Insights

In this issue:

• EBA consults on Guidelines to Assess Breaches of Large Exposure Limits
• MFSA publishes changes to Right of Appeal Process
• Amendments introduced by the transposition of the Bank Recovery and Resolution Directive II
• EBA calls upon national authorities to remove obstacles to account access under the Payment Services Directive
• ESMA publishes first Q&A on the Crowdfunding Regulation
• ECB extends non-eurozone euro swap lines
• ECB launches 2021 EU-wide stress test
• ECB makes public consolidated banking data for end-September 2020

EBA consults on Guidelines to Assess Breaches of Large Exposure Limits

The EBA has launched a consultation process aimed at classifying the criteria that competent authorities should base their assessment of breaches of large exposure limits on.

The proposed guidelines hold that any breach of the large exposure limits of Article 395(1) of the Capital Requirements Regulation (CRR) should always be considered as an exceptional case. The guidelines propose criteria aimed at determining exceptional cases, information that must be given to the competent authority in case of a breach of the large exposure limits, criteria to determine the appropriate time to return to compliance with the limits, and measures to be taken to ensure that the institution returns to compliance with the limits established, in a timely manner.

The EBA will be accepting comments on said proposed guidelines until 17 May 2021, and they will apply from 1 March 2022.

Link to guidelines

MFSA publishes changes to Right of Appeal Process

Article 85 of Directive 2014/59/EU of the European Parliament and of the Council of 15 May 2014, establishing a framework for the recovery and resolution of credit institutions and investment firms (the BRRD) stipulates that, a remedy is to be available to any person who feels aggrieved by a decision related to the taking of a crisis management measure, by providing such person with the right to appeal against that decision.

Pursuant to the above and to Article 47 of the Charter of Fundamental Rights of the European Union which allows for the right to an effective remedy and to a fair trial, Article 21 of the Malta Financial Services Authority Act has been amended to include the right of appeal as prescribed under Article 85.

The amendments, amongst other changes, serve to extend the jurisdiction of the Financial Services Tribunal as well as increase the Tribunal’s powers; empowering the Tribunal to be able to annul a decision of the Resolution Committee.

Link to press release

Amendments introduced by the transposition of the Bank Recovery and Resolution Directive II

Directive (EU) 2019/879 of the European Parliament and of the Council of 20 May 2019, amending Directive 2014/59/EU as regards the loss-absorbing and recapitalisation capacity of credit institutions and investment firms and Directive 98/26/EC (the BRRD2), introduces a number of measures aimed at harmonising the Union’s resolution policy.

To this end, Legal Notice 6 of 2021 has introduced a number of changes into national legislation. Amongst such changes, this includes a requirement on Member States to ensure a bank’s orderly exit from the market, ensure that entities and institutions have sufficient loss-absorbing and recapitalisation capacity to ensure a smooth and fast absorption of losses and recapitalisation with minimum impact on taxpayers and it offers an enhanced level of protection to retail investors when purchasing subordinated liabilities.

Link to the full list of amendments brought about by the BRRD2

EBA calls upon national authorities to remove obstacles to account access under the Payment Services Directive

Through an Opinion published on 22 February 2021, the EBA has called upon national competent authorities (NCAs) to ensure that banks remove any remaining obstacles that prevent third party providers from accessing payment accounts. Failure to do so would result in the restriction of EU consumer’s choice of payment services.

The Opinion holds that NCAs are expected to access the progress made in removing such obstacles by account servicing payment service providers, in their respected jurisdictions. Following this assessment, should obstacles still persist, NCAs are to take supervisory actions by 30 April 2021.

Link to opinion

ESMA publishes first Q&A on the Crowdfunding Regulation

The ESMA has published a series of questions and answers relating to Regulation (EU) 2020/1503 on European crowdfunding service providers for business (the Regulation).

The aim is to help harmonise the Regulation’s application, as well as to provide information to all the stakeholders. This particular Q&A dealt with matters relating to the use of a Special Purpose Vehicle (SPV) under the Regulation. Matters dealt with included amongst others, the circumstances and conditions in which a SPV can be created for the purpose of crowdfunding services, the type of instruments that can be offered to investors via a SPV and the type of underlying asset a SPV can give exposure to.

Link to Q&A

ECB extends non-eurozone euro swap lines

The ECB has decided to extend the euro liquidity lines which were meant to expire in June 2021, by 9 months. The central banks of Albania, Croatia, Hungary, North Macedonia, Romania, San Marino and Serbia have all agreed to extend the duration of their euro liquidity lines with the ECB to March 2022.

These lines are aimed at addressing possible euro liquidity needs in non-euro area countries affected by the current financial woes due to the COVID-19 pandemic.

Link to press release

ECB launches 2021 EU-wide stress test

The EBA has finally launched its EU-wide stress test, following the postponement of the 2020 exercise, due to the COVID-19 pandemic. The test is aimed at assessing the impact of an adverse macroeconomic scenario on the solvency of EU banks and allows supervisors to assess if banks’ capital buffers are sufficient to cover losses and support the economy in stressed times.

The ECB will be carrying out its assessment over a sample of 50 banks, 38 of them being from countries under the jurisdiction of the Single Supervisory Mechanism.

Results are expected to be published by 31 July 2021.

Link to press release

ECB makes public consolidated banking data for end-September 2020

The ECB has published its consolidated banking data for end-September 2020. Amongst others, the main takeaways are that the total assets of EU-headquartered credit institutions increased by 5.36%, from €28.2 trillion in September 2019 to €29.7 trillion in September 2020, that the EU rate of non-performing loans dropped by 0.16 percentage points year on year to 2.75% in September 2020, and that the EU average return on equity was 2.19% in September 2020.

Link to press release