Share

Supervisory Authorities Bolster the Importance of Financial Education

Financial education got a boost last month when both the European Commission, and the three European Supervisory Authorities (EBA, ESMA and EIOPA), collectively called the ESAs, published initiatives related to financial competence and financial digitalization education, respectively. On January 11, 2022, the European Commission and the OECD’s International Network on Financial Education published a joint EU/OECD-INFE financial competence framework for adults. This was a continuation of measures that were announced in Action 7 of the 2020 capital markets union action plan. The joint EU/OECD-INFE’s, Financial Competence Framework for Adults in the European Union, “aims to improve individuals' financial skills so that they can make sound decisions regarding their personal finances. It will support the development of public policies, financial literacy programmes and educational materials by Member States, educational institutions and industry. It will also support the exchange of good practices by policy makers and stakeholders in the EU.”

On January 31, 2022 the European Supervisory Authorities (ESAs) published a, Joint ESAs thematic repository of national financial education initiatives on digitalisation - with a specific focus on cybersecurity, scams and fraud, which consists of 127 national initiatives providing consumers with information on how to improve their financial literacy. The repository, focusing on cybersecurity, scams, and fraud, will also be used to prepare a report on financial education that will be published later in 2022. The majority of the initiatives generally pertain to consumers, but also target retail investors, elderly people, students, children/young people, families; or specific groups such as journalists and mass media representatives; as well as social media and influencers “as sources of information and promoters of investment platforms.”

More information on the Financial Competence Framework for Adults can be found here; and information on the Joint ESAs thematic repository can be found here.

Tags
OECD, European Banking Authority, European Commission

ENCU Urges EBA to Address De-risking

The European Banking Authority (EBA) called for input to understand the impact of de-risking on financial institutions and customers. The European Network of Credit Unions responded to the EBA’s directed questions and highlighted that credit unions are often the subject of de-risking by banks. Reasons for this include perceived regulatory burden and risks associated with AML/CFT requirements and the potential to eat into profits; confusion surrounding responsibility associated with AML/CFT requirements; and conflicting privacy standards in various countries creating difficulty navigating cross-border operations. ENCU noted that de-risking has reduced access to bank services causing credit unions to seek these services from second and third tier banks, which in turn has proven to be costly and burdensome, and therefore a deterrent to the provision of these services to its members.

ENCU’s comment letter to the EBA regarding the impact of de-risking on financial institutions can be found here.

Tags
Comment Letter, European Banking Authority

ENCU Comments on EBA Draft ITS on MREL and TLAC

ENCU responded to the European Bank Authority’s consultation regarding their Draft Implementing Technical Standards (ITS) on Disclosure and Reporting of MREL and TLAC. The draft ITS consisted of the EBA’s proposals for MREL/TLAC templates and tables that implement disclosure and reporting requirements. The EBA hopes to “optimise efficiency by institutions when complying with their disclosure and reporting obligations, to facilitate the use of information by authorities and market participants, and to promote market discipline.” The EBA requested feedback on the necessity, discrepancies, and clarity of specified tables and templates. ENCU emphasized its support for the EBA’s efforts to “to maximise efficiency by institutions when complying with their disclosure and reporting obligations, and to facilitate the use of information by authorities and market participants.” ENCU’s comments on this draft ITS can be found here.

Tags
Comment Letter, ENCU, European Banking Authority

European Banking Authority Releases Consultation on Revised AML/CFT Guidelines

The European Banking Authority (EBA) issued a public consultation on its draft Guidelines regarding revised money laundering and terrorist financing (ML/FT) risk factors. “This update takes into account changes to the EU Anti Money Laundering and Counter Terrorism Financing (AML/CFT) legal framework and new ML/TF risks, including those identified by the EBA’s implementation reviews.” The Guidelines provide factors for institutions to consider when assessing ML/FT risks, guidance on how to adjust due diligence measures to mitigate ML/FT risks once they’re identified, and support supervision efforts to assess a competency of financial institutions risk assessments and AML/CFT policies and procedures. Some of the key changes to the EBA’s guidance includes enhanced due diligence for high-risk third countries, as well as guidance on crowdfunding, corporate finance, PISPs and AISPs and currency exchange activities. The EBA’s press release on this consultation can be found here.

