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On 18 October 2018, the Basel Committee on Banking Supervision (Basel Committee) issued a statement on ‘leverage ratio window-dressing behaviour’. This is a form of temporary reductions of transaction volumes in key financial markets around reference dates resulting in the reporting and public disclosure of elevated leverage ratios. The Basel Committee states that window dressing by banks is unacceptable as it undermines the intended policy objective s of the leverage ratio requirement and risks disrupting…
On 18 October 2018, the Basel Committee on Banking Supervision (Basel Committee) issued a consultative document seeking views on whether a targeted and limited revision of the leverage ratio’s treatment of client cleared derivatives may be warranted. The leverage ratio complements the risk-based capital requirements by providing a safeguard against levels of leverage and by mitigating gaming and model risk across both internal models and standardised risk measurement approaches. By design, the leverage ratio does…
On 9 October 2018, the European Banking Authority (EBA) acknowledged the European Commission’s adoption of the Implementing Act amending the Implementing Technical Standards on Supervisory Reporting with regard to the inclusion of prudent valuation into COREP as well as other amendments. Whilst the amendments have been approved by the Commission, they have not yet been published in the Official Journal of the EU. The amendments apply as of 31 December 2018.…
On 4 October 2018, the European Banking Authority (EBA) published a report on liquidity measures under Article 509(1) of the Capital Requirements Regulation (CRR). As part of its mandate under the CRR, the EBA monitors and evaluates the liquidity coverage requirements on an annual basis. In this regard, the EBA takes into account the potential impact of these requirements on the business and risk profiles of banks, on the stability of financial markets, on the…
On 4 October 2018, the European Banking Authority (EBA) published a report that presents the estimated impact of the Basel reform package on European banks as agreed in December 2017 by the Group of Central Bank Governors and Heads of Supervision. The assessment of the final package includes the revisions to the internal ratings-based (IRB) approach, the standardised approach to credit risk and the standardised approach to operational risk, as well as the revisions to…
On 26 September 2018, the Prudential Regulation Authority (PRA) published a report on the impact of climate change on the UK banking sector (the Report). The Report examines the financial risks from climate change that impact PRA regulated banks, building societies and designated investment firms, and assesses how banks are responding to and managing the financial risks from climate change. The Report notes that two channels of risk emerge from climate change: physical risks: arising…
On 24 September 2018, the European Banking Authority (EBA) issued a press release announcing the launch of its fifth annual EU-wide transparency exercise. In December 2018, together with the Risk Assessment Report (RAR), the EBA will release over 900000 data points on roughly 130 EU banks. The data to be released will cover: capital positions; risk exposure amounts; sovereign exposures; and asset quality. Specifically, the data for December 2017 and June 2018 will cover: financial…
On 21 September 2018, the European Central Bank (ECB) published its guide to on-site inspections and internal model investigations (the Guide). The Guide acts as a reference document for the supervised entities and other legal entities for which the ECB has decided to launch an on-site inspection of. The Guide applies to inspections conducted in (i) significant institutions; (ii) less significant institutions, when the ECB decides to exercise directly all the relevant supervisory powers for…
On 20 September 2018, the Basel Committee on Banking Supervision (BCBS) published a press release on the outcome of their meeting  of 19 and 20 September 2018 (the Press Release).  The Press Release notes that the BCBS discussed: the results of the annual assessment exercise for global systemically important banks (G-SIBs). The BCBS also agreed to publish the high-level indicator values of all the banks that are part of the G-SIB assessment exercise; progress on…
On 20 September 2018, the Basel Committee on Banking Supervision (BCBS) published responses to FAQs relating to the treatment of settled-to-market derivatives under the liquidity coverage ratio and net stable funding ratio. The FAQ responses clarify that the liquidity risks associated with settled-to-market derivatives are the same as those for more conventional collateralised-to-market derivatives, and should therefore be treated in an equivalent manner.…