News

Banking and finance regulatory news, 29 March 2021

FIG Bulletin

29 March 2021

This week reports on recent EU regulatory developments focussing on banking and finance. See also our Financial institutions general regulatory news and other sector news in the Related Materials links.

Depositor protection identity verification: PRA PS4/21

Following its consultation in CP3/21, the UK Prudential Regulation Authority (PRA) has published a policy statement, PS4/21, on depositor protection identity verification. The changes relate to the timing of identity verification required for eligibility of depositor protection under the Financial Services Compensation Scheme (FSCS) and amendments to the PRA's expectations set out in its supervisory statement, SS18/15, on depositor and dormant account protection.

The changes come into force on 29 March 2021.

ECB's economy-wide climate stress test: preliminary results

The European Central Bank (ECB) has published a blog post by Luis de Guindos, ECB Vice-President, summarising the preliminary results of the ECB's first economy-wide climate stress test.

MREL: SRB approach to eligibility of UK law instruments without bail-in clauses after Brexit

The Single Resolution Board (SRB) has published a communication stating that it will consider liabilities governed by UK law without a contractual bail-in recognition clause as eligible for minimum requirement for own funds and liabilities (MREL), if they satisfy MREL criteria and were issued on or before 15 November 2018. This exemption applies until 28 June 2025. Further details are in the communication.

SSM total supervisory fees for 2020: ECB decision

Decision (EU) 2021/490 of the ECB on the total amount of annual supervisory fees under the single supervisory mechanism (SSM) for 2019 has been published in the Official Journal of the European Union. The Annex to the decision sets out the calculation of the total amount of annual supervisory fees for 2020. The decision will enter into force on 28 March 2021.

EU CRR: European Commission adopts Implementing Regulation on ITS on public disclosures

The European Commission has published the text of an Implementing Regulation that it has adopted containing implementing technical standards (ITS) on public disclosure requirements for institutions under the Capital Requirements Regulation (CRR). The Annexes are published separately. The ITS will apply from 30 June 2021.

The European Banking Authority) (EBA) states that the ITS provide a comprehensive Pillar 3 disclosure framework that seeks to facilitate its implementation by institutions and to improve clarity for users of this information. They also implement regulatory changes introduced by the updated Capital Requirements Regulation (CRR II) and align the disclosure framework with international standards.

CHF LIBOR: European Commission consults on designating replacement rate

The European Commission has published a consultation paper to assess the suitability of designating a statutory replacement rate for certain settings of Swiss Franc (CHF) LIBOR. It is relevant to products including such as savings accounts, mortgages and loans, including consumer credit agreements and small business loans, that were concluded before the EU Benchmarks Regulation (EU BMR) applied (that is, 1 January 2018), and are governed by the laws of one of the EU member states.

The FCA announced, on 5 March 2021, the cessation of CHF, GBP, JPY and EUR LIBOR rates at the end of 2021. It has no plans to require the administrator of LIBOR to continue publishing any of the CHF LIBOR settings on a non-representative, synthetic basis for a further period after this date.

The Commission has received submissions from market participants active in the banking sector in several member states, including Poland and Austria, according to which CHF LIBOR plays an important role in their financial markets. Among other things, stakeholders propose that the Commission statutory designation follows the recommendation of the Swiss National Working Group on Swiss Franc Reference Rates for replacing CHF LIBOR in mortgages.

Comments can be made on the consultation until 18 May 2021.

BRRD: EBA consults on draft revised guidelines on recovery plan indicators

The EBA has published a consultation paper on draft revised guidelines on recovery plan indicators under Article 9 of the Bank Recovery and Resolution Directive (BRRD). The EBA published the original guidelines in May 2015 and they entered into force in July 2015. It has decided to amend them to take into account relevant policy developments and practical supervisory experience acquired in recovery planning.

The consultation closes to responses on 18 June 2021. The EBA will finalise the revised guidelines having considered the consultation responses received. When the final version is published, the original guidelines will be repealed.

BRRD: EBA consults on draft guidelines for institutions and resolution authorities on improving resolvability

The EBA has published a consultation paper on draft guidelines for institutions and resolution authorities on improving resolvability, together with a separate Annex 2 containing a resolvability assessment template. The guidelines seek to implement existing international standards on resolvability and take stock of the best practices so far developed by EU resolution authorities on resolvability topics. However, the guidelines do not cover all topics relevant to resolvability, either because they are covered elsewhere or will be further specified in future EBA regulatory products.

The EBA's aim is for the guidelines to be the policy point of reference for both authorities and institutions on resolvability-related topics in the EU, as well as ensuring consistent progress on resolvability for all institutions and facilitating resolvability work for cross-border groups and monitoring in resolution colleges.

The consultation closes to responses on 17 June 2021. Following the consultation, the EBA intends to publish the final guidelines by the first half of 2021. Institutions and authorities within the scope of these guidelines must comply in full by 1 January 2024.

IBOR transition: IIFM white paper

The International Islamic Financial Market (IIFM) has published a white paper on "Global Benchmark Rate Reforms and Implications of IBOR Transition for Islamic Finance". The paper aims to highlight the challenges posed to Islamic financial product structures, transactions, documentation, accounting, credit and legal related matters. It also contains recommendations on developing workable and unified solutions to overcome these challenges.