Official Journal of the European Union
BRRD - Implementing Regulation on ITS for contractual recognition of write down and conversion powers published in OJ - 4 October 2021
Commission Implementing Regulation (EU) 2021/1751 on implementing technical standards (ITS), supplementing the Bank Recovery and Resolution Directive (2014/59/EU) (BRRD), in relation to uniform formats and templates for notifications of determination of the impracticability of including contractual recognition of write down and conversion powers has been published in the Official Journal of the EU (OJ).
The BRRD II Directive ((EU) 2019/879) amended Article 55 of the BRRD to address the scenario where it is impracticable for institutions and entities subject to the BRRD to include bail-in contractual recognition clauses in liability contracts. New Article 55(8) provided the European Commission with the power to adopt ITS specifying uniform formats and templates for notifying resolution authorities in relation to impracticable clauses. The ITS specify the information to be provided in a notification of determination of impracticability and the uniform formats for making a notification.
The Commission adopted the Implementing Regulation on 1 October 2021. It will enter into force on 24 October 2021.
Commission Implementing Regulation (EU) 2021/1751 laying down implementing technical standards for the application of Directive 2014/59/EU with regard to uniform formats and templates for notifications of determination of the impracticability of including contractual recognition of write down and conversion powers
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CRR - Commission Implementing Decision on third-country equivalence for purposes of treatment of exposures published in OJ - 4 October 2021
Commission Implementing Decision (EU) 2021/1753 on the equivalence of the supervisory and regulatory requirements of certain third countries and territories for the purposes of the treatment of exposures in accordance with the Capital Requirements Regulation (575/2013/EU) (CRR) has been published in the Official Journal of the EU (OJ).
Under the CRR, credit risk incurred by institutions relating to exposures to non-EU entities is determined by the quality of the relevant regulatory framework and supervision applied to those entities in the relevant third country. Articles 107(4), 114(7), 115(4), 116(5) and 142(2) of the CRR allow the Commission to adopt implementing decisions as to whether a third country applies prudential supervisory and regulatory requirements at least equivalent to those applied in the EU. These decisions are currently set out in Commission Implementing Decision 2014/908/EU.
Article 391 of the CRR, as amended by the CRR II Regulation ((EU) 2019/876), allows the Commission to adopt implementing decisions as to whether a third country applies prudential supervisory and regulatory requirements at least equivalent to those applied in the EU for the purpose of determining the treatment of exposures under the CRR’s large exposures regime. The Commission has therefore decided to consolidate all the provisions on the equivalence of third countries’ regulatory requirements for the purposes of the treatment of exposures in accordance with the CRR into a single decision.
The Implementing Decision:
- consolidates the provisions of Implementing Decision 2014/908/EU, which is also repealed;
- establishes a list of third countries and territories, set out in Annex VI to the Decision, that are considered as applying supervisory and regulatory arrangements equivalent to those applied in the EU for the purposes of Article 391; and
- adds North Macedonia and Bosnia and Herzegovina to the lists of third countries and territories whose regulatory requirements and arrangements for credit institutions are considered to be at least equivalent to those applied in the EU.
The Implementing Decision will enter into force on 24 October 2021.
Commission Implementing Decision (EU) 2021/1753 on the equivalence of the supervisory and regulatory requirements of certain third countries and terroritories for the purposes of the treatment of exposures in accordance with Regulation 575/2013/EU
European Banking Authority
EBA publishes work programme for 2022 - 5 October 2021
The European Banking Authority (EBA) has published its work programme for 2022. The EBA’s five ‘vertical’ strategic priorities for 2022 relate to:
- The prudential framework for supervision and resolution: The EBA’s work will focus on supporting the transposition of the final Basel III standards and strengthening the effectiveness of the resolution framework. This will include supporting the European Commission on the crisis management and deposit insurance (CMDI) review;
- The EU-wide stress-testing framework: The EBA will focus on putting into practice the revised new framework for the EU-wide stress test and working on the new methodology for the next stress test;
- Banking and financial data: The EBA will continue its work on its data strategy to leverage the European centralised infrastructure for supervisory data to bring more value to the EBA’s stakeholders through data. Among other things, in 2022, it will start collecting from the European Central Bank payment fraud data under the EBA guidelines on fraud reporting for all EU member states, as well as data stemming from reforms to the Capital Requirements Regulation (575/2013/EU) (CRR) and the Capital Requirements Directive (2013/36/EU) (CRD IV), and data relating to investment firms;
- Digital resilience, fintech and innovation: Among other things, the EBA will begin preparations for the mandates for technical standards and guidelines deriving from the proposed Regulations on digital operational resilience for the financial sector and on markets in cryptoassets; and
- Anti-money laundering (AML) and counter-terrorism financing (CTF): The EBA intends to use information from its database proactively to ensure that money-laundering and terrorism-financing risks are addressed by national competent authorities (NCAs) and financial institutions in a timely and effective manner. This information will include weaknesses identified by NCAs in financial institutions’ processes and procedures, governance arrangements, fitness and propriety, business models and operations.
The EBA also has two ‘horizontal’ priorities: providing tools to measure and manage risks relating to environmental, social and governance (ESG) issues, and monitoring and mitigating the impact of COVID-19. The EBA intends to consult on a report on the potential prudential treatment of assets associated with environmental or social objectives.
