Banking and finance regulatory news, December 2020

SSM banks: ECB guide on climate-related and environmental risks

The ECB has published a guide[15] on climate-related and environmental risks for banks in the single supervisory mechanism (SSM). The guide applies with immediate effect. Banks are expected to consider the extent to which their current management and disclosure practices for climate-related and environmental risks are sound, effective and comprehensive in light of the expectations set out in the guide. Where needed, banks are expected to promptly start enhancing their practices. A report[16] has been published alongside the guide that aims to provide an overview of the level of disclosure of climate-related and environmental risks in SSM countries.

CRR: EBA final draft RTS on treatment of non-trading book positions subject to foreign exchange risk or commodity risk

The EBA has published a final report[17] containing final draft regulatory technical standards (RTS) on the treatment of non-trading book positions subject to foreign exchange (FX) risk or commodity risk under Article 325(9) of the CRR.

Article 325(9) mandates the EBA to develop draft RTS to specify how institutions should calculate the own funds requirements for non-trading book positions that are subject to FX risk or commodity risk in accordance with the alternative standardised approach (SA) and the alternative internal model approach (IMA). In addition, Articles 325bf(4) and 325bg(9) mandate the EBA to draft RTS to specify how institutions are to calculate the changes in hypothetical profit and loss (HPL), actual profit and loss (APL) and risk theoretical profit and loss (RTPL) for the purpose of the back-testing and P&L attribution requirements.

The EBA proposes that the draft Delegated Regulation should enter into force twenty days after its publication in the Official Journal of the EU (OJ).

The EBA will submit the final draft RTS to the European Commission for adoption.

CRR: EBA final draft RTS on treatment of non-trading book positions subject to foreign exchange risk or commodity risk

The EBA has published a final report[18] containing final draft regulatory technical standards (RTS) on the treatment of non-trading book positions subject to foreign exchange (FX) risk or commodity risk under Article 325(9) of the CRR.

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