EBA Clarifies Operational Application of CRR3 in Credit Risk Modelling
Welcome back to this edition of RegFocus! Your trusted source for the latest regulatory updates across the world.
In this edition, the latest updates from the following:
European Banking Authority:
EBA Updates List of Systematically Important Institutions
The EBA has revised the list of other systemically important institutions (O-SIIs) in the EU based on year-end 2023 data. This list, created using EBA guidelines, includes scores and capital buffer rates for the identified O-SIIs. Key criteria include size, importance, complexity, and interconnectedness. The list is available through a user-friendly visualisation tool.
EBA Launches Consultation on Internal Model Authorisation Amendments
The EBA has issued a consultation paper proposing changes to the Implementing Regulation for internal model authorisation under the Capital Requirements Regulation (CRR). The amendments reflect updates in the EU legal framework and CRR III, including the removal of the Advanced Measurement Approach (AMA).
EBA Publishes Report on Gender-Neutral Remuneration Policies
The EBA has released a report on gender-neutral remuneration policies in financial institutions and investment firms. While most institutions have not faced significant obstacles in implementing these policies, some still lack explicit measures for ensuring and monitoring gender-neutral pay. Despite progress, a gender pay gap persists.
EBA Report on Derogations for Variable Remuneration Requirements
The EBA's report evaluates the impact of derogations on deferring variable remuneration and using instruments for identified staff at small and non-complex institutions. The report finds that the introduction of CRDV derogations has had a marginal effect due to existing national waivers.
EBA Clarifies Operational Application of CRR3 in Credit Risk Modelling
The EBA has welcomed the new European Banking Package, integrating the Basel III framework into EU regulation. To ensure smooth implementation, institutions should engage in active dialogue with competent authorities, inform them about model landscapes, assess changes affecting rating system performance, and share implementation plans for modelling updates.
European Securities and Markets Authority:
New Guidelines on Crypto-Assets Classification by ESAs
The European Supervisory Authorities (EBA, EIOPA, and ESMA) have issued a consultation paper on new guidelines under the Markets in Crypto-assets Regulation (MiCA). These guidelines include a standardised test and templates for legal opinions to ensure consistent classification of crypto-assets.
ESMA Seeks Feedback on Order Execution Policies Under MiFID II
ESMA has initiated a consultation on draft technical standards for refining investment firms' order execution policies. The proposed standards aim to enhance investor protection by addressing the formulation, monitoring, and effectiveness of these policies.
ESAs Publish Second Batch of Policy Products Under DORA
The ESAs (EBA, EIOPA, and ESMA) have released a second set of policy products under the Digital Operational Resilience Act (DORA). These include regulatory and implementing technical standards and guidelines to strengthen digital operational resilience in the EU's financial sector.
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Establishment of EU Systemic Cyber Incident Coordination Framework by ESAs
The ESAs have announced the creation of the EU Systemic Cyber Incident Coordination Framework (EU-SCICF) under DORA. This framework aims to enhance the financial sector's resilience and coordination in responding to cyber incidents threatening financial stability.
Bank of England:
UK FX Market Sees 14% Turnover Growth in April 2024
The UK FX market experienced a 14% increase in average daily turnover in April 2024, reaching $3,351 billion. FX swaps were the most traded instrument, followed by FX spot trades. The top currency pairs—EUR/USD, GBP/USD, and USD/JPY—maintained their market share.
CHAPS Payments Issue on July 18th
A global payment issue affected the BOE CHAPS service on July 18, delaying some high-value and time-sensitive payments. The issue, resolved on the same day, did not impact retail payment systems.
Federal Reserve:
2024 CRA List Released for Distressed and Underserved Areas
Federal bank regulatory agencies have published the 2024 list of distressed or underserved nonmetropolitan middle-income areas where certain bank activities can earn Community Reinvestment Act (CRA) credit. The list is based on economic indicators like unemployment, poverty, and population shifts.
Federal Agencies Finalise Rule on Automated Valuation Models for Mortgages
Six federal regulatory agencies have finalised a rule to enhance the credibility of automated valuation models (AVMs) used for mortgages. The rule mandates robust policies to ensure high confidence in valuation estimates and compliance with non-discrimination laws.
Federal Agencies Finalise Guidance on Reconsiderations of Value for Residential Real Estate
Five federal regulatory agencies have issued final guidance on reconsiderations of value (ROVs) for residential real estate transactions. The guidance outlines procedures for consumers to submit information for reassessment of property values during appraisals.
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