The role of the EBA after the adoption of the CRR and CRD IV framework

Transcription

1 The role of the EBA after the adoption of the CRR and CRD IV framework Dr. Christos Gortsos Associate Professor of International Economic Law, Panteion University of Athens Visiting Professor, Europa-Institut, Universität des Saarlandes, Chargé d enseignement, Law Faculty, University of Athens ERA Conference, February 2013

2 Table of Contents I. The contents of the CRD IV and the CRR: elements of amended continuity and of change II. The role of the EBA in the making of European Banking Law III. The powers assigned to the EBA in order to contribute to the issuing of delegated and implementing acts IV. The role of the EBA as "soft law" regulator (guidelines) V. Concluding remarks 2

3 I. The contents of the CRD IV and the CRR: elements of amended continuity and of change 3

4 A. The impact of the work of the Basel Committee on Banking Supervision on the shaping of European Banking Law with regard to credit institution's capital adequacy Regulatory measure A. Capital requirements for credit and country risk Initial provisions Basel Committee Capital Accord (1998) (Basel I) European Law Directive 89/647/EEC Supervisory acceptance of netting arrangements The treatment of the credit risk associated with certain off-balancesheet items (1994) The treatment of potential exposure for off-balance sheet items (1995) Directive 96/10/EEC Second wave of provisions Third wave of provisions Basel II (2004) Basel III (2010) Directives 2006/48/EC (CRD) and 2006/49/EC CRR 4

5 A. The impact of the work of the Basel Committee on Banking Supervision on the shaping of European Banking Law with regard to credit institution's capital adequacy Regulatory measure B. Capital requirements for market risks Initial provisions Second wave of provisions Third wave of provisions Basel II Basel III Basel Committee Amendment to the capital accord to incorporate market risks (1996), Part A Amendment to the capital accord to incorporate market risks (1996), Part B Modifications to the market Risk Amendment (1997) Directive 93/6/EEC Directive 98/31/EC Directives 2006/48/EC (CRD) and 2006/49/EC CRR European Law 5

6 A. The impact of the work of the Basel Committee on Banking Supervision on the shaping of European Banking Law with regard to credit institution's capital adequacy Regulatory measure C. Capital requirements for operational risk Basel Committee European Law Initial provisions Second wave of provisions Basel II Basel III Directives 2006/48/EC CRR D. Capital requirements for credit valuation adjustment risk Initial provisions Basel III CRR 6

7 A. The impact of the work of the Basel Committee on Banking Supervision on the shaping of European Banking Law with regard to credit institution's capital adequacy Regulatory measure E. Meeting capital requirements: Definition of own funds Initial provisions Second wave of provisions Capital Accord (1988) Amendment of the capital accord in respect of the inclusion of general provisions / general loanloss reserves in capital (1991) Basel II Basel Committee European Law Directive 89/299/EC Directive 91/633/EEC Directive 2006/48/EC Third wave of provisions Basel III CRR 7

8 B. CRD IV 154 articles I. Subject matter, scope and definitions (1-4) II. Competent authorities (5-8) III. Access to the activity of the business of credit institutions (9-27) IV. Initial capital of investment firms (28-32) V. Provisions concerning the freedom of establishment and the freedom to provide services (33-46) VI. Relations with third countries (47-48) VII. Prudential supervision (49-132) (new elements (buffers): ) VIII. Disclosure by the competent authorities (Pillar II) ( ) IX. Delegated and implementing acts ( ) X. Amendments to the Directive 2002/87/CE (139) XI. Transitional and final provisions ( ) 8

9 C. CRR 486 articles Part One: General provisions I. Subject matter, scope and definitions (1-4) II. Level of application of requirements Chapter 1: Application of requirements on an individual law (5-9) Chapter 2: Prudential consolidation (10-21) 9

