Fifth Industry Dialogue Critical Functions and Access to FMIs:

Transcription

1 Fifth Industry Diaogue Critica Functions and Access to FMIs: New Tempates for Resoution Panning Mauro Grande, Board Member Nadège Jassaud, Head of Unit, Strategy & Methodoogy Industry Diaogue, 30 January 2017, Brusses

2 TABLE OF CONTENTS 1. Critica Functions: Guiding the Banks Sef-Assessment > Critica Functions: Key for Resoution > Critica Functions: Common Approach > Main Features of the Tempate > Next Steps 2. Continued Access to FMIs: Information on FMI Participation > FMIs: Key for Resoution > Information coection on FMI participation 3. Process for 2017 Data Coections > SRB and EBA tempates > Pubishing and Submission Dates > Process for Q&As > Reporting Scope 2 Critica Functions and access to FMIs

3 CRITICAL FUNCTIONS: KEY FOR RESOLUTION (i) Continuity of critica functions: One of the five resoution objectives Critica functions are functions that are provided by an institution to third parties not affiiated to the institution or group, whose sudden disruption woud ikey have a materia negative impact on the third parties, give rise to contagion or undermine the genera confidence of market participants. Ensuring continuity of critica functions: one of the five resoution objectives Identifying critica functions is essentia in resoution panning W h y? Ensure the continuity of critica functions Avoid a significant adverse effect on the financia system [ ] Protect pubic funds by minimising reiance on extraordinary pubic financia support Protect covered depositors and investors [ ] Protect cient funds and cient assets 3 Critica Functions and access to FMIs

4 CRITICAL FUNCTIONS: KEY FOR RESOLUTION (ii) Critica functions: a node in resoution pans Part of the first chapter of resoution pans (i.e. Strategic Business Anaysis) Important to assess: Separabiity; Loss-absorbing capacity (MREL): quantum and ocation This has consequences for the preferred resoution strategy and toos Group-, ownership- & governancestructure Business mode, core business ines critica functions Key financia figures Interna & externa interconnectedness Separabiity Loss-absorbing capacity RESOLUTION STRATEGY Critica systems & infrastructures 4 Critica Functions and access to FMIs

5 IDENTIFYING CRITICAL FUNCTIONS: COMMON APPROACH (i) Deveoping a common approach for the Banking Union Tookit for banks and Resoution Authorities: Package for banks: tempate and guidance note Package for Resoution Authorities The bank package can be used for resoution and recovery pans P a c k a g e f o r b a n k s R e c o v e r y p a n s P a c k a g e f o r R e s o u t i o n t e a m s R e s o u t i o n p a n s 1 - T e m p a t e 2 - B a n k G u i d a n c e N o t e B a n k s s e f a s s e s s m e n t o f c r i t i c a f u n c t i o n s 1. F i e d t e m p a t e 2. I R T G u i d a n c e n o t e O u t c o m e : e n h a n c e d r e s o u t i o n p a n s 5 Critica Functions and access to FMIs

6 IDENTIFYING CRITICAL FUNCTIONS: COMMON APPROACH (ii) The SRB is deveoping a common approach for the Banking Union Bank package provides guidance on: > Definition of critica functions > Methodoogy for assessing criticaity (impact and suppyside anayses) First version tested on piot banks Compementary to the EBA tempate: > EBA tempate focuses on mapping critica functions to ega entities and core business ines. FSB (2013) Guidance on Identification of Critica Functions and Critica Shared Services BRRD Art. 2(1)(35-36), Art. 10(7)(c), Art. 15(1) Art. 31(2)(a), Annex Section B(4) SRMR Art. 8(9)(c), Art.10(3-4), Art. 14(2)(a) EC Deegated Reguation on Critica Functions & Core Business Lines, Feb 2016 EBA/Op/2015/05 Technica advice on deegated acts on Critica Functions & Core Business Lines EBA/RTS/2014/15 Art. 3(c)(ii) Resoution Panning Manua Chapter Critica Functions and access to FMIs

7 granuarity of anaysis IDENTIFYING CRITICAL FUNCTIONS: COMMON APPROACH (iii) Increasing harmonization whie maintaining fexibiity Harmonization of: Granuarity: economic sub-functions Indicators: mix of quantitative indicators and quaitative expert judgement Geographica scope: Member State is mandatory Tempate: consistent granuarity eve consistent methodoogy transparent methodoogy Banking group Fexibiity: Additiona sub-functions coud be added in specia cases and some are optiona ega entity 1 economic functions economic sub-functions specific products retai bank ending whoesae, retai ending car oans, student oans 7 Critica Functions and access to FMIs

