European Commission Extends Transitional Period for Capital Requirements for Banks' Exposures to CCPs
On June 4, 2015, the European Commission published the provisional text of the Implementing Regulation it has adopted to extend the transitional period for capital requirements for EU banking groups' exposures to central counterparties (CCPs) under the Capital Requirements Regulation (Regulation 575/2013) (CRR).
The current transitional period, which was introduced by an earlier Implementing Regulation, expires on June 15, 2015. The new Implementing Regulation will extend the transitional period by six months to December 15, 2015.
In an accompanying press release, the Commission explains that capital charges for exposures to CCPs are higher if the CCP is not authorized or recognized under EMIR (that is, for a CCP not considered as "qualifying"). Since the authorization and recognition processes take time, the CRR provides a transitional period during which the higher capital requirements will not be applied, to ensure a level playing field. As the authorization and recognition processes for existing CCPs serving EU markets will not be fully completed by June 15, 2015, the Commission has extended the transitional phase to December 15, 2015.
EBA Publishes Risk Dashboard of EU Banking Sector for Q1 2015
On June 4, 2015, the European Banking Authority (EBA) published its risk dashboard for the first quarter of 2015, summarizing the main risks and vulnerabilities in the banking sector, together with a press release.
The risk dashboard is based on data from the fourth quarter of 2014 and takes into consideration the evolution of a set of key risk indicators from 55 EU banks. It confirms, among other things, that:
1. EU banks' capital positions remained strong, with a common equity tier 1 (CET1) ratio of 12.1%. This is an increase of 50 basis points compared to 2013.
2. The quality of banks' loan portfolios remained weak but bottoming out.
3. Profitability showed a mildly positive trend on a year over year comparison, but return on equity remained subdued and materially below banks' average cost of equity.
4. In 2014, at an EU level, deposits increased more than loans. The EU average loan‐to‐deposit ratio therefore decreased further in Q4 2014 to 108.6%, which is the lowest ratio since 2009.
The EBA risk dashboard is part of the regular risk assessment carried out by the EBA and complements the EBA's risk assessment report.
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