10 Part Two: Own Funds C. CRR 486 articles I. Definitions specific to own funds (22) II. III. Elements of own funds Chapter 1: Tier 1 capital (23) Chapter 2: Common equity Tier 1 capital (24-47) Chapter 3: Additional Tier 1 capital (48-58) Chapter 4: Tier 2 capital (59-68) Chapter 5: Own funds (69) Chapter 6: General requirements (70-75) Minority interest and additional Tier 1 + Tier 2 instruments issued by subsidiaries (76-83) IV. Qualifying holdings outside the financial system (84-86) 10

11 C. CRR 486 articles Part Three: Capital Requirements I. General requirements, valuation and reporting Chapter 1: Required level of own funds (87-93) Chapter 2: Calculation and reporting requirements (94-96) Chapter 3: Trading book (97-101) II. Capital requirements for credit risk Chapter 1: General principles ( ) Chapter 2: Standardised approach ( ) Chapter 3: Internal ratings based approach ( ) Chapter 4: Credit risk mitigation ( ) Chapter 5: Securitisation ( ) Chapter 6: Counterparty credit risk ( ) 11

12 C. CRR 486 articles Part Three: Capital Requirements (cont.) III. IV. Own funds requirements for operational risk Chapter 1: General principles ( ) Chapter 2: Basic indicator approach ( ) Chapter 3: Standardised approach ( ) Chapter 4: Advanced measurements approaches ( ) Own funds requirements for market risk Chapter 1: General provisions (314) Chapter 2: Own funds requirements for positions risk ( ) Chapter 3: Own funds requirements for FX risk ( ) Chapter 4: Own funds requirements for commodities risk ( ) Chapter 5: Use of internal models to calculate own funds requirements ( ) 12

13 C. CRR 486 articles Part Three: Capital Requirements (cont.) V. Own funds requirements for settlement risk ( ) VI. Own funds requirements for credit valuation adjustment risk ( ) (new element) 13

14 C. CRR 486 articles Part Four: Large exposures I. Large exposures regime ( ) Part Five: Exposures to transferred credit risk (new element) I. General positions (393) II. Requirements for investor institutions ( ) III. Requirements for sponsor and originator institutions ( ) Part Six: Liquidity (new element) I. Definitions and liquidity coverage requirements ( ) II. Liquidity reporting ( ) III. Reporting on stable funding ( ) 14

15 C. CRR 486 articles Part Seven: Leverage ( ) (new element) Part Eight: Disclosure by institutions (Tier III) I. General principles ( ) II. Technical criteria on transparency and disclosure ( ) III. Qualifying requirements for the use of particular instruments or methodologies ( ) Part Nine: Delegated and implementing acts ( ) Part Ten: Transitional provisions, reports and reviews I. Transitional provisions ( ) II. Reports and reviews ( ) 15

16 D. The sources of European Banking Law after the adoption of the CRD IV and the CRR Authorisation of credit institutions Freedoms of establishments and of providing services by credit institutions Micro-prudential supervision of credit institutions (+ certain provisions of the Proposal for a Recovery and Resolution Directive Micro-prudential and macro-prudential regulation of credit institutions CRD IV CRD IV CRD IV CRR 16

17 D. The sources of European Banking Law after the adoption of the CRD IV and the CRR Macro-prudential oversight Reorganisation and winding-up of credit institutions Resolution of credit institutions Deposit guarantee schemes Recommendations by the European Systemic Risk Board Directive 2001/24/EC (under review) Proposal for a Recovery and Resolution Directive Directive 94/19/EC (as in force, under full amendment) 17

18 II. The role of the EBA in the making of European Banking Law 18

19 The Lamfalussy Process Level 1 Level 2 Level 3 Type of legal act Basic legal act Implementing measures Recommendations / Guidelines Legislator European Parliament /Council European Commission EBS/CESR/CEIOPS Supporting mechanism EBC/ESC/EIOPC (as advisory committees) EBC/ESC/EIOPC (as advisory and regulatory committees) CEBS/CESR/CEIOPS (as advisory committees) 19