8 MAIN FEATURES CRITICAL FUNCTIONS TEMPLATE (i) Part 1: seect appicabe sub-functions Economic functions Key economic sub-functions based on the five economic functions retained by FSB Banks can add sub-functions (in grey ces) Part 1: seect appicabe functions Economic (sub-)functions Part 1: seect appicabe functions Economic (sub-)functions Snapshot (deposits) Deposits Code Sub-function Appicabe? (yes or no) F.1 Househods pease seect Appicabe? F.2 Non-financia corporations - SMEs pease seect Code Sub-function (yes or no) F.3 F.1 Non-financia Househods corporations - other pease seect 8 Critica Functions and access to FMIs Deposits F.4 F.2 Genera Non-financia Governments corporations - SMEs pease seect F.5.1 F.3 Additiona Non-financia function corporations - other [specify if provided] pease seect F.5.2 F.4 Additiona Genera Governments function [specify if provided] pease seect F.5.3 F.5.1 Additiona function [specify if provided] F.5.2 Additiona function

9 MAIN FEATURES CRITICAL FUNCTIONS TEMPLATE (ii) Part 2: report quantitative data Data input ces Harmonised geographica scope (nationa market shares are mandatory, regiona/goba can aso be provided) Part 2: report quantitative data (ony for appicabe functions) Data Input Ces when a function is marked as appicabe (coumn G), report data in bank ces in # (thousands) or miions, or as otherwise indicated. Excude intra-group transactions. Snapshot (deposits) Q.1 Q.2 Q.3 Q.4 Q.5 Q.6 nationa market share based on vaue on residents' accounts (in %) optiona: regiona market share based on vaue on regiona residents' accounts (in %) vaue on accounts number of cients number of accounts (in Mn.) (in # thousands) (in # thousands) cross-border vaue vaue on accounts of deposits of nonresidents (in Mn.) 9 Critica Functions and access to FMIs

10 MAIN FEATURES CRITICAL FUNCTIONS TEMPLATE (iii) Part 3: impact and suppy-side assessments Impact assessment Harmonised steps for assessing impact of discontinuation of a sub-function on third parties (from high to ow) Part 3: assess impact and suppy-side using the pre-defined indicators and reporting buckets Snapshot (deposits) Reevance I.1 I.2 I.3 I.4 size indicator 1 - vaues within EU expert judgement of size based on vaues (Q.3) Impact Anaysis - seect from drop down ist Nature and reach size indicator 2 - nationa numbers expert judgement of size based on numbers (Q.4) cross border indicator number of EU countries in which the entity has >5% market share nationa market share expert judgement of nationa market share (Q.1) H: arge H: arge H: >5 countries H: arge MH: medium MH: medium MH: [4-5 countries] MH: medium ML: sma ML: sma ML: [2-3 countries] ML: sma L: negigibe L: negigibe L: 1 country L: negigibe 10 Critica Functions and access to FMIs

11 MAIN FEATURES CRITICAL FUNCTIONS TEMPLATE (iv) Part 3: impact and suppy-side assessments Suppy-side assessment Harmonised steps for assessing the degree of substitutabiity for each function (from high to ow) Part 3: assess impact and suppy-side using the pre-defined indicators and reporting buckets Snapshot (deposits) Timing S.1 S.2 S.3 S.4 S.5 nationa market share autofied from indicator I.4 Market Structure Suppy-Side Anaysis - seect from drop down ist market concentration number of competitors that coud substitute the function expected time for substitution time for the function to be absorbed by the market Abiity for substitution ega barriers barriers to market entry or expansion operationa requirements organisationa, infrastructura, and technica requirements H: arge H: <5 H: >6 months H: critica barriers H: critica requirements MH: medium MH: [5-10) MH: [1-6 months] MH: substantia barriers MH: substantia requirements ML: sma ML: [10-20) ML: [1 week - 1 month] ML: some barriers ML: some requirements L: negigibe L: 20 L: <1 week L: no major barriers L: no major requirements 11 Critica Functions and access to FMIs

12 MAIN FEATURES CRITICAL FUNCTIONS TEMPLATE (v) Part 4: Criticaity assessment Criticaity assessment Cear overview summarising the impact and suppy-side anayses Concusion of criticaity assessment (yes/no) Part 4: assess criticaity (ony of appicabe functions) Criticaity Assessment C.1 C.2 C.3 C.4 Snapshot Impact Anaysis on nationa market Optiona: Impact anaysis on regiona market Suppy-Side Anaysis Critica Function? H: major impact MH: significant impact ML: materia, but imited impact H: not substitutabe MH: difficut to substitute ML: reasonaby substitutabe Yes Yes No L: ow impact L: substitutabe No 12 Critica Functions and access to FMIs

13 NEXT STEPS Submission process Nationa Resoution Authorities communicate which entities fa within the scope of the exercise which ces of the EBA Tempate do not need to be fied in Utimate submission deadine: 28 Apri Today: tempate and guidance pubished on SRB website The tempate wi serve as a basis for the identification of critica functions in 2017 resoution (and recovery) pans. 13 Critica Functions and access to FMIs

