European supervisory agencies reject proposed technical standards changes

ESA’s decide against certain technical updates as it debates and pursues various strands of reform

The various European Supervisory Agencies (ESA’s) e.g. EBA, ESMA and EIOPA, have suggested to the European Commission (EC) that various proposals to amend Regulatory Technical Standards (RTS) are rejected to address stakeholder concerns for clarification and proportionality. This includes proposed amendments around risk mitigation covering OTC derivatives not cleared by a central counterparty, as well as the potential removal of concentration limits on initial margins for pension schemes when assessing and mitigating risk exposures.

The EBA has also separately reported to the EC that the suggestions for EU banks to be able to proportionally assess funding risks using a new and alternative core stable funding ratio (CFR), would be likely to mislead and fail to properly take account of the whole balance sheet when assessing potential funding gaps which is already being covered by the net stable funding ratio (NSFR).

In addition numerous ongoing consultations remain in progress, such as around the basis of setting future target levels for national resolution financing arrangements under the Bank Recovery and Resolution Directive (BRRD), as well as future guidelines on aspects of credit risk management approaches and standards and the treatment of connected clients (as defined by the Capital Requirements Regulation - CRR) under the large exposures regime etc.

The EBA has also announced plans to progress other matters via a series of public events and hearings during the coming months. This includes further work around credit risk management practices, and draft technical standards concerning payment service provisions designed to facilitate access and innovation through robust customer authentication and secure communications under the revised Payments Services Directive (PSD2). Also, a research workshop is scheduled for end-November which will consider the implications and challenges for future regulation brought by increased competition across the banking sector.