EBA Consults on Amendments to EBA Framework v3.2

April 29, 2021 -The European Banking Authority (EBA) announced the upcoming changes to EBA reporting framework 3.2 which will apply from December 2022.

The EBA reporting framework v3.2 will include updates to the following modules:

Additional liquidity monitoring metrics (ALMM)- including new proportionality measures for small and non-complex institutions.

COREP – including changes to own funds in response to RTS on software, to securitisations to align with the Capital Market Recovery Package (CMRP) in response to the COVID-19 crisis, and technical amendments.

Asset Encumbrance (AE) – including a revision of the definition of the asset encumbrance level.

Supervisory benchmarking (SBP) – updated Implementing Technical Standards (ITS).

Resolution planning (RES) reporting – revision in the light of user needs.

On 28 April 2021, the EBA launched a public consultation on ITS on Additional Liquidity Monitoring Metrics (ALMM) due to the mandate laid down in the revised Capital Requirements Regulation (CRR2). The EBA will introduce some proportionality considerations in ALMM reporting for small and non-complex institutions. Small and non-complex institutions will be exempted from reporting metrics regarding concentration of funding by product type (C 68.00), the funding price for various lengths of funding (C 69.00) and information on roll-over of funding (C 70.00). The liquidity metrics and related reporting are thus reduced to the maturity ladder-monitoring tool, concentration of funding by counterparty and by counterbalancing capacity. The EBA is also proposing to exempt medium-sized institutions from reporting metrics on roll-over funding. The consultation will close on 28 July 2021. The EBA plans the new ALMM requirements to be included in EBA Framework v3.2 and to apply as of reference date 31 December 2022.

The EBA also consults on draft ‘Regulatory Technical Standards (RTS) specifying the types of factors to be considered for the assessment of appropriateness of risk weights and the conditions to be taken into account for the assessment of appropriateness of minimum loss given default (LGD) values for exposures secured by immovable property’.

The competent authorities would be able to set higher risk weights or require stricter criteria on risk weights, or increase the minimum LGD values when the following two conditions are met:

 

(i) the risk weights do not adequately reflect the actual risks related to the exposures secured by mortgages on residential property or commercial immovable property, or that the minimum LGD values are not adequate;

(ii) the identified inadequacy of these risk weights or minimum LGD values could adversely affect the current or future financial stability in the Member State.

For institutions applying the standardised approach (SA), these draft RTS specify the types of factors that authorities should consider during the risk weight assessment on the basis of the loss experience of exposures secured by immovable property and forward-looking immovable property market developments.

For institutions applying the internal ratings-based (IRB) approach to retail exposures secured by residential or commercial immovable property, these draft RTS provide conditions to be considered when assessing the appropriateness of minimum LGD values. This consultation will close on 29 June 2021.

For more information please visit: EBA website

Jurisdiction: European Union

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