European Commission Requests 11 Member States to Implement Bank Recovery and Resolution Directive (BRRD)
On May 28, 2015, the European Commission published a press release announcing that it has requested 11 member states (Bulgaria, the Czech Republic, France, Italy, Lithuania, Luxembourg, the Netherlands, Malta, Poland, Romania, and Sweden) to fully implement the BRRD.
The member states in question have failed to meet the deadline of December 31, 2014 for incorporating the BRRD into their national law. If any of the countries fail to comply within two months, the Commission may decide to refer them to the European Court of Justice.
EBA Issues Guidelines Under Recast Deposit Guarantee Schemes Directive (DGSD)
On May 28, 2015, the EBA published its final guidelines (EBA/GL/2015/10) on methods for calculating contributions under the recast DGSD.
Article 13 of the recast DGSD requires contributions to deposit guarantee schemes (DGSs) from their members to be risk-based. The guidelines specify the objective and principles for DGS contributions and provide guidance on specific elements that should be taken into account in developing and assessing the methods for calculating risk-based contributions.
The EBA also published its final guidelines (EBA/GL/2015/09) on payment commitments under the DGSD. Article 10(3) of the recast DGSD states that the available financial means of a deposit guarantee schemes (DGSs) may include "payment commitments". These are defined as payment commitments of a credit institution towards a DGS that are fully collateralized, providing that the collateral consists of low risk assets and is unencumbered by any third-party rights and is at the disposal of the DGS.
The guidelines provide guidance on the legal instruments that should be entered into by DGSs and credit institutions, providing for the terms and conditions for the inclusion of payment commitments within the available financial means of the DGS. These guidelines also provide criteria on the eligibility and management of the collateral.
The EBA expects competent authorities and designated authorities to implement both sets of guidelines by December 31, 2015.
ISDA Publishes Market Practice Guidance for Portfolio Compression Under EMIR
On May 27, 2015, the International Swaps and Derivatives Association (ISDA) published market practice guidance on the portfolio compressions obligations under EMIR. The portfolio compression rules are part of the risk mitigation requirements for non-centrally cleared OTC derivatives under EMIR (Regulation 648/2012).
EBA Publishes Guidance on How to Determine Whether a Firm is Failing or Likely to Fail Under the BRRD
On May 26, 2015, the European Banking Authority (EBA) published its final guidelines (EBA/GL/2015/07) on how to determine whether an institution is failing or likely to fail for the purposes of the BRRD.
Under Article 32(1) of the BRRD, the relevant authority must determine that the firm is failing or likely to fail before resolution action can be taken. The guidelines provide separate guidance for competent authorities and resolution authorities. Competent authorities should base their determination on their assessment of the firm's viability under the supervisory review and examination process set out in the CRD IV Directive (2013/36/EU). Resolution authorities must consider the firm's capital and liquidity position, as well as other requirements set out in the BRRD. The guidelines will apply from January 1, 2016.
EBA Issues Guidelines on Management of Interest Rate Risk Arising from Non-Trading Activities
On May 22, 2015, the European Banking Authority (EBA) published its final guidelines on the management of interest rate risk arising from non-trading activities (EBA/GL/2015/08). The guidelines cover the management of interest rate risk in the balance book and provide detailed guidance relating to scenarios and stress-testing, measurement assumptions, methods for measuring interest rate risk, the governance of interest rate risk and the identification, calculation and allocation of capital to interest rate risk. The guidelines will apply from January 1, 2016.
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