20 The procedure for issuing legal acts constituting sources of European financial law after the start of operation of the ESFS(*) Type of legal act Level 1 (*): legally binding acts legislative acts falling within the Authorities' scope of action (TFEU, article 289) regulatory technical standards by means of delegated acts (TFEU, article 290) Level 2 (*): legally binding acts implementing technical standards by means of implementing acts (TFEU, article 291) Level 3 (*): non-legally binding acts (soft law) guidelines and recommendations (Regulations establishing the Authorities) Body issuing the legal act European Parliament and Council (with the ordinary legislative procedure) European Commission European Commission ΕΒΑ/ΕSMA/EIOPA (according to the scope of action) Assistance to the issuing of a legal act EBC/ESC/EIOPC (**) (as advisory committees) ΕΒΑ/ΕSMA/EIOP A (as opiniongiving bodies) ΕΒΑ/ΕSMA/EIOP A (elaborating draft technical standards ΕΒΑ/ΕSMA/EIOPA (elaborating draft technical standards) EBC/ESC/EIOPC (as Regulatory committees) (***) (*) Reference to these "three levels" depicts the wording that was established (without any explicit legal basis) in the Lamfalussy Report (**) European Banking Committee, European Securities Committee, European Insurance and Occupational Pensions Committee 20 (***) According to the comitology procedure (Regulation 182/2011)

21 III. The powers assigned to the EBA in order to contribute to the issuing of delegated and implementing acts 21

22 A. CRD IV (Section IX) 1. Article 135 (delegated acts) The Commission shall be empowered to adopt delegated acts in accordance with Article 138 concerning the following aspects: clarification of the definitions referred to in Article 4 and Article 122 to ensure uniform application of this Directive; clarification of the definitions referred to in Article 4 and Article 122 in order to take account, in the application of this Directive, of developments on financial markets; the alignment of terminology on, and the framing of definitions referred to in Article 4 in accordance with subsequent acts on institutions and related matters; 22

23 A. CRD IV (Section IX) 1. Article 135 (delegated acts) (cont.) expansion of the content of the list referred to in Articles 33 and 34 and set out in Annex I to this Directive or adaptation of the terminology used in that list to take account of developments on financial markets; the areas in which the competent authorities shall exchange information as listed in Article 51; adjustment of the provisions in Articles 75 to 86 and 94 in order to take account of developments on financial markets (in particular new financial products) or in accounting standards or requirements which take account of Union legislation, or with regard to the convergence of supervisory practices; adjustments of the criteria set out in Article 23(1), in order to take account of future developments and to ensure the uniform application of this Directive 23

24 A. CRD IV (Section IX) 2. Article 136 (implementing acts) The following measures shall be adopted as implementing acts in accordance with the examination procedure referred to in Article 137(2): technical adjustments to the list in Article 2; alteration of the amount of initial capital prescribed in Article 12 and Title IV to take account of developments in the economic and monetary field 24

25 B. CRR (Part Nine) 1. Article 441 The Commission will adopt delegated acts concerning the following aspects: clarification of the definitions set out in Articles 4, 22, 137, 148, 188, 237, 267, 294, 371 and 400 to ensure uniform application of this Regulation, clarification of the definitions set out in Articles 4, 22, 137, 148, 188, 237, 267, 294, 371 and 400 in order to take account, in the application of this Regulation of developments on financial markets; amendment of the list of exposure classes in Articles 107 and 142 in order to take account of developments on financial markets; the amount specified in point c of Article 118, Article 142(5)(a), Article 148(4) and Article 158(4), to take into account the effects of inflation; the list and classification of off-balance sheet items in Annexes I and II; 25

