Banking and finance regulatory news, November 2020 # 4 | Hogan Lovells

Recent regulatory developments focussing on banking and finance. 


  • Submission of statistical data: BoE Green Notice 2020/02
  • Market risk: PRA PS23/20 and updated SS13/13
  • Brexit: ECB interview comments on preparations
  • CRR: EBA report on significant risk transfer in securitisation transactions
  • Securitisations on non-performing loans: BCBS technical amendment concerning capital treatment

Submission of statistical data: BoE Green Notice 2020/02

The Bank of England (BoE) has published a Green Notice 2020/02 announcing future changes to the submission of statistical data to its Data and Statistics Division (DSD).

Any financial institution with permission from the PRA to accept deposits must provide the BoE with statistical data. Currently, statistical data is submitted through the BoE’s online statistical collection application (OSCA). The notice states that DSD is planning to move the collection of statistical data to the BoE’s online electronic data submission (BEEDS) application. In addition to completing and submitting data online through BEEDS, firms can view the information held about them by the BoE and keep it up to date. The BoE also intends to move the reporting format from XML to XBRL.

The BoE has started conversations with software houses and plans to release the draft XBRL taxonomy and data point model to them, as soon as possible. Firms that do not use a software house to help them send statistical data to the BoE are asked to contact the OSCA helpdesk.

The BoE intends to move away from OSCA by the end of October 2022. Migration to BEEDS will take place over an extended period and the BoE will run a pilot of early adopters. It will release more information in statistical notices in due course.

Market risk: PRA PS23/20 and updated SS13/13

Following its October 2020 consultation, the Prudential Regulation Authority (PRA) has published a policy statement, PS23/20, on market risk, the calculation of risks not in value at risk (RNIV), and stressed value at risk (sVaR). As well as setting out its final policy, the PRA gives feedback on its consultation in PS23/20. It has also updated its supervisory statement, SS13/13, on market risk.

On measurement of RNIV, respondents generally agreed with the benefits of expecting RNIV own funds to be calculated as an average RNIV measure across the preceding twelve-week period. However, all respondents argued for a less-frequently than weekly calculation of the RNIV measure, at least for certain RNIVs. On the meaning of “period of significant financial stress relevant to the institution’s portfolio” for sVaR calculation, the majority of respondents expressing a view agreed with the PRA’s proposed expectations.

Having considered the consultation responses, the PRA has changed its draft policy to:

  • expect that RNIV own funds requirements should be calculated as the average across the preceding three-month period of an RNIV measure calculated at least monthly (rather than weekly, as proposed);
  • set an additional expectation that firms should still consider whether more frequent calculation than monthly may be appropriate for more material, or more variable, RNIV positions; and
  • set an expectation that the relevant RNIV measure for at least 90% of RNIV own funds requirements should be calculated at least monthly. This means that the RNIV measure for up to 10% of RNIV’s own funds requirements may be calculated less frequently than monthly.

The updated version of SS13/13 is effective immediately on publication of PS23/20. However, the PRA appreciates that, particularly for the measurement of RNIV, firms may not be able to immediately comply with its new expectations. Firms should contact their PRA supervisor to agree their plans and a reasonable timeframe for complying with the new expectations.

Brexit: ECB interview comments on preparations

The European Central Bank (ECB) has the transcript of an interview given by Yves Mersch, ECB Executive Board Member and Supervisory Board Vice-Chair. Among other things, Mr Mersch answered a question in the interview on whether the financial services sector is doing enough to prepare for the end of the Brexit transition period. In response, he explains that a lot has been achieved but more could still be done. The ECB is continuing to push some firms to implement their Brexit plans.

Mr Mersch does not underestimate the large number of contracts that require repapering or novation. This work is still ongoing. Banks are telling the ECB that it is their customers who are causing problems in this area. He notes that there are some contracts relating to certain instruments, like uncleared derivatives, where there seem to be more problems than with other contracts.

Mr Mersch believes that there may still be a risk for UK firms where, for instance, if on 1 January 2021 there is no post-Brexit transition period agreement between the EU and the UK, they would be acting on the continent without the proper authorisation or licence to provide services to EU clients. Extensive use of third country national regimes could also pose risks to the level playing field and could undermine the integrity of supervision. He explains that banks and investment firms may unduly use these regimes, and other national exemptions, to avoid EU banking supervision. The ECB will be monitoring the situation.

Mr Mersch explains that the ECB’s message is clear: EU products and transactions with EU clients should be booked in the EU, and risk management capabilities related to these products should also be located in the EU.

CRR: EBA report on significant risk transfer in securitisation transactions

The European Banking Authority (EBA) has published a report on significant risk transfer (SRT) in securitisation transactions under Articles 244(6) and 245(6) of the Capital Requirements Regulation (CRR). The report includes a set of detailed recommendations to the European Commission on the harmonisation of practices and processes applicable to the SRT assessment. The EBA proposals aim to enhance the efficiency, consistency and predictability of the supervisory SRT assessment within the current securitisation framework.

The recommendations focus on three key areas where inconsistencies have been found:

  • assessment of structural features of securitisation transactions;
  • application of SRT quantitative tests; and
  • supervisory process for assessing SRT in individual transactions.

The EBA states that the recommendations on supervisory process are aimed at facilitating and speeding up supervisory decision-making on SRT, without compromising the quality and thoroughness of the assessment. It says that the clear classification of complex structural features between those ineligible for SRT, and those that need to comply with a set of safeguards for a fast-track assessment, will provide clarity to market participants and support an effective supervisory assessment.

In addition, the EBA has identified shortcomings in certain CRR provisions currently in force that are significantly detrimental to the effectiveness of the supervisory assessment of SRT. Accordingly, the EBA sets out several recommendations on desirable amendments to the CRR that could correct those shortcomings and improve the SRT framework.

The report will inform the delegated acts that the Commission may adopt to harmonise the substantive aspects of the EU supervisory SRT framework.

Securitisations on non-performing loans: BCBS technical amendment concerning capital treatment

The Basel Committee on Banking Supervision (BCBS) has published a technical amendment concerning the capital treatment of securitisations on non-performing loans (NPLs). The amendment closes a gap in the Basel framework by setting out prudent and risk-sensitive capital requirements for NPL securitisations which are subject to different risk drivers compared to securitisations of performing assets.

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