A Proportionate Book for Banking in the Union and Eurozone Isabelle - PowerPoint PPT Presentation

A Proportionate Book for Banking in the Union and Eurozone Isabelle Vaillant, Director of Regulation, EBA 16 June 2016

Part I THE EUROPEAN BANKING AUTHORITY (EBA) 2

Mission of the EBA Mission: To build a single regulatory and supervisory framework for the entire banking sector in the EU, so as to ensure an efficient, transparent and stable Single Market Ensure an effective and Identify risks and Development of European consistent level of banking vulnerabilities across the EU Single Rulebook – develop regulation and supervision banking system, act as a single set of harmonised in the EU, promote centralised disclosure hub prudential rules for convergence of supervisory for supervisory data on EU financial institutions practices and cross-border banks and protect public throughout the EU and and international values such as the stability improve the functioning of supervisory cooperation for of the financial system and the internal market banking groups of depositors and investors 3

Part II BUILDING THE EU SINGLE RULEBOOK FOR BANKING 4

The building blocks of the EU Single Rulebook 5

The Single Rulebook & Handbook illustrated Capital Legislators Requirements Directive Binding TS on EBA technical TS on remuneration standards passporting instruments Binding EBA Guidelines on Guidelines on supervisory guidelines remuneration review process Comply/explain Single Handbook & Supervisory Q&A Q&A Handbook Non-binding use / market discipline given disclosure 6

What we are doing in 2016 Summary of 2016 expected regulatory deliverables: 25 2016 22 20 TS 17 17 15 15 13 13 GLs 22 10 10 9 9 8 7 6 REPORTS 13 5 5 4 4 2 0 OPINIONS/ADVICE 5 Advice/Opin RTS ITS Guidelines Report ion PUBLICATIONS 6 2016 5 13 4 22 13 2015 9 10 6 2 17 TOTAL 64 2014 7 15 4 8 9 Ensure other books are on track: - AMLD and Funds Transfer Regulation: 7 mandates - EMIR: 2 mandates - Audit Regulation: 4 mandates - BRRD coordination on subordination and Bail-in for capital instruments - New Securitisation Regulation: 7 mandates 8

EBA Regulatory products expected in 2016  RTS on criteria for intragroup flows  Annual report on securitisation retention rules 2016  Quantitative and qualitative analysis  RTS on central contact points  2 JAT Reports of IFRS 9 – 2016  RTS on assessment methodology for  Report on additional information on AE disclosure  Joint Opinion on ML/TF risk and the RTS market risk  Report on SMEs financial sector  RTS on Authorisation of credit  Report on the functioning of the covered bond  CET1 list institutions  Covered Bonds Opinion on national frameworks under the best practice principles  RTS on disclosures of unencumbered  Report on interaction with EMIR waivers asset  own funds requirements for exposures to a central  Risk weights for mortgage lending  RTS on mitigating risk of third counterparty countries’ prohibiting the application  Second Report on Overreliance on external Ratings of equivalent AML/CFT standards  Report on the Remuneration Benchmarking Exercise  RTS on Prudent Valuation (COREP (Data for 2014) Advice/Opinion Templates)  Report on benchmark diversity practices 9%  Update RTS on Proxy spreads for CVA Report  Review clause on remuneration close cooperation with  2 RTS on Risk weights for mortgage EU COM 22% lending  Standard Templates AT1  RTS on risk weights for specialised  Report on leverage ratio calibration lending exposures RTS  RTS on Exclusion of CVA for 3rd 24%  5 GLs on Internal Governance & GL on Internal Processes country NFC  GL for communication between supervisor and auditors  RTS on Definition of default –  GL on disclosure of LCR Thresholds of past due items  GL on Enhanced Due Diligence  GL on Risk Based Supervision  GL on Simplified Due Diligence  Guidelines on Connected Clients  ITS amending Commission  Guidelines on accounting for expected credit losses Implementing Regulation on additional ITS  GLs on PD computation monitoring metrics amending ITS on  GL on corrections to modified duration for debt Guidelines 7% AMM instruments 38%  ITS on mapping of external credit  GL on Qualified Holdings assessments for securitisation  GL on review of the permission to use internal  ITS on Authorisation of credit approaches institutions  GL on unencumbered assets  ITS on common procedures, forms,  GL on LGD templates  GL on default of an obligor  Pillar 2 Guidelines and Recommendation on excessive CVA Risk  GL on Implicit Support 9

