Prudential Regulation Review February 2018

Insights

Prudential Regulation Review

February 2018

February saw a number of important regulatory developments. Adam Farkas, Executive Director of the EBA, delivered a speech on bank business models at the Deutsche Bundesbank Conference where he highlighted the significantly strengthened capital positions of EU banks and noted that they are now perceived by market participants as more stable and resilient.

Key Highlights

  • Sabine Lautenschläger, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, spoke on macro prudential policy.
  • Adam Farkas, Executive Director of the EBA, delivered a speech on bank business models at the Deutsche Bundesbank Conference where he highlighted the significantly strengthened capital positions of EU banks and noted that they are now perceived by market participants as more stable and resilient.
  • The Basel Committee on Banking Supervision (BCBS) consulted on revisions to the Pillar 3 disclosure framework. Proposed changes include new or revised requirements for credit risk, operational risk, the leverage ratio and CVA; benchmarking of Risk Weighted Assets (RWAs) calculated by internal models; and an overview of risk management, key prudential metrics and RWAs.  
Prudential Regulation February 2018

Other topics covered

  • Capital (including stress testing and macro prudential)
  • Crisis Management (including special resolution, systemically important firms, and business continuity)
  • Disclosure, valuation and accounting
  • Governance and risk management (including remuneration)
  • Information security and data privacy
  • Liquidity
  • Regulatory perimeter
  • Central Bank of Ireland

EU bank capital negotiations: Update on CRD5/CRR2 latest progress

The European Commission’s ‘CRD5/CRR2’ bank capital proposal (including amendments to the BRRD) is now at an important stage in its negotiations. Although a deal has not been reached in either the Council or Parliament, the likely contours of a deal, and their implications for firms, are becoming increasingly clear.

The proposed legislation implements components of the Basel III framework in the EU, including giving effect to TLAC, the NSFR, the leverage ratio and potentially the FRTB. But it excludes the package of Basel reforms that was agreed on 7 December 2017 by the Basel Committee on Banking Supervision (BCBS) (i.e. SA credit risk, IRB constraints, operational risk, and standardised output floors) often referred to as ‘Basel IV’.

This note updates on the key points of debate that we understand have emerged in the EU’s CRD5/CRR2 negotiations in the last three months, and our views on the next steps as the proposal progresses towards becoming law.

Did you find this useful?