RegTech Intelligence 
JWG analysis.
The European Banking Authority (EBA) have been particularly busy this year, publishing over 30 key documents (5 consultations, 5 guidelines, 7 technical standards, 4 opinions and 11 reports and other notable publications) between June and August.
Keeping up this pace, according to the EBA’s September newsletter, we can expect 25 deliverables covering 16 topics to be published before the year is out.
With over half of these predicted to be released this month alone, this article discusses 10 key releases across 5 topics.
Anti-money laundering (AML)
1. Joint committee consultation paper on guidelines on simplified and enhanced due diligence (expected October 2015)
2. Joint committee consultation paper on guidelines on risk based supervision (expected October 2015).
With AML being a cross-sectoral issue, it falls within the remit of the Joint Committee of the European Supervisory Authorities (ESAs). The Commission’s proposal for a fourth anti-money laundering directive outlines the rulemaking tasks assigned to both the EBA and the other ESAs on this topic. With regards to the rulemaking process, the proposal suggests that a range of deliverables, such as Binding Technical Standards (BTS), guidelines and reports will be produced.
In addition to the rulemaking tasks, the Joint Committee also acts as a “forum for the exchange of practices and experience among supervisory authorities and provides regulatory and supervisory inputs for taking measures to combat money laundering”.
For existing coverage, have a read of our AML articles.
Basel III/CRD IV-CRR monitoring
3. Report on banks’ status of Basel III implementation 2015 (published)
Since Basel III was finalised in December 2010, its impact has been monitored biannually by the Basel Committee on Banking Supervision (BCBS) at a global level and the European Banking Authority (EBA) in Europe. The monitoring exercises are based on data provided by participating banks on a voluntary and confidential basis.
In the EU, the relevant set of regulatory requirements includes the Capital Requirements Directive (CRD IV) and the Capital Requirements Regulation (CRR), which applied from 1 January 2014.
This report is the eighth publication of the CRD IV – CRR/Basel III monitoring exercise and is based on data from a sample of 364 banks, summarising the results at EU level with data as of 31 December 2014. The report discusses capital and risk-weighted assets by assessing the compliance of EU banks with the fully implemented CRD IV-CRR framework. Furthermore, leverage and liquidity is also discussed by assessing the level of compliance with the Basel III framework.
Our articles on CRD IV discuss a range of key issues under this regulation.
Consumer protection and financial innovation
4. Consultation paper on the draft EBA benchmark rate under annex II of the Mortgage Credit Directive (published)
The Mortgage Credit Directive “aims to develop a more transparent, efficient and competitive internal market, through consistent, flexible and fair credit agreements relating to immovable property, while promoting sustainable lending and borrowing and financial inclusion, and hence providing a high level of consumer protection”.
In this consultation paper, the EBA sets out its proposal for how the EBA’s benchmark rate should be calculated. It assessed three different options against criteria, such as the availability of data, degree of representativeness for consumers, methodological robustness, compliance costs for financial institutions and costs to the EBA and concluded that it should provide a formula that creditors have to use to calculate the rate. The formula uses an existing external reference rate as a key input.
5. Joint Committee Discussion paper on Automation in Financial Advice (expected November 2015)
6. Joint Committee Discussion paper on the draft RTS on the Key Information Document (KID) under the PRIIPs Regulation (expected October 2015)
The EBA continues to enhance consumer protection within financial services across the EU by identifying and addressing disadvantages that consumers may experience, or are at risk of experiencing.
In particular, the role and tasks of the EBA related to consumer protection and financial activities include:
- Collecting, analysing and reporting on consumer trends in the EU
- Reviewing and coordinating financial literacy and education initiatives
- Developing training standards for the industry
- Contributing to the development of common disclosure rules
- Monitoring existing and new financial activities
- Issuing warnings if a financial activity poses a serious threat to the EBA’s objectives as set out in its funding regulation
- Temporarily prohibiting or restraining certain financial activities, provided certain conditions are met.
Our PRIIPS articles detail some of the key issues arising from this regulation.
Market infrastructure
7. Final draft RTS on prudential requirements for central securities depositories (CSDs) (expected October 2015)
Considering the multiple regulations, such as EMIR and CRD IV/CRR (Basel III) coming into force, the EBA are required to produce “regulatory technical standards, opinions and reports on the interaction between credit institutions and investment firms on the one hand and market infrastructures on the other hand”.
In order to guarantee a harmonised implementation of the new regulations, the EBA closely collaborates with the ESAs and the European System of Central Banks (ESCB) for the prudential requirements of banks’ exposures to Central Counterparties (CCPs), CCP capital, Central Securities Depositories (CSD) and the over-the-counter (OTC) derivatives reform.
The EBA is also closely monitoring the development and the implementation of the international proposals of the BCBS and International Organization of Securities Commissions (IOSCO) on market infrastructures.
More information on CSD, CCPs, and OTCs can be found in our articles.
Remuneration
8. Report on the remuneration benchmarking exercise (data for 2013) and high earners (data collection of 2013) (published)
Under CRD IV, the EBA is required to benchmark remuneration trends at Union level and to publish aggregated data on high earners who receive EUR 1 million or more per financial year.
The EBA has analysed the data provided to it for the year 2013 and the main results of this analysis are as follows:
- The number of high earners decreased from 3,530 in 2012 to 3,178 in 2013, reflecting a number of factors, such as changes in the exchange rate between the euro and the pound sterling
- Remuneration practices within institutions were not sufficiently harmonised, in particular, the application of deferral and pay out in instruments differs significantly between Member States and between institutions
- The ratio of variable to fixed remuneration paid to identified staff was further reduced in 2013 to 104% (this is likely to change further given CRD IV’s entry into force in 2014 and the so-called bonus cap).
9. Report on approved higher ratios for remuneration (expected October 2015)
10. Report on the use of allowances (expected October 2015)
The requirements set out in the CRD are complemented by more detailed recommendations on remuneration policies. The Guidelines on Remuneration Policies and Practices were initially published by the Committee of European Banking Supervisors (CEBS). The EBA are reviewing and updating those Guidelines in light of the requirements laid down in the revised CRD. The EBA will submit draft regulatory standards to the European Commission as mandated by the CRD.
Our latest article on remuneration provides some EU guidance covering CRD IV, AIFMD, UCITS and MiFID II.
Keep up to date with our analysis on new publications from the ECB via our alerts, following us on Twitter or by joining our LinkedIn group.