Part III THE SINGLE RULEBOOK IMPLEMENTED 10

Interactive Single Rulebook (1) 11

Interactive Single Rulebook (2) 12

A shift towards regulatory monitoring (1) Q&A: a more and more prominent tool for day to day supervision Status Total 2015 2016 Q&A Process: Q&As received /published (May/16 ) Total (CRR-CRD and BRRD Q&As) 2550 845 200 90 80 Rejected/Deleted 1000 220 25 70 60 Finalised & Published 910 245 85 50 of which: Supervisory 415 90 40 40 30 Reporting 70 65 5 20 of which: BRRD 10 0 Under Review Total 840 485 170 Under Review – Reporting Q&As 555 265 90 Under Review – Regular Q&As 175 130 55 Regular Q&A Received Regular Q&A Published Under Review – BRRD Q&As 110 90 25 100 50 80 40 60 30 40 20 20 10 0 0 Month Aug-13 Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 Dec-15 Feb-16 Apr-16 Jan-15 Feb-15 Mrz-15 Apr-15 Mai-15 Jun-15 Jul-15 Aug-15 Sep-15 Okt-15 Nov-15 Dez-15 Jan-16 Feb-16 Mrz-16 Apr-16 Mai-16 Reporting Q&A Received Reporting Q&A Published BRRD Q&A Received BRRD Q&A Published 13

A shift towards regulatory monitoring (2) Capital definition monitoring: CET1 list updates – July 2016 • AT1 monitoring - July 2016 • AT1 Term Sheet preparation – late 2016 • Market and Securitisation risks : CVA Monitoring Report – February 2015 • CVA QIS – February 2016 • Risk Retention Report, due diligence and disclosure – April 2016 • Market Infrastructures : • JAT analysis and report on ISDA SIMM – BoS Summer 2016 Remuneration Policies : • Opinion on the use of Allowances and follow-up report published - Nov 2015 Report on approved higher ratio published - Nov 2015 • Report on Benchmarking of remuneration and High Earners - 2014 data–Report • published and submitted to EU COM – March 2016 14

Part IV EBA AND ITS ROLE FOR THE EUROZONE 15

A basis for the Union and Eurozone 16

EBA and SSM - Implications  EBA has a unique position thanks to its EU-wide focus  Increased importance of: Development of the Single Rulebook applicable to all institutions in the • EU – Same rules apply for those in the Banking Union to those outside it Consistency of supervisory practices across the EU - Single Supervisory • Handbook Cooperation between home and host authorities – mediation, colleges • Cooperation with the ECB •  Implications for EBA: • Governance changes  Voting  Breach of Union Law/mediation panels  Participation of SSM/Single Resolution Board in EBA work 17

Part V EBA AND PROPORTIONALITY 18

Single Rulebook – Single but never uniform (1) Proportionality is a Legal Requirement General principle of EU law: Principle of Proportionality requires that measures: “the Union must always observe the principle of proportionality when do not exceed the limits of what is exercising its competences deriving appropriate and necessary in order to from the principle of conferral attain the objectives legitimately (Article 5(4) TEU)”: Case C-62/14 pursued by the legislation in question Gauweiler (OMT), A-G Villal ό n when there is a choice between several Opinion [161] appropriate measures, recourse must “the principle of proportionality requires be had to the least onerous, and that acts of the EU institutions be the disadvantages caused must not be appropriate for attaining the disproportionate to the aims pursued legitimate objectives pursued by the legislation at issue and do not go beyond what is necessary in order to achieve those objectives”: Gauweiler , CJEU [67] 19

Single Rulebook – Single but never uniform (2) Proportionality is a Supervisory Need  Revising the CRR Reform requires large repairs • We caution pause for thought before revising the CRR • There should be considered reflection around our thinking or proportionality and simplification given • the current importance and complexity, The level of prudence should not be diminished : for banks all distance to failure should be maintained • the same Heightened attention due to complexity Tailoring issues Dimensions of Proportionality Feedback to Commission call for Evidence: Size Gold platting • • Business Models Reporting • • Interconnectedness Regulatory mismatch • • Legal Form Compliance costs • • Scope and Complexity of A simplified rulebook • • Activities Erosion of the Single Rulebook 20

EBA approach to proportionality Proportionality is not:  Simplification without due attention to risk  Exemptions which would render us blind to ongoing and future risk  Unlevel playing field and market fragmentation 21