Banking and finance regulatory news, 6 August 2021 2021

FIG Bulletin

Reports on key UK and EU recent regulatory developments focussing on banking and finance. See also our supplementary Financial institutions general regulatory news and other sector news in the Related Materials links.

Contents:

This is our last edition of the weekly regulatory news as we move to focus on more topic-driven material. We will send you notification of new publications from your area(s) of interest in the usual Hogan Lovells Engage Alerts. If you have any enquiries, please contact us.

BCBS rules on NPL securitisations: PRA CP10/21 extended closing date

The Prudential Regulation Authority (PRA) has announced that it has extended the closing date, from 26 July 2021 to 9 August 2021, for responses to its June 2021 consultation paper setting out proposed rules relating to the implementation of prudential standards agreed by the Basel Committee on Banking Supervision (BCBS) for non-performing loan (NPL) securitisations (CP10/21).

It has come to the PRA's attention that, due to a technical issue, past responses to CP10/21's mailbox have not been received. The PRA requests that responses sent before 29 July 2021 are re-sent to the following mailbox: SecuritisationPolicy@bankofengland.co.uk.

PRA banking supervisory disclosures on rules and guidance, options and discretions, SREP, and aggregate statistical data

On 30 July 2021, the PRA published a webpage on banking supervisory disclosures. The PRA explains that, before the UK withdrew from the EU, it was required to publish information on rules and guidance, options and discretions, the supervisory review and evaluation process (SREP), and aggregate statistical data, alongside submitting this information to the European Banking Authority (EBA), in line with Article 143 of the Capital Requirements Directive (CRD) and Commission Implementing Regulation 650/2014. Subsequent to the UK's withdrawal from the EU, the PRA agreed, on a voluntary basis, to provide this data for the period to end-2020.

The purpose of the PRA publishing this information is to enable a comparison of the approaches adopted by the competent authorities of the different EU member states. Consolidated data can be found on the EBA's website.

Credit Information Market Study: FCA resumes work

The Financial Conduct Authority (FCA) has announced that it has resumed work on its Credit Information Market Study. The FCA paused its work on the market study in April 2020 due to the COVID-19 pandemic. It has now restarted the study with the same scope as in the original terms of reference. The work will, however, reflect market and regulatory developments relevant to credit information over the last 18 months, including:

  • the response of credit reference agencies (CRAs) and lenders to the pandemic;
  • the impact that the growth in different / new forms of credit could have on credit information; and
  • technological and behavioural changes that may alter the way people interact with their credit information (for example, greater uptake of Open Banking).

The market study will also take account of the Woolard Review recommendations to the FCA.  

The FCA intends to engage with industry and consumer groups and complete its analysis during Q3 2021, ahead of publishing an interim report in Q1 2022. The interim report will set out the FCA's vision for the credit information sector, its emerging findings (including on lenders' reporting of forbearance) and the FCA's early thinking on any potential remedies. It will also take into account a report that the FCA commissioned into potential future developments in the credit information market.

Access to Banking Standard: LSB summary report

The Lending Standards Board (LSB) has published its third summary report following a review of compliance with the Access to Banking Standard. The Access to Banking Standard aims to help minimise the impact of bank branch closures on customers and local communities. It is designed to ensure that customers affected by branch closures receive sufficient communication and clarity on the reasons for the closure and adequate support in accessing alternative banking services.

The activity reviewed covers ten closure programmes across the nine firms registered to the Standard. One firm review completed in 2019 covered 17 branch closures, and nine firm reviews undertaken during 2020 covered 357 branch closures. The LSB states that the review evidenced areas of good practice from all firms involved in the review and it did not identify any areas of non-compliance with the Standard. However, some areas of improvement were identified and firms have been issued with individual reports and action plans which the LSB will continue to monitor.

EBA and ECB 2021 EU-wide stress test results

The European Banking Authority (EBA) and the European Central Bank (ECB) have published the results of their respective 2021 EU-wide stress tests for banks. The EBA has published its results in a report, together with a summary of the results and FAQs.

The ECB has separately published the results of its stress test as prudential supervisor of banks in the single supervisory mechanism (SSM), together with FAQs. It is the first time the ECB has published individual information for banks that are not part of the EBA exercise.

BRRD: EBA final report on amending draft ITS on resolution planning reporting

The EBA has published a final report and annexes containing draft implementing technical standards (ITS) amending Commission Implementing Regulation (EU) 2018/1624 (resolution planning reporting ITS) on the provision of information for the purposes of resolution plans in the context of the Bank Recovery and Resolution Directive (BRRD).

The EBA explains that the amendments are minimal and are aimed at re-aligning the standards with the provisions of the BRRD, following the changes to the minimum requirement for own funds and eligible liabilities (MREL) introduced in BRRD II, as well as to remove some identified obstacles, at the technical level, which hamper compliance with the requirements specified in these ITS.

The amended ITS are intended to apply for the first time for reporting with the reference date of 31 December 2021.

The draft ITS will be submitted to the European Commission for endorsement before being published in the Official Journal of the European Union.

Proportionality in banking regulation and supervision: Joint BCBS and World Bank report

The Basel Committee on Banking Supervision (BCBS) has published a report jointly with the World Bank (WB) setting out the findings from a global survey on proportionality in banking regulation and supervision. The survey was carried out to facilitate greater understanding by all relevant stakeholders of the proportionality practices in different jurisdictions. The BCBS and the WB found that proportionate implementation is practised widely and its use is growing. Supervisors view proportionality as promoting banking stability, reducing unnecessary regulatory burdens and compliance costs, and making effective use of scarce supervisory resources. Consistent with this, a significant number of respondents plan to implement or revise their proportionate approaches.

However, the BCBS and WB also found that challenges remain for jurisdictions both in designing a proportional approach and after proportionality is implemented. These challenges include how to define tiering criteria, maintain a level playing field, and ensure financial positions are comparable across banks. They also found that implementation can be motivated by factors other than risk profile or systemic relevance, for example, to meet the expectations of host-jurisdiction supervisors or rating agencies, or because of regional or peer pressure.

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Authored by Yvonne Clapham

 

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