EC adopts regulation on own funds, issues other updates

The European Commission adopted Delegated Regulations on own funds and eligible liabilities, on requirements for the internal methodology under the internal default risk model, and on calculation of the own funds requirements for market risk for non-trading book positions.

EC also published proposals for the Directives on deposit protection and the use of deposit guarantee schemes funds, on the minimum requirement for own funds and eligible liabilities as well as on early intervention measures and conditions for resolution and financing of resolution action.
 

Below are key highlights of the aforementioned publications, as part of which EC:

• Adopted a Delegated Regulation 2023/827 that sets out the regulatory technical standards amending Delegated Regulation 241/2014 with regard to the prior permission to reduce own funds and the requirements related to eligible liabilities instruments. The Regulation shall enter into force on May 05, 2023.
• Adopted a Delegated Regulation that supplements Regulation 575/2013 of the European Parliament and of the Council with regard to regulatory technical standards specifying the requirements for the internal methodology or external sources used under the internal default risk model for estimating default probabilities and losses given default. The Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.
• Adopted a Delegated Regulation that supplements Regulation 575/2013 of the European Parliament and of the Council with regard to regulatory technical standards on the calculation of the own funds requirements for market risk for non-trading book positions subject to foreign exchange risk or commodity risk and the treatment of those positions for the purposes of the regulatory back-testing requirements and the profit and loss attribution requirement under the alternative internal model approach. The Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.
• Published a proposal for a Directive of the European Parliament and of the Council that amends Directive 2014/49/EU with regard to the scope of deposit protection, use of deposit guarantee schemes funds, cross-border cooperation, and transparency. The proposed amendments build on and clarify the mandate of Deposit Guarantee Scheme (DGSs) to better protect deposits in the context of the reimbursement of depositors. They also enhance the role of the DGS outside of situations in which depositors are repaid by the DGS following the failure of a bank for the purpose of bank crisis management with the view to maintain depositor confidence and financial stability. The Directive shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.
• Published a proposal for a Directive of the European Parliament and of the Council that amends Directive 2014/59/EU with regard to early intervention measures, conditions for resolution and financing of resolution action. The proposal amends the Bank Recovery and Resolution Directive (BRRD), in particular with regard to the improved application of the tools that are already available in the bank recovery and resolution framework, clarifying the conditions for resolution, facilitating access to safety nets in the event of bank failure, and improving the clarity and consistency of funding rules. By establishing harmonized requirements for applying the crisis management and deposit insurance (CMDI) framework to banks in the internal market, the proposal considerably reduces the risk of divergent national rules in Member States, which could distort competition in the internal market. The Directive shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.
• Published a proposal for a Directive of the European Parliament and of the Council that amends Directive 2014/59/EU and Regulation 806/2014 with regard to certain aspects of the minimum requirement for own funds and eligible liabilities. The proposed amendments will contribute to the resolvability of banks by improving the functioning and proportionality of the deduction mechanism and will ensure that it does not create level playing field issues between different banking group structures. The Directive shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.
• Published a proposal for a Regulation of the European Parliament and of the Council that amends Regulation 806/2014 with regard to early intervention measures, conditions for resolution and funding of resolution action. The proposal amends an existing regulation, the Single Resolution Mechanism Regulation (SRMR), in particular with regard to the improved application of the tools that are already available in the bank resolution framework, clarifying the conditions for resolution, facilitating access to safety nets the event of bank failure and improving the clarity and consistency of funding rules. The Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.

Related links:

• EC Delegated Regulation 2023/827
• RTS on requirements under internal default risk model
• RTS on own funds requirements for market risk
• Proposal for a Directive on deposit protection and DGS funds
• Proposal for a Directive on resolution measures
• Proposal for a Directive on own funds and eligible liabilities
• Proposal for a regulation on resolution measures