14 TABLE OF CONTENTS 1. Critica Functions: Guiding the Banks Sef-Assessment > Critica Functions: Key for Resoution > Critica Functions: Common Approach > Main Features of the Tempate > Next Steps 2. Continued Access to FMIs: Information on FMI Participation > FMIs: Key for Resoution > Information Coection on FMI Participation 3. Process for 2017 Data Coections > SRB and EBA Tempates > Pubishing and Submission dates > Process for Q&As > Reporting Scope 14 Critica Functions and access to FMIs

15 FMIs: KEY FOR RESOLUTION (i) Access to FMIs: essentia for ensuring resovabiity Reated to at east two of the five resoution objectives Critica functions cannot be preserved without access to FMIs Risk of osing access to FMIs mentioned as impediment to resovabiity in resoution pans Ensure the continuity of critica functions Avoid a significant adverse effect on the financia system, in particuar by preventing contagion to market infrastructures Protect pubic funds by minimising reiance on extraordinary pubic financia support Protect covered depositors and investors [ ] Protect cient funds and cient assets 18 Critica Functions and access to FMIs

16 FMIs: ESSENTIAL FOR RESOLUTION (ii) as recognised by reguatory framework Description of options for preserving access to FMIs, and assessment of portabiity of cient positions [BRRD 10(7)() EBA/RTS/2014/15] Resoution panning Information on membership of FMIs, incuding mapping to entities, critica operations and core business ines [BRRD Annex Section B(12)] Communication pans with FMIs [Artice 3(f) EBA RTS] Contingency pans and measures to ensure continuity in access to FMIs [BRRD Annex Section C(7)] Resovabiity assessment Precautions to meet the specific FMI requirements [EBA GL/2014/11] Reasonabe efforts to re-negotiate contracts with FMIs, subject to safeguards to protect FMIs [idem] Resoution does not aow termination, suspension etc. [BRRD Art.68(3)] Purchaser/bridge institution remains member of FMI, provided it meets criteria. [BRRD Art.38(12) and 40(10)] Ensuring continuity Rating criterion not binding. If criteria not met, participation maintained upon RA request [idem] RAs powers to provide for the recipient to be treated as if it were the institution under resoution 19 Critica Functions and access to FMIs

17 FMIs: KEY FOR RESOLUTION (ii) Internationa standard-setting bodies and BRRD FSB consuts industry on Continuity of Access to FMIs for a firm in resoution 1- Providers of critica FMI services shoud take appropriate steps to consider and pan for the interaction between the resoution regimes and their own risk management framework; thereby carifying the actions they may take in a resoution scenario. 2- Firms shoud take adequate measures to faciitate their continued access to critica FMI services in resoution (..), incuding by ensuring that obigations to FMI service providers are met throughout resoution and through the provision of information to the reevant authorities. 3- The reevant authorities of firms and providers of critica FMI services (..) shoud (..) have adequate cooperation arrangements in pace. 20 Critica Functions and access to FMIs

18 FMIs: KEY FOR RESOLUTION (iii) SRB Initiative to iaise with FMIs Three piars 1. Manage risk of osing access 2. Support resoution actions 3. Estabish com.pans Understand conditions for continued participation and ensure they are met Prepare "fast-track" procedure to transfer participation to e.g. bridge institution Institution/group - FMI: timey information to avoid FMI actions triggering resoution Identify risks from actions FMI may take & possibe measures Identify/remove ega and operationa impediments Resoution authorities - FMI Be prepared to act to maintain access Prepare resoution in peacetime Minimise uncertainty for FMI 21 Critica Functions and access to FMIs 9

19 INFORMATION COLLECTION ON FMI PARTICIPATION (i) FMI Access is important for resoution panning Strategic Business Anaysis O p e rationa C o ntinui t y C o m munication P a ns Identify essentia FMI accesses Understand potentia FMI behaviour and impact Maintain access where necessary and possibe Prepare ordery wind-down and discontinuation in other cases Communication Pan shoud incude FMIs 21 Critica Functions and access to FMIs

20 INFORMATION COLLECTION ON FMI PARTICIPATION (ii) FMI Tempate Based on EBA tempate: Annex VIII on payment, cearing and settement systems > Common denominator across the EU Purpose: improve quaity and detai of FMI membership anayses in resoution pans > Best of cass pans go beyond Annex VIII > Annex VIII needs to be expanded to aow for a sufficient understanding of reation with FMI Provides a reasonaby detaied overview of banks participation in FMIs, but shoud not repace in-depth discussion. I-suited for extensive descriptions / ega considerations Leve of detai needed depends on criticaity of FMI: for the most critica FMIs, tempate does not cover a needs Horizonta data gathered directy by resoution authorities Membership requirements, termination causes, mitigating actions that FMIs woud take... First for BU FMIs + CLS, expanded to cover a critica FMIs over time 28 Critica Functions and access to FMIs

