Issue No. 17 of the Banking & Fintech weekly Newsletter is now available.
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In this issue:
- ECB publishes for consultation a guide for credit institutions on climate and environmental exposures
- ESMA clarifies reporting obligations of repos with EU central banks
- ECB opines on changes to the Union prudential framework in response to COVID-19
- EBA reports on BRRD interlinkages between recovery and resolution planning
ECB PUBLISHES FOR CONSULTATION A GUIDE FOR CREDIT INSTITUTIONS ON CLIMATE AND ENVIRONMENTAL EXPOSURES
The European Central Bank (ECB) has recently initiated a consultation exercise on a guide relating to the management of climate-related and environmental risks by credit institutions and on the transparent disclosure of such risks under the current prudential framework. The same guide, which was drafted in close cooperation with the national competent authorities, outlines that institutions are expected to bear in mind this type of exposure in their strategies and in their governance and risk management structures. The deadline for the consultation period is 25 September 2020, following which the ECB will be publishing the comments and feedback on its website.
ESMA CLARIFIES REPORTING OBLIGATIONS OF REPOS WITH EU CENTRAL BANKS
The supranational authority has issued a set of clarifications on reporting of repo transactions, particularly in the context of obligations under MiFIR. Replying to a request by the International Capital Market Association (ICMA) submitted in November 2019, ESMA explained various matters relating to repos with one and or multiple collateral securities, the timing of reporting and pledge-based repos. The European regulator confirmed inter alia that the reporting of a repo with multiple collateral securities as a complex trade is acceptable through linking each component with the Complex Trade Identifier.
ECB OPINES ON CHANGES TO THE UNION PRUDENTIAL FRAMEWORK IN RESPONSE TO COVID-19
The ECB, following requests from the Council of the EU and the European Parliament, has recently proposed an opinion to the Capital Requirements Regulations (Regulations (EU) No 575/2013 and (EU) 2019/876) as a result of the COVID-19 crisis amongst other matters. The opinion generally tackles the following matters:
- Transitional arrangements for mitigating the impact of IFRS 9 provisions on regulatory capital;
- Treatment of publicly guaranteed loans under the NPE prudential backstop;
- Date of application of the leverage ratio buffer;
- Offsetting the impact of excluding certain risks from the leverage ratio;
- Amendments to certain aspects of market risk obligations.
EBA REPORTS ON BRRD INTERLINKAGES BETWEEN RECOVERY AND RESOLUTION PLANNING
The EBA has recently published a new report for the purposes of examining and eventually improve the interlinkages between recovery and resolution planning. The report aims to:
- Summarise the European regulator's comparative analysis wherein it identified best practices and areas which need improvement;
- Outline the supranational authority's conclusions on particular commonalities between plans across the union and analyse the benefits and hurdles for potential harmonisation in recovery and resolution plans;
- Study the possibility of introducing an assessment framework including an assessment table, and assessment approach to aid consultation across resolution authorities and competent authorities.
Two separate annexes were published, alongside the report, which include (a) proforma used in the context of the comparative analysis of a sample of recovery and resolution plans and (b) a tool that will help resolution authorities in conducting their analysis of the potential impact of recovery options on the institution's resolvability.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