26 B. CRR (Part Nine) 1. Article 441 (cont.) adjustment of the categories of investment firms in Article 90(1) and Article 91(1) to take account of developments on financial markets; clarification of the requirement laid down in Article 92 to ensure uniform application of this Regulation, a clarification of exemptions provided for in Article 389; the extension by twelve months of the duration of the requirement to provide own funds which are at all times more than or equal to the amount specified in Article 476 beyond the periods provided for in paragraphs 1 and 2 of that Article; the modification of the capital measure and the total exposure measure of the leverage ratio referred to in Article 416(2) in order to correct any shortcomings discovered on the basis of the reporting referred to in Article 417(1) before the leverage ratio has to be published by institutions as set out in Article 436(1)(a). This delegation of power shall be subject to the procedure referred to in Article

27 B. CRR (Part Nine) 2. Article 442: Technical adjustments and corrections The Commission will adopt delegated acts, to make technical adjustment and corrections of non-essential elements in the following provisions in order to take account of developments on financial markets, in particular new financial products, to make adjustments to developments after the adoption of this Regulation in other EU legislative acts on financial services and accounting including accounting standards based on Regulation No. (EU) 1605/2002, or to reflect convergence of supervisory practice: the own funds requirements for credit risk laid down in Articles 106 to 129, and in Articles 138 to 187; the effects of credit risk mitigation in accordance with Articles 189 to 236 ; the own funds requirements for securitisation laid down in Articles 238 to 261; 27

28 B. CRR (Part Nine) 2. Article 442: Technical adjustments and corrections (cont.) the own funds requirements for counterparty credit risks in accordance with articles 267 to 300; the own funds requirements for operational risk laid down in Articles 304 to 313; the own funds requirements for market risk laid down in Articles 314 to 367; the own funds requirements for settlement risk laid down in Articles 368 and 369; the own funds requirements for credit valuation adjustment risk laid down in Articles 373, 374 and 375; Part Two and Article 95 as a result of developments in accounting standards or requirements which take account of Union legislation or with regard to the convergence of supervisory practices 28

29 B. CRR (Part Nine) 3. Article 443: Prudential requirements The Commission will adopt delegated acts to impose stricter prudential requirements, for a limited period of time, for all exposures or for exposures to one or more sectors, regions or Member States, where this is necessary to address changes in the intensity of microprudential and macro-prudential risks which arise from market developments emerging after the entry into force of this Regulation, in particular upon the recommendation or opinion of the ESRB, concerning: a temporary increase in the level of own funds laid down in Article 87; the prudential filters laid down in Articles 29 to 32; the deductions from elements of own funds set out in Articles 33, 53 and 63; the own funds requirements for credit risk laid down in Articles 106 to 129, and in Articles 138 to 187; 29

30 B. CRR (Part Nine) 3. Article 443: Prudential requirements (cont.) the effects of credit risk mitigation in accordance with Articles 189 to 236; the own funds requirements for securitisation laid down in Articles 238 to 261; the own funds requirements for credit risks in accordance with articles 268 to 300; the own funds requirements for operational risk laid down in Articles 304 to 313; the own funds requirements for market risk laid down in Articles 314 to 367; the own funds requirements for settlement Risk laid down in Articles 368 and 369; the own funds requirements for credit valuation adjustment risk laid down in Articles 373, 374 and

31 B. CRR (Part Nine) 4. Article 444: Liquidity The Commission will adopt a delegated act to specify in detail the general requirement set out in Article 401. Such specification shall be based on the items to be reported according to Part Six, Title II. The delegated act shall also specify under which circumstances competent authorities have to impose specific inand outflow levels on credit institutions in order to capture specific risks to which they are exposed 31

32 V. Concluding remarks 1. The role of EBA is enhanced as compared to that of CEBS as a regulator 2. The EBA s work on the making of European Banking Law will contribute to the creation of a single rulebook, one of the main elements of the European Banking Union 3. EBA will not become the pan-european supervisory authority for European banks in view of creating a European Banking Union - this will be assigned to the ECB 32