Ooni Koda
  1. Home
  2. /
  3. Newsfeed
  4. /
  5. Banking Package 2021: new EU rules to strengthen...

Banking Package 2021: new EU rules to strengthen banks' resilience and better prepare for the future

November 29, 2021

The European Commission has adopted a review of EU banking rules (the Capital Requirements Regulation and the Capital Requirements Directive). These new rules will ensure that EU banks become more resilient to potential future economic shocks, while contributing to Europe's recovery from the COVID-19 pandemic and the transition to climate neutrality.   Today's package finalises the implementation of the Basel III agreement in the EU. This agreement was reached by the EU and its G20 partners in the Basel Committee on Banking Supervision to make banks more resilient to possible economic shocks. Today's proposals mark the final step in this reform of banking rules.   The review consists of the following legislative elements: a legislative proposal to amend the Capital Requirements Directive (Directive 2013/36/EU); a legislative proposal to amend the Capital Requirements Regulation (Regulation 2013/575/EU); a separate legislative proposal to amend the Capital Requirements Regulation in the area of resolution (the so-called “daisy chain” proposal).   The package is comprised of the following parts: Implementing Basel III – strengthening resilience to economic shocks Today's package faithfully implements the international Basel III agreement, while taking into account the specific features of the EU's banking sector, for example when it comes to low-risk mortgages. Specifically, today's proposal aims to ensure that “internal models” used by banks to calculate their capital requirements do not underestimate risks, thereby ensuring that the capital required to cover those risks is sufficient. In turn, this will make it easier to compare risk-based capital ratios across banks, restoring confidence in those ratios and the soundness of the sector overall. The proposal aims to strengthen resilience, without resulting in significant increases in capital requirements. It limits the overall impact on capital requirements to what is necessary, which will maintain the competitiveness of the EU banking sector. The package also further reduces compliance costs, in particular for smaller banks, without loosening prudential standards. Sustainability – contributing to the green transition Strengthening the resilience of the banking sector to environmental, social and governance (ESG) risks is a key area of the Commission's Sustainable Finance Strategy. Improving the way banks measure and manage these risks is essential, as is ensuring that markets can monitor what banks are doing. Prudential regulation has a crucial role to play in this respect.   Today's proposal will require banks to systematically identify, disclose and manage ESG risks as part of their risk management. This includes regular climate stress testing by both supervisors and banks. Supervisors will need to assess ESG risks as part of regular supervisory reviews. All banks will also have to disclose the degree to which they are exposed to ESG risks. To avoid undue administrative burdens for smaller banks, disclosure rules will be proportionate.   The proposed measures will not only make the banking sector more resilient, but also ensure that banks take into account sustainability considerations. Stronger supervision – ensuring sound management of EU banks and better protecting financial stability Today's package provides stronger tools for supervisors overseeing EU banks. It establishes a clear, robust and balanced “fit-and-proper” set of rules, where supervisors assess whether senior staff have the requisite skills and knowledge for managing a bank.   Moreover, as a response to the WireCard scandal, supervisors will now be equipped with better tools to oversee fintech groups, including bank subsidiaries. This enhanced toolkit will ensure the sound and prudent management of EU banks. Today's review also addresses – in a proportionate manner – the issue of the establishment of branches of third-country banks in the EU. At present, these branches are mainly subject to national legislation, harmonised only to a very limited extent. The package harmonises EU rules in this area, which will allow supervisors to better manage risks related to these entities, which have significantly increased their activity in the EU over recent years.   Members of the College said: Valdis Dombrovskis, Executive Vice-President for an Economy that Works for People, said: "Europe needs a strong banking sector to keep lending to the economy as we recover from the COVID-19 pandemic. Today's proposals ensure that we implement the key parts of the Basel III international standards. This is important for the stability and resilience of our banks. We do it by taking into account the specificities of the EU banking sector, and avoiding a significant increase in capital requirements. Today's package will make EU banks stronger and able to support the economic recovery and the green and digital transitions.”   Mairead McGuinness, EU Commissioner responsible for Financial services, financial stability and Capital Markets Union, said: “Banks have an essential role to play in the recovery and it is in all our interests that EU banks are resilient going forward. Today's package makes sure that the EU banking sector is fit for the future, and can continue to be a reliable and sustainable source of finance for the EU economy. By incorporating ESG risk assessments, banks will be better prepared and protected to weather future challenges such as climate risks.”   Didier Reynders, Commissioner for Justice, said: “The board members and key function holders of banks can have a significant influence on the activities of a credit institution. They play a pivotal role in directing the businesses and managing banks' activities in a cautious and sound manner. Harmonised rules were necessary to assess whether board members and key function holders are suitable for their duties. Today's adopted rules will clarify the respective obligations of credit institutions and competent authorities. They will then ensure consistency at EU level and will ultimately contribute to the increased robustness of banks.”   Next steps The legislative package will now be discussed by the European Parliament and Council.   Background In the aftermath of the financial crisis, regulators from 28 jurisdictions across the globe, within the Basel Committee on Banking Supervision (BCBS), agreed on a new international standard for strengthening banks, known as Basel III. This agreement was finalised in 2017. The EU has already implemented the vast majority of these rules, which has resulted in the EU's banking sector being much more robustly capitalised.   As a result, EU banks remained resilient during the COVID-19 crisis, as evidenced by the fact that they continued lending. Today's reforms complete the post-financial crisis agenda with a view to substantially boosting the competitiveness and sustainability of the EU's banking sector.

The text of this article has been partially taken from the publication:
ActMedia
Read in full - click here
FONDUL PROPRIETATEA FINANCIAL RESULTS FOR Q1 2022

  Fondul Proprietatea (hereinafter “The Fund”) published today its financial results for the first three months ended on 31 March 2022 and would like to share the following highlights:   The Fund’s share price registered a strong performance in the first three months reaching a price of RON 2.11 at 31 March 2022, a record […]

Romania’s economy grows 6.5% in first quarter, but pace may not last

Romania’s economy posted a surprising 6.5% growth rate in the first quarter, but economists predict a significant slowdown for the rest of the year, euractiv.com reads. Romania’s GDP grew 6.5% in the first quarter of 2022 compared with the same period of 2021, the statistics institute said in a flash estimate Tuesday (17 May).   […]

Euroins Romania: The time to pay for car repairs continues to be fast: 5 days is the average compensation time

  Euroins Romania Asigurare-Reasigurare SA, the most important player in the Romanian insurance industry, announces new positive results in terms of the time required to process claims and prompt payment of claims in which are not recorded human casualties   On average, in Q1 2022, Euroins paid the claims in just 5 days, 25% faster […]

Current arrears up by RON 12 billion in first four months of 2022

Current arrears increased by RON 12 billion in the first four months of this year, the president of the National Tax Administration Agency (ANAF), Lucian Ovidiu Heius, told on Friday a press conference, mentioning that he will send inspectors to companies to find out what is going on."I noticed a phenomenon in the first four […]

 iBanFirst analysis: The RON’s unusual stability is likely to continue throughout all this year

  Romania is in a very unusual situation. The country is having the most stable exchange rate against the EUR this year compared with CEE peers, the lowest key rate at 3.75 % while running large twin deficits.   This is likely to continue all this year, according to the most recent forecast by the […]

The internal flows of companies in the financial-banking industry can be affected by the rapid pace of legislative novelties

The internal flows of the companies in the financial-banking industry may be affected by the rapid pace of the legislative novelties, the growth of the number of fiscal reports, digitization of the fiscal administrations, and the intensification of the exchange of information between the Romanian fiscal authorities and those of other countries, said the specialists […]