Tags
European Banking Authority

ENCU Responds to EBA Consultation on Draft Implementing Technical Standard on Supervisory Reporting

The European Banking Authority (EBA) solicited comment on their Draft Implementing Technical Standards on supervisory reporting requirements for institutions under Regulation (EU) No 575/2013 (Draft ITS), which addresses “institutions’ compliance with prudential requirements as put forward by the CRR and related technical standards as well as additional financial information required by supervisors to perform their supervisory tasks.” Additionally, the EBA the Draft ITS revised reporting modules to adhere to two amendments to the CRR made in 2019  regarding liquidity, leverage and large exposures; and amending the’ backstop regulation’ “which sets out uniform minimum levels of coverage to ensure that institutions have sufficient loss coverage for future non-performing exposures (NPEs)” The European Network of Credit Unions (ENCU) stated its support for the EBA’s updates and revisions to its Draft ITS, and the incorporation of proportionality in the reporting requirements, however, ENCU urged EBA to encourage finalization of the Basel standards using proportionality in the reporting requirements.  This consultation ran parallel with the EBA’s consultation on ITS on public disclosures; and for more information on ENCU’s response to this consultation, please see our blog post here. ENCU's response to the EBA Consultation on Draft Implementing Technical Standards on Supervisory Reporting can be viewed here

The Draft [ITS] on supervisory reporting requirements for institutions under Regulation (EU) No 575/2013, can be downloaded here.

Tags
Comment Letter, ENCU, European Banking Authority

ENCU Responds to EBA Consultation on Draft Implementing Technical Standard for Pillar 3 Disclosures

The European Banking Authority (EBA) released two public consultations on the Implementing Technical Standard (ITS) for financial institutions’ public disclosure and on supervisory reporting for CRR2. The Draft [ITS] on public disclosures by institutions of the information referred to in Titles II and III of Part Eight of Regulation (EU) No 575/2013 was developed to create uniform disclosure formats under the regulation, as well as update EBA’s policies on the Pillar 3 disclosures, “in order to foster the role of institutions’ disclosures in promoting market discipline through… the development of a comprehensive implementing technical standard (ITS) on disclosure.” The European Network of Credit Unions (ENCU) applauded the EBA’s priority to honor Basel 3’s proportionate approach to small and non-complex institutions by decreasing the number or required disclosures and allowing them to focus only on key metrics. ENCU, however, urged the EBA to provide more detailed guidance within their templates, tables and accompanying instructions regarding which disclosures specifically apply to small and non-complex institutions. For more information on the Draft ITS on supervisory reporting for CRR2 and backstop regulation, check out our blog post here. ENCU's response to the EBA's Draft Implementing Technical Standard for Financial Institutions' Public Disclosure can be found here

The Draft [ITS] on public disclosures by institutions of the information referred to in Titles II and III of Part Eight of Regulation (EU) No 575/2013 can be downloaded here.

Tags
Comment Letter, ENCU, European Banking Authority

ENCU Urges Proportionality in EBA's Reporting Requirements for Market Risk

The European Network of Credit Unions (ENCU) responded to the European Banking Authority's public consultation regarding specific supervisory reporting requirements for market risk. These requirements are the initial elements of the Capital Requirements Regulation's (CRR2) launch of the Fundamental Review of the Trading Book. The consultation serves to "include proposals for a thresholds template, providing insights into the size of institutions’ trading books and the volume of their business subject to market risk, and a summary template, reflecting the own funds requirements under the ‘Alternative Standardised Approach’ for market risk (MKR-ASA)." In a comment letter, ENCU responded directly to the EBA’s Draft Implementing Technical Standards on specific reporting requirements for market risk, and stated its support their Draft Standards, but urged the EBA to finalize these standards with consideration for credit unions by implementing proportional requirements that recognize the limited resources of smaller financial institutions. ENCU’s comment letter can be viewed here.

