In this week’s newsletter, we provide a snapshot of the principal US, European and global financial regulatory developments of interest to banks, investment firms, broker-dealers, market infrastructure providers, asset managers and corporates.
Bank Prudential Regulation & Regulatory Capital
European Banking Authority Consults on Common Procedures for Information Exchange between National Regulators on Proposed Acquisitions
On November 10, 2015, the European Banking Authority published a consultation paper on draft Implementing Technical Standards for common procedures that national regulators in the EU should use when consulting with each other about prudential assessments for proposed acquisitions and increases of qualifying holdings in credit institutions. The draft ITS set out the proposed process and timeframes for requests of information and includes proposed templates and forms that are to be used by national regulators. Comments on the consultation are due by February 10, 2016.
The consultation paper is available at:
http://www.eba.europa.eu/documents/10180/1267841/EBA-CP-2015-20+CP+on+ITS+on+qualifying+holdings.pdf.
European Central Bank Consults on Use of Options and Discretions Under Capital Requirements Directive IV
On November 11, 2015, the European Central Bank published a consultation on harmonizing the exercise of Options and Discretions (O&Ds) available to EU member state national supervisory authorities under the Capital Requirements Regulation and Capital Requirements Directive, together known as CRD IV. Alongside the consultation, the ECB also published a draft Regulation on the exercise of O&Ds, a draft Guide on available O&Ds, an explanatory note as well as Q&As. An Option can allow a member state or a national regulator to choose how to comply with a given provision of CRD IV, selecting from a range of alternatives set out in such legislation. A Discretion can allow a national regulator or a member state to choose whether or not to apply a certain provision in CRD IV. The aim of the Regulation is to encourage the harmonization of supervision of significant banks in the Euro area, with the aim of safeguarding the financial stability and integration of the EU banking system. Comments on the consultation are due by December 16, 2015.
The consultation and related documents are available at:
https://www.bankingsupervision.europa.eu/legalframework/publiccons/html/reporting_options.en.html.
European Supervisory Authorities Publishes Final Draft Implementing Technical Standards on Mapping of Credit Assessments by External Credit Assessment Institutions
On November 11, 2015, the EBA, European Securities and Markets Authority and European Insurance and Occupational Pensions Authority (known as the Joint Committee of the European Supervisory Authorities) published two final draft ITS on the mapping of credit assessments to risk weights of External Credit Assessment Institutions under the CRR and Solvency II Directive. The ITS aim to ensure sound credit assessments to encourage financial stability in the EU and determine an objective approach for attributing risk weights to the assessment of ECAIs. The final ITS will replace the Committee of European Banking Supervisors' guidelines on the recognition of ECAIs as well as the existing mappings of ECAIs' credit assessments issued by national regulators. The final draft ITS have been submitted to the European Commission for endorsement.
The final draft ITS are available at: http://www.eba.europa.eu/-/esas-define-risk-weights-for-credit-ratings-in-the-eu.
European Banking Authority Consults on Draft Guidelines on Treatment of Credit Valuation Adjustment Risk Under Supervisory Review and Evaluation Process
On November 12, 2015, the EBA published a consultation paper including draft Guidelines on the treatment of Credit Valuation Adjustment risk further to the Supervisory Review and Evaluation Process under the CRR. The draft Guidelines implement the recommendations of the EBA's report on CVAs published in February 2015 and aim to form a common and proportionate approach to determine: (i) the materiality of CVA risk for an institution; (ii) material CVA risk under the SREP; and (iii) adequate additional own fund requirements where risks aren't sufficiently covered. The EBA has also published a data collection exercise for a Quantitative Impact Study to ensure the appropriate calibration of threshold values. The Guidelines will be finalized once the consultation process and QIS are complete. National regulators will then have two months from the date of publication of the translated versions of the guidelines on the EBA website to report whether or not they comply with the Guidelines. Comments on the consultation are due by February 12, 2016. It is expected that the data collection exercise will be completed by January 28, 2016.
The consultation paper and draft Guidelines are available at:
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