21 Snapshot (new eements) INFORMATION COLLECTION ON FMI PARTICIPATION (iii) Structure of the FMI Tempate Characteristics of the FMIs and representative institutions providing indirect access to FMIs Quaitative information on use of the system by the reporting institution Country / governing aw Currencies Core and anciary services received from FMI (or representative institution) Service providers needed to access FMI Operator Country Currency(ies) reevant for reporting entity Core services provided by FMI Anciary services provided by FMI Services provided to FMI Communication service providers A10 A20 A30 A40 A50 A60 A70 29 Critica Functions and access to FMIs

22 INFORMATION COLLECTION ON FMI PARTICIPATION (iv) Structure of the FMI Tempate Key metrics (new section) Quantitative data showing the extent to which the reporting institution uses the FMI and reevant exposures Vaues/voumes Cient/proprietary Avaiabe credit ines, peak iquidity requirements and estimated increased iquidity requirements under stress Snapshot Key metrics Vaue of positions on proprietary accounts (EUR Mn) Vaue of positions on cient omnibus accounts (EUR Mn) Vaue of positions on cient segregated accounts (EUR Mn) Number of cients covered by omnibus accounts ( 000) Number of cients Number of covered by segregated transactions on accounts ( 000) proprietary accounts ( 000) Number of transactions on cient accounts ( 000) Vaue of transactions on proprietary accounts (EUR Mn) Vaue of transactions on cient accounts (EUR Mn) Credit ine (EUR Mn) Peak of (intraday) iquidity or coatera requirements (EUR Mn) Estimated additiona iquidity or coatera requirements in a stress situation (EUR Mn) Q R S T U V W X Y Z AA AB 29 Critica Functions and access to FMIs

23 INFORMATION COLLECTION ON FMI PARTICIPATION (v) Structure of the FMI Tempate Potentia impact of resoution proceedings Quaitative information to understand impact of resoution or necessary at the point of resoution Termination triggers Time-to-substitution Contact for the bank within the FMI (e.g. reationship manager) 30 Critica Functions and access to FMIs

24 TABLE OF CONTENTS 1. Critica Functions: Guiding the Banks Sef-Assessment > Critica Functions: Key for Resoution > Critica Functions: Common Approach > Main Features of the Tempate > Next Steps 2. Continued Access to FMIs: Information on FMI participation > FMIs: Key for Resoution > Information Coection on FMI Participation 3. Process for 2017 Data Coections > SRB and EBA Tempates > Pubishing and Submission Dates > Process for Q&As > Reporting Scope 24 Critica Functions and access to FMIs

25 PROCESS SRB and EBA Tempates Tempates for SRB data coection have been deveoped or improved in repacing or compementing the EBA tempates: LDT: more granuar information on the iabiity structure than EBA Annex V => LDT repaces EBA Annex V CFT: assists in the identification of critica functions vs. EBA Annex III: mapping to ega entities and core business ines. => Some quantitative data ces of EBA Annex III are redundant FMI tempate: adds data requests to EBA Annex VIII => If FMI tempate is fied, then EBA Annex VIII does not need to be fied 25 Critica Functions and access to FMIs

26 PROCESS Pubishing and submission dates Tempate Start Submission deadine Pubication Liabiity Data Tempate Critica Functions Tempate December May 2017 SRB website February Apri 2017 SRB website EBA Tempate February May 2017 EBA website FMI Tempate February May 2017 SRB website 26 Critica Functions and access to FMIs

27 PROCESS Q&As Questions for which guidance is not yet avaiabe can be submitted to the Nationa Resoution Authorities Critica Functions Tempate Frequenty Asked Questions (based on the 2016 piot exercise) in the guidance note Dedicated worksheet for questions in the Critica Functions Tempate 27 Critica Functions and access to FMIs

28 PROCESS Reporting Scope Tempate Institutions Entities within scope Liabiity Resoution Data Authorities wi provide the ist of entities faing within the scope A institutions C.f. LDT presentation Tempate of the LDT and CFT Critica Functions Tempate EBA Tempate FMI Tempate Institutions for which fu pans are being drafted A institutions Institutions for which fu pans are being drafted Resoution Authorities communicate entities within scope incudes, at a minimum, entities that were found to possess critica functions in 2016 Information coected on a consoidated, sub-consoidated or individua eve, as defined by Resoution Authorities. Resoution entity eve Reevant ega entities Same scope as EBA Tempate 28 Critica Functions and access to FMIs

29 1/31/2017 THANK YOU