hours granted in the period from October 1, 2022 to October 1, 2023. The total amount for compensation is 26 million euros.

Fees

Legal aid fees could not rise directly with cost increases due to high inflation in recent years. The increase for compensation is based on figures from two years earlier. As a result, the indexation for 2023 was 0.67 percent. From January 1, 2024, the fee will increase by 5.29 percent.

Minister Weerwind’s one-time compensation will consist of the difference between these indexations. This means that an additional compensation of 4.62 percent will be paid this year in the form of a subsidy. This is the percentage by which fees will increase as of January 1, 2024, minus the percentage by which fees increased as of January 1, 2023.

Independent commission

In addition to this one-time compensation, Minister Weerwind is working to better align legal aid fees with the practice of legal aid providers. Therefore, an independent commission will be set up before the end of this year to investigate the average time spent on certain case types in 2022 and 2023. The purpose of this is to examine whether the fees are still appropriate for how many hours are spent on a case.

Source: Government of the Netherlands

News item | 12-10-2023 | 16:15

Physical duty to report

The mayor can impose an administrative area ban on people who have disrupted public order. The mayor can link a duty to report to this to ensure that the individual does not enter the prohibited area. This could, for example, be in the vicinity of a football stadium where a match is being played at that time. Currently, individuals subject to a duty to report must still report to the police station at a specified time. In practice, a physical duty to report is now rarely imposed as it is considered a severe measure that may be disproportionate to the offence, and it strains police capacity who are then required to receive and register the reporting person on location.

Digital duty to report

A digital duty to report is already legally admissible but is not yet imposed in practice as the technology is still under development. The Ministry of Justice and Security, together with the municipalities of Rotterdam, Leeuwarden and Utrecht, will test this technology with the Mini-ID pilot. This small, portable box enables these individuals to fulfil their duty to report and registers any failure to comply with the area ban. Identification of the person subject to a duty to report takes place beforehand using fingerprinting. The pilot will assess the reliability of the system, security and privacy of users, among other aspects. 

The pilot project

In the first phase of the pilot, 10 volunteers from the participating organisations will carry the Mini-ID. They will receive a fictitious area ban and must report at specific times over a two-month period. In this phase, subjects will test the technical and organisational operation of the Mini-ID. In the second test phase, individuals who are effectively subject to an area ban with a duty to report will begin using the Mini-ID. In this phase, in addition to the trial participants, the Mini-ID will also be used by individuals from the three municipalities that are actually subject to an area ban combined with the duty to report.

Source: Government of the Netherlands

News item | 10-10-2023 | 16:00

The number of traffic offences detected with digital enforcement tools increased slightly from 2,766,195 in 2022 in the months of May to August to 2,937,129 in the same term of 2023. Digital enforcement tools include speed cameras and section speed control systems. The number of traffic stops this year is also higher than last year. The number of traffic fines following a traffic stop in the second quarter of this year was 202,309 compared to 171,617 in the same period in 2022.

Speed violations 

The majority of traffic fines were imposed for speeding: 2,509,571 in the second four-month term of 2023, compared to 2,370,783 in the same term the previous year. Of these traffic violations, the majority were detected using digital enforcement tools by licence plate. During May to August 2023, 1,299,223 speeding offences were detected using a speed camera (up 17.4%), and 420,084 using mobile radar sets (down 2.5%). There were also 728,708 offences detected at section speed control systems, down 7.4%.

 The significant increase for speed cameras compared to last year can be explained by the implementation of the flex speed camera as of November 2022. There are now nearly 30 flex speed cameras deployed across the country, and this number will continue to grow in the coming years. The decrease in section speed control systems is mainly seen in section speed control systems on N roads, which have been active since 2020. Now that these controls have been in place for a while, drivers are adhering better to the speed limit, which improves road safety.

Increase in fines for mobile phone use, violating the helmet requirement and bicycle lighting 

The ‘other’ category (which includes violating the helmet requirement, handheld phone use and not using bicycle lights) showed notable increases. A total of 402,283 fines were imposed in this four-month term of 2023 in this category, up from 344,993 in the same term last year. In the months of May to August of 2023, 30,547 fines were imposed for violating the helmet requirement, up from 13,380 fines in the same period a year earlier. The introduction of the helmet requirement for mopeds (1 January 2023) accounts for the higher number of fines in this term. In the second term of this year, more offences were again recorded for handheld phone use compared to the same period last year. While last year 66,150 people were seen holding a mobile phone while driving, this year the figure was 72,609. For lack of proper and safe bicycle lights, 5,965 fines were imposed in the second four-month term of this year, compared to 3,996 fines in the same term in 2022.

Foreign traffic offenders 

In the second four-month term of 2023, 359,110 traffic fines were issued to a foreign traffic offender. This is a slight increase from the 358,108 fines in the same period in 2022.

* The four-monthly overview of traffic fines under the Traffic Regulations (Administrative Enforcement) Act (Wahv) is compiled by the Ministry of Justice and Security, Police, Central Judicial Collection Agency (CJIB) and the Public Prosecution Service.