EBA finalises preference shares RTS: EBA has published part four of its final draft Regulatory Technical Standards (RTS) on own funds, covering multiple and differentiated distributions. The RTS detail when multiple distributions would constitute a drag on the loss absorbency capacity of Core Equity Tier 1 instruments issued by joint stock institutions. They also define preferential distributions, in respect of which joint-stock institutions would be subject to the same limits as applicable to multiple distributions. Non-joint-stock institutions would not face hard quantitative limits, but rather limits related to the features of the instruments and the nature of their holders. (Source: RTS on Own Funds – Multiple Dividends and Differentiated Distributions)

EBA finalises prudent valuation RTS: EBA has published its final draft RTS on prudent valuation adjustments to trading book positions. Institutions with fair-valued assets and liabilities under €15 billion will be allowed to use a simplified approach that sets Additional Valuation Adjustments (AVAs) at 0.1% of the aggregate absolute value of the fair-valued positions they hold. Institutions above the threshold will have to apply the core approach, which aims at a 90% target level of certainty based on market data or expert judgement as specified. To avoid arbitrage, once the threshold is breached on a consolidated basis the core approach would be compulsory for all the entities in the group. (Source: Prudent Valuation RTS)

EBA finalises additional collateral outflows RTS: EBA has published its final draft RTS on measuring additional outflows resulting from increased collateral calls in derivatives and secured financing transactions during an adverse market scenario. The draft RTS exempt from additional outflows calculations those firms for which the notional amount of derivatives represents less than 10% of their net Liquidity Coverage Ratio outflows. Firms that already use an Internal Model Method (IMM) for counterparty credit risk will be allowed to use an Advanced Method for Additional Outflows (AMAO). Other firms will have to use the Historical Look Back Approach (HLBA), which will also act as floor for firms using AMAO. (Source: RTS on Additional Collateral Outflows)

EBA finalises liquidity requirements RTS: EBA has published final draft RTS related to liquidity requirements under CRR, covering:

  • the currencies for which the justified demand for liquid assets exceeds their availability (the Norwegian krone and the Danish krone);
  • derogations of requirements to hold liquid assets denominated in a particular currency, where those assets are not available; and
  • currencies for which only central government or central bank debt is eligible as collateral for standard liquidity operations at the central bank (the Bulgarian lev). 

(Source: EBA Publishes Draft Standards on Liquidity Requirements)

EBA publishes guidelines on discount to bonus calculations: EBA has published guidelines on the factors to determine the notional discount rate available in the calculation of the cap on variable remuneration. This discount can amount to a maximum of 25% of the variable remuneration, provided it is deferred at least five years. The factors are inflation, the average interest rate of EU government bonds, and a nominal factor to incentivise longer deferral periods. (Source: Guidelines on Discount to Bonus Calculations)