EU Banking and Financial Regulation Newsletter – Spring 2021 Edition

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EU Banking and Financial Regulation Newsletter – Spring 2021 Edition

Spring is upon us and the EU-UK trade agreement and cooperation has come to an end. Even with this agreement ratified and fully applied from May 1, 2021, the rifts continue to echo on both sides of the now-quite-familiar division of subjects. From diverse perspectives on transporting vaccines to fishing quotas, the prospects for building new bridges globally are over financial regulatory cooperation or minimal coexistence in the mutual market. Attempts on the proposed regulatory memorandum of understanding end even before equivalence. Various standards on everything from the direction of future supervision of crypto-assets, artificial intelligence (see our comment on these new rules) to ESG methodology, as well as UK changes to MiFID research rules or EU “quick fix” legislation and was previously on- shored in the UK is leading to fragmentation.

Economic growth in Europe is currently diverging as different blocking actions take different directions, making it difficult for the ECB to communicate and report clearly in terms of a toolkit. Crucially, however, the German Constitutional Court gave the green light to pass national legislation confirming the EU Recovery Fund after dismissing legal challenges against the debt-financed common investment scheme backed by the EU budget.

Meanwhile, on April 29, the European Commission and the European Occupational Insurance and Pensions Authority (EIOPA) and industry began discussing options to improve the protection of businesses affected by the COVID-19 pandemic, particularly in removing aid-led measures state ago. is likely to reveal the magnitude of the total damage caused by the health and economic crisis suffered by the EU and its member states. Insurers and re-insurers are like banks, they should be part of the solution. On 28 April, the European Systemic Risk Board warned “The threat of a wave of insolvency loopholes, unless Member States manage a smooth transition of liquidity assistance towards targeted solvency assistance and restructuring the successful corporate debt for profitable businesses ”.

This is not the first time that the ESRB (along with the ECB’s almost monthly statements) has called for more fiscal action and coordination and it is particularly timely as most Member States have sent in their recovery and resilience plans to the European Commission (today, 30 April) as well as to the appropriate national parliaments. France and Germany have introduced a joint plan and these national plans, essential to the realization of the EU’s € 750 trillion Recovery Fund efforts, include ambitious structural reforms. These range from taxation to improving the national labor market as well as improving infrastructure, increasing digitalization and the ecology of the economy, thereby providing additional components of the Green Deal. Once individual Member States’ plans are approved, countries are entitled to receive up to 13% of the funds allocated in advance, possibly by early summer. This all goes hand in hand with the EU’s introduction of its new industrial strategy, which in turn should further support the single market and recovery path.

Early spring and the release of ECB-SSM’s report on its multi-annual targeted review of in-house models (TRIM) begun in 2016, conducted at 65 major credit institutions over more than 200 on-site investigations, can much spring cleaning throughout the banking sector as a whole and not just those that were within their scope. The SSM concluded that “TRIM confirmed that in-house [systemic institutions] models can still be used to calculate their own fund requirements, subject to supervisory measures to ensure an adequate level of fund requirements at all times.” However, the “relevant supervisory measures” that banks now need to implement are based on supervisory “outcomes” – elements that require immediate supervisory attention – with the SSM-ECB reporting over 5,800 results across all type of risk, of which about 30% were. it is considered to be of high or very high severity.
Equally, perhaps more importantly, the ECB-SSM Report provides a detailed overview of findings relating to general topics; credit risk; market risk; and counterparty credit risk. To address these findings, the ECB-SSM is able to issue binding oversight decisions that include obligations or remedial actions necessary to ensure compliance with a legal requirement.

Given that 75% of all obligations have an operating period of more than 12 months, some restrictions (which restrict or modify the permitted use of a template) may be required in cases where non-compliance has resulted to underestimate the requirements assets. In total, 253 supervisory decisions have been or are being issued. Of these, 74% include at least one constraint and 30% include approval of a material model change.

In summary, the ECB-SSM stated that the TRIM project “fully achieved” its primary objectives of reducing the variability of non-risk-based assets (RWAs) and supporting the future oversight of in-country models. ‘MVU. In general, supervisory decisions “… are expected to result in a 12% increase in aggregate RWAs covered by the models assessed in their respective TRIM surveys. This equates to an absolute net increase in RWAs of approximately € 275 billion as a result of the TRIM and an average impact of -51 basis points and an average impact of -71 basis points on the CET1 ratios of the organizations in scope. “TRIM was the first major ECB-SSM project that now has the potential to make a big impact. It’s quite possible, and especially given the ECB and SSM priorities for 2021 and 2022, there will be” success ” TRIM presses for similar future projects.

Regulatory developments in the EU

We present a selection of the major regulatory developments in the EU.

Regulatory developments in Germany

We present a selection of the major regulatory developments in Germany.

Regulatory developments in Spain

We present a selection of the major regulatory developments in Spain.

Regulatory developments in Italy

We present a selection of the major regulatory developments in Italy.

Regulatory developments in Luxembourg

We present a selection of the major regulatory developments in Luxembourg.

Regulatory developments in the Netherlands

We present a selection of the major regulatory developments in the Netherlands.

Regulatory developments in the Czech Republic

We present a selection of the major regulatory developments in the Czech Republic.

Regulatory developments in Romania

We present a selection of the major regulatory developments in Romania.

Our recent thought guide

The following is a carefully curated excerpt from our recent Thinking Leadership contributions.

Regulatory Review of Global Financial Markets – April 2021 Issue

Global: Dentons is pleased to present the April 2021 issue of the Global Financial Markets Regulatory Review. The report combines the views of Dentists’ attorneys with extensive experience in financial markets located in major global financial centers. Reports for each country include links to additional information and contact information for Dentists professionals.

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