2022 Work Programme (EBA/REP/2021/28)
Updated webpage
Press release
European Central Bank
Bank supervision priorities - ECB publishes speech on the incorporation of climate risks in banks’ risk governance frameworks - 5 October 2021
The European Central Bank (ECB) has published a speech, given by ECB Supervisory Board Member, Edouard Fernandez-Bollo, on post-pandemic banking supervision priorities. Among other things, Mr Fernandez-Bollo talks about the need for banks to effectively incorporate climate risks into risk governance frameworks. He refers to this as an issue requiring urgent attention.
The ECB has carried out an extensive survey of banks’ self-assessments against its supervisory expectations on climate-related and environmental risks. Although banks are now aware of the importance of this subject, and some banks have started adapting their practices, almost all of them still have a long way to go to be fully aligned with supervisory expectations. Generally, banks do not have a clear strategic and operational framework to deal with these risks in their day-to-day operations. The underlying issue is mainly the availability of adequate data.
Mr Fernandez-Bollo notes that banks have started requesting greater data from their customers and using proxies when data is unavailable. Progress has been made by a variety of banks from different countries, with different business models and different asset volumes, which confirms that what the ECB is asking banks to do can be done.
In 2022, the ECB intends to carry out a full supervisory review of banks’ practices for incorporating climate risks into their risk frameworks, as it gradually rolls out a dedicated supervisory review and evaluation process (SREP) methodology that will eventually influence banks’ Pillar 2 capital requirements. It will also carry out a supervisory stress test focusing on climate-related risks, the methodology for which will be shared with banks shortly.
The outcome of these supervisory exercises next year will be reflected in qualitative measures. A possible quantitative impact, if any, will be indirect, via the SREP scores on Pillar 2 requirements and no bank-specific results will be published. Mr Fernandez-Bollo explains that this is only the beginning of the journey and requirements may change in the years to come, given the prominence of climate risks and evidence of the need to accelerate the transition to a greener economy.
Speech by Edouard Fernandez-Bollo: ECB Banking Supervision’s post-pandemic priorities – the way forward
Bank of England and Pay.UK
ISO 20022 Payment Messaging - Bank of England and Pay.UK publish joint response to consultation - 7 October 2021
The Bank of England (the Bank) and Pay.UK have published their joint response to the feedback received on their consultation on the draft UK Purpose Code list for the ISO 20022 payment messaging standard, and the Bank’s approach to implementing the recommended UK Purpose Code list in CHAPS. Purpose Codes are four letter codes which are carried across the payment chain, providing information to all users in the chain on the reason a payment is being made.
The consultation put forward proposals on which Purpose Codes from the existing global ISO list should be used and prioritised for UK payments. The proposals received broad support from industry and in response to the feedback the Bank and Pay.UK have jointly developed the recommended UK Purpose Code list which now contains a smaller number of Codes overall, as well as two new Purpose Codes covering ‘property payments’ and ‘gambling’. The list is contained at Annex B of the consultation response and is the recommended UK Purpose Code list going forward.
The Bank is working with industry to develop transactional market guidance to ensure consistency and best practice, which will include guidance on which Code to use in which circumstance. The Bank and Pay.UK will continue to develop guidance with the industry as necessary. From Spring 2024, the Bank will mandate the use of Purpose Codes for CHAPS payments between financial institutions and for property transactions (those for which one of the property Codes set out in Annex B should be used). The Bank plans, in 2025, to further expand the requirements for Purpose Codes beyond these two transaction types and, in due course (but not before 2026), mandate the use of Codes at schema level, which will cause payments to be automatically rejected where mandatory enhanced data is incomplete or inaccurate.
Consultation response: Purpose Codes in ISO 20022 Payment Messaging
Press release
Competition and Markets Authority
Open Banking Implementation Entity - CMA publishes update on Open Banking following independent report - 1 October 2021
The Competition and Markets Authority (CMA) has published a statement providing an update on Open Banking, following publication of an independent report into the Open Banking Implementation Entity (OBIE). Open Banking was established as part of the package of remedies set out in the Retail Banking Market Investigation Order 2017 (the Order) and arising from the retail banking market investigation. The OBIE, which is funded by the nine largest retail banks, was established by the Order to implement Open Banking.
In September 2020, an independent investigation was commissioned by the CMA following receipt of a complaint setting out a number of allegations relating to the OBIE, the Open Banking Implementation Trustee (Trustee) and certain current and former OBIE senior staff members. The investigation examined allegations relating to corporate governance, late delivery of accounts, management of conflicts, procurement and value for money, and human resources issues. It found that inaction and failures by the leadership of the OBIE allowed a culture of bullying and intimidation to prevail and there was a failure to properly manage conflicts of interest.
The investigation concluded that the Trustee did not ensure that the OBIE was properly managed in accordance with the Retail Banking Market Investigation Order 2017. It also concluded that the CMA and the nine founding banks must accept their share of responsibility for not putting stronger governance mechanisms in place from the outset, for lack of attention and for not improving governance as the project became longer and more complex.
As a result of these findings, the CMA has announced the following actions that are being taken:
- the Trustee and Chair has resigned;
- a replacement for the Trustee and Chair has been nominated to lead the planned transition to the future arrangements for Open Banking;
- new non-executive Directors will be appointed to the OBIE board as a priority, to provide appropriate independent scrutiny and oversight;
- an independent non-executive Director of the CMA has been appointed to lead a review to identify the lessons for the CMA in its approach to designing, implementing and monitoring remedies in its market investigations – the findings of this review will be published in due course; and
- the findings of the investigation will be taken into consideration in relation to the future governance arrangements for Open Banking, alongside responses received to the CMA consultation earlier this year – a further update on this will be published as a priority.
Report: Investigation of Open Banking Limited: Independent report by Alison White
Webpage
Press release
