Regulatory requirement defined at European level by the EBA

News

Regulatory requirement defined at European level by the EBA

26 February 2020

Regulatory News Alert

We hereby draw your attention to the regulatory requirement defined at European level by the EBA (via the guidelines EBA / RTS / 2016/06 and EBA / GL / 2016/07) and taken up by the CSSF through the Regulation 18/03 on articles 13 and 14, on the new definition of the default of a debtor with the consideration of new materiality thresholds.
 

What is about?

  • The CSSF published Regulation 18/03: « Règlement CSSF N° 18-03 sur 1) l’implémentation de certaines discrétions contenues dans le règlement (UE) n° 575/2013 et la transposition de l’Orientation (UE) 2017/697 de la Banque Centrale Européenne du 4 avril 2017 relative à l'exercice des options et facultés prévues par le droit de l'Union par les autorités compétentes nationales à l'égard des établissements moins importants (BCE/2017/9) et 2) abrogeant le Règlement CSSF N° 14-01 » ;
  • In article 13 and 14 it provides clarification on the timeline for applying the new definition of default and the materiality thresholds to apply for all CRR banks in Luxembourg.
     

What does this mean?

  • The EBA published a guideline and a RTS on the implementation of the new definition of default. It clarifies that a debtor is in default if 90 days past due they are observed with a materiality of;
    • 1 percent relative and €100 absolute materiality thresholds for retail exposures;
    • 1 percent relative and €500 absolute materiality thresholds for non-retail exposures.
  • The implementation deadline proposed by EBA is 1 January 2021, as described in the guideline: “These guidelines apply from 1 January 2021, therefore institutions should incorporate the requirements of these guidelines in their internal procedures and IT systems by that time, but competent authorities may accelerate the timeline of this transition at their discretion.
  • However, the CSSF expects firms implement this framework from January 2020.
     

What do firms need to do?

  • Banks should start to evaluate the impact of these changes on capital requirement and on their credit risk framework and start preparing their plans for making the necessary changes.


Next Steps

  • Banks may consider raising this matter with CSSF to start discussing their Credit Risk framework.
PDF - 599kb

Contacts

Subject matter specialists

Jean-Philippe Peters
Partner – Risk Advisory
Tel : +352 45145 2276
jppeters@deloitte.lu

Arnaud Duchesne
Director – Risk Advisory
Tel : +352 45145 4852
aduchesne@deloitte.lu


Regulatory Watch Kaleidoscope service

Simon Ramos
Partner – IM Advisory & Consulting
Leader and Regulatory Watch Co-Leader
Tel : +352 45145 2702
siramos@deloitte.lu

Benoit Sauvage
Director – Regulatory Watch Coordinator
Tel : +352 45145 4220
bsauvage@deloitte.lu

Marijana Vuksic
Manager – Strategy, Regulatory & Corporate Finance
Tel : +352 45145 2311
mvuksic@deloitte.lu

Did you find this useful?