Basel Committee on Banking Supervision
G-SIB assessment methodology review process - Basel Committee publishes consultation paper - 20 July 2021
The Basel Committee on Banking Supervision (BCBS) has published a consultation paper on technical amendments to its review of the global systemically important bank (G-SIBs) assessment methodology. At present, the BCBS is committed, under SCO40.30 in the Basel framework, to undertake a review of the methodology every three years.
In the consultation, the BCBS sets out proposals for revisions to SCO40.30 to replace the current three-year review cycle with a new process of ongoing monitoring and review. This process will include monitoring:
- recent developments in techniques or new indicators that can be used for the assessment of systemic risk;
- emerging evidence on the effectiveness of the G-SIB regime; and
- structural changes that could impact the effectiveness of the regime.
The consultation closes on 3 September 2021.
Consultation paper: Technical amendment: G-SIB assessment methodology review process
Webpage
Press release
Council of the European Union
Cross-border payments - Council of the EU publishes text of proposed codified Regulation - 14 July 2021
The Council of the EU has published the text (PE-CONS 34/1/21) of the proposed Regulation on cross-border payments in the EU, codifying and replacing the existing Regulation on cross-border payments (924/2009). According to the Council information note, the European Parliament adopted the Regulation at first reading on 23 June 2021.
The note states that the Parliament’s position reflects what had been agreed between the institutions in informal contracts and consequently the Council should be in a position to approve the Parliament’s position. The Council’s Permanent Representatives Committee voted on 7 July 2021 to approve the Regulation on that basis.
The next step will be for the Council to approve the Parliament’s position, as set out in PE-CONS 34/1/21. The proposed Regulation will codify the existing Regulation on cross-border payments.
Regulation on cross-border payments in the union (codification) (PE-CONS 34/1/21 REV 1)
European Banking Authority
CRR - EBA consults on amendments to ITS on currencies with constraints on availability of liquid assets - 16 July 2021
The European Banking Authority (EBA) has published a consultation paper (EBA/CP/2021/29) on proposed amendments to the implementing technical standards (ITS) on currencies with constraints on the availability of liquid assets. The ITS supplement the Capital Requirements Regulation (575/2013/EU) (CRR).
In the consultation paper, the EBA sets out proposals to amend Commission Implementing Regulation (EU) 2015/2344 by removing the Norwegian Krone from the list of currencies that benefit from a derogation for the purpose of the calculation of the liquidity coverage ratio (LCR) under Article 419 of the CRR.
The consultation closes on 16 October 2021. The EBA expects to submit the final draft amendments to the ITS to the European Commission before the end of 2021.
Consultation paper: Draft Amending Implementing Technical Standards on currencies with constraints on the availability of liquid assets in accordance with the Capital Requirements Regulation (575/2013/EU) (EBA/CP/2021/29)
Press release
Webpage
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Proportionality assessment methodology - EBA publishes discussion paper - 22 July 2021
The European Banking Authority (EBA) has published a discussion paper on the methodology for the application of proportionality to the treatment of credit institutions and investment firms. It explains that it already uses part of the proposed classifications in its work involved with the Basel III monitoring exercise (that is, classifications I and II). However, it has identified the need to expand its existing classifications (classifications I and II) within the second Capital Requirements Regulation ((EU) 2019/876) (CRR II) (that is, classification III) and the Investment Firms Regulation ((EU) 2019/2033) (that is, classification IV).
The deadline for comments on the discussion paper is 22 October 2021. The EBA will consider any feedback, following which it will finalise the document and make it a point of reference for proportionality assessments.
Discussion paper: Proportionality assessment methodology (EBA/DP/2021/03)
Webpage
Press release
UK Parliament
Bank of England Act 1998 (Macro-prudential Measures) (Amendment) Order 2021 published - 21 July 2021
The Bank of England Act 1998 (Macro-prudential Measures) (Amendment) Order 2021 (SI 2021/869) has been published, along with an explanatory memorandum. The Order sets out amendments to the statutory instruments that give the Financial Policy Committee (FPC) the power to direct the PRA and the FCA to take action with respect to specific macro-prudential measures relating to sectoral capital requirements, mortgage lending and the leverage ratio.
More specifically, one of the amendments extends the FPC’s powers to holding companies approved under Part 12B of FSMA. The Order also specifies that certain macro-prudential measures can be applied on a consolidated or sub-consolidated basis.
The Order also amends the definition of the total exposure measure for the purposes of the leverage ratio, which is set out in the Bank of England Act 1998 (Macro-prudential Measures) Order (SI 2015/905), to define it by reference to the PRA’s rules, rather than to the UK Capital Requirements Regulation (575/2013) (UK CRR). The Order also provides for the FPC to specify how the total exposure measure should be defined for the purposes of implementing a direction in relation to the leverage ratio.
The Order came into force on 21 July 2021.
