On May 3, 2016, the European Banking Authority (EBA) issued an opinion to the European Commission supporting the Commission’s proposed amendment to the historical look-back approach (HLBA) methodology used in the draft Regulatory Technical Standards (RTS) on additional collateral outflows.
The amendment by the EBA followed a request by the European Commission that the draft RTS be amended so that the calculation of the additional collateral outflows was based on the HLBA for market valuation changes developed by the Basel Committee on Banking Supervision (BCBS). The BCBS’s HLBA focuses on the largest net difference in collateral posted instead of the largest gross difference which had been the focus of the EBA’s approach. In December 2015, the Commission had raised concerns that the EBA’s HLBA approach could have a significant impact on credit institutions and international derivative markets. Therefore, it decided not to adopt the draft RTS as it had been submitted by the EBA, but signalled it was open to endorsing an amended draft RTS based on the BCBS’s HLBA approach.