The Bank of England Act 1998 (Macro-prudential Measures) (Amendment) Order 2021 (SI 2021/869)
Explanatory memorandum
Webpage
Bank of England
Executing bail-in - Bank of England publishes operational guide - 22 July 2021
The Bank of England (BoE) has published an operational guide on executing bail-in, together with draft ‘base’ or ‘illustrative’ legal instruments it might make, including:
- a Bail-in Resolution Instrument template to be made by the BoE at the point of entry into resolution;
- a Supplemental Resolution Instrument template to be made by the BoE when it has quantified the level of recapitalisation required for the firm in resolution, determined the exchange ratio of certificates of entitlement of each class for shares in the firm, and is ready to start the process for exchange of certificates of entitlement; and
- an Onward Transfer Instrument template that the BoE would make to give effect to the transfer of shares (or other compensation) to the certificate of entitlement holders who have exchanged their certificates.
The guide and templates are intended to enhance the transparency and credibility of the bail-in tool. It covers pre-resolution contingency planning, the ‘resolution weekend’, the bail-in period and the end of bail-in and exit from resolution.
Operational guide: Executing bail-in: an operational guide from the Bank of England
Template Bail-in Resolution Instrument
Template Supplemental Resolution Instrument
Template Onward Transfer Instrument
Press release: July 2021 Resolution publications
Webpage
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MREL - Bank of England publishes consultation paper on proposed changes to framework - 22 July 2022
The Bank of England (BoE) has published a consultation paper on proposed changes to its framework for the minimum requirement for own funds and eligible liabilities (MREL). The BoE has also published a statement by BoE Deputy Governor for Markets and Banking, Dave Ramsden, commenting on the proposals and an operational guide on executing bail-in that has been published alongside the consultation paper.
The consultation paper is the second part of the BoE’s review of its MREL framework, following its December 2020 discussion paper. The BoE’s feedback to the points raised in response to the discussion paper, which informed its proposals, can be found in Annex 1. There are a range of proposed revisions to the BoE’s approach in this context, including the following:
- the BoE has proposed changes to the transactional accounts threshold to mitigate the risk of disruption in insolvency. The paper also sets out proposals for a ‘stepped glide-path’ for new and growing firms;
- it proposes amending its statement of policy on its approach to setting a minimum requirement for own funds and eligible liabilities to address legacy capital instruments; and
- the BoE will review its policy on intragroup MREL distribution in light of any progress in international engagement.
Proposed changes to the text of the BoE’s MREL statement of policy are set out in Annex 2. The consultation closes on 1 October 2021. The BoE intends to make any policy changes by the end of 2021, taking account of feedback received.
Consultation paper: The Bank of England’s review of its approach to setting a minimum requirement for own funds and eligible liabilities (MREL)
Statement by BoE Deputy Governor for Markets and Banking, Dave Ramsden
Webpage
Prudential Regulation Authority
Remuneration - PRA publishes policy statement on correcting definition of ‘higher paid material risk taker’ - 21 July 2021
The PRA has published a policy statement on correcting an error in the definition of ‘higher paid material risk taker’ in the PRA Rulebook (PS18/21). In the policy statement, the PRA amends the definition, as set out in the Remuneration Part, so that it will apply to an individual either whose annual variable remuneration exceeds 33% of their total remuneration or whose total remuneration exceeds £500,000. At present, the definition only applies to individuals that satisfy both of these conditions.
The appendices to the policy statement set out the final versions of the PRA Rulebook: CRR Firms: Remuneration Instrument 2021 (PRA2021/10), which contains amendments to the Remuneration Part, as well as a revised version of the PRA supervisory statement on remuneration (SS2/17).
The instrument and the revised supervisory statement will come into force on 23 July 2021.
Policy statement: Remuneration: Correction to the definition of ‘higher paid material risk taker’ (PS18/21)
Appendix 1: PRA Rulebook: CRR Firms: Remuneration Instrument 2021
Appendix 2: PRA Supervisory Statement on Remuneration (SS2/17)
Policy statement webpage
Supervisory statement webpage
Financial Conduct Authority
Mortgage prisoners review - FCA publishes terms of reference - 20 July 2021
The FCA has published the terms of reference for its mortgage prisoners review. The FCA’s programme of work will cover:
- Data review: The FCA intends to review and update its data to consider the demographic and loan characteristics of mortgage prisoners, including updated assumptions arising from the change in economic conditions caused by COVID-19; and
- Interventions review: The FCA will review the effect of its interventions to remove regulatory barriers to switching. In particular, this will involve examining the effect of the FCA’s modified affordability assessment and the lender switching options.
The FCA plans to carry out the data review and analysis between July and October 2021. It will report to HM Treasury on the outcome of the review by the end of November 2021. The Government had committed to use the results of the review to establish whether solution can be found for mortgage prisoners.
Webpage: Mortgage prisoners review: Terms of reference
See the Enforcement section for an item on the FCA’s announcement of action following a review of debt packager firms.