Tags
Comment Letter, ENCU, European Banking Authority

AML/CFT Cooperation Guidelines Include ENCU Supported Recommendations

The European Supervisory Authorities (ESA), comprised of The European Banking Authority (EBA), European Insurance and Occupational Pensions Authority (EIOPA), and European Securities and Markets Authority (ESMA), published joint guidelines on information exchange and cooperation between the authorities regarding anti-money laundering and counter financing of terrorism (AML/CFT). “The Guidelines are broadly based on, and consistent with, the framework of colleges of prudential supervisors of banks, but the scope of these Guidelines is much wider and encompasses all financial sectors in a proportionate manner.” This is the first time colleges of AML/CFT supervisor have been established in the EU for this purpose.  

The European Network of Credit Unions commented on these guidelines and encouraged prudential regulators to utilize the improved communication with an eye towards reducing regulatory burden on credit unions.  ENCU is pleased to see that many of the adopted guidelines, including the mapping guidelines, were adopted with proportionality in mind and should not significantly increase regulatory burdens on credit unions.  Further, the framework should increase the effectiveness of AML/CFT supervision.  

The ESA’s hope to address long standing compliance failures attributed to cross border AML/CFT crimes that were able to occur due to a failure in communication between AML/CFT supervisors. The guidelines aim to establish a “formal cooperation framework” between supervisors in various Member States in order to maintain effective supervision of firms operating on a cross-border basis. Included is this framework, is an outline for establishing AML/CFT colleges when a firm operates in more than three Member States. Additional information on the ESA joint guidelines and a copy of the guidelines can be found here.

Tags
ENCU, European Banking Authority

ENCU Urges ESA to Minimize AML/CFT Regulatory Burdens

The European Network of Credit Unions urged the European Supervisory Authorities to use the increased communication and collaboration that will be gained as a result of the revised guidelines for the “AML Colleges” to reduce regulatory burden for credit unions. 

These comments came as part of the consultation process on the Draft joint guidelines on the cooperation and information exchange for the purposes of Directive (EU) 2015/849 between competent authorities supervising credit and financial institutions. The AML Colleges will be used to establish supervisory protocols when an institution crosses over multiple countries or jurisdictions for supervision regarding Anti-Money Laundering and Countering Financing of Terrorism.

ENCU noted that AML/CFT burdens are often disproportionately borne by credit unions as they do not have the economies of scale as larger institutions and are not-for-profit, member-owned cooperatives governed by a board of members who usually serve on a voluntary basis without receiving any remuneration for time and resources dedicated to the credit unions.

A copy of the comment letter can be viewed here.

Tags
Comment Letter, ENCU, European Banking Authority

ENCU Urges Reg Burden Relief on EBA's Deposit Guarantee Schemes Levies

The European Network of Credit Unions (ENCU) filed its comment letter on the European Banking Authority’s (EBA) guidelines on methods for calculating contributions to Deposit Guarantee Schemes (DGS) in the European Union.  Michael Edwards, vice president and general counsel of ENCU made several suggestions on the guidelines as follows:

  • Encouraged the continuation of the ability of national competent authorities to have continued discretion to exclude and adjust the core risk indicators for sectors, such as the credit union sector, based on the legal characteristics and reporting requirements of those sectors, noting that the EBA’s DGS methodology would likely impose excessive reporting requirements on credit unions without continued national discretion in this area
  • Urged the EBA to establish DGS levy guidance that takes into account the value of an institution’s covered deposits relative to the DGS funds’ total CD liabilities or total reserves, and sets higher marginal rates of DGS levies on systemically important institutions such as G-SIBs and O-SIIs;
  • Urged the EBA to recognize all private-sector Institutional Protection Schemes (IPS) in its DGS levy guidelines where the IPS has a history of providing support to its member institutions, whether or not the IPS in question is recognized officially by their national competent authority; and 
  • Opposed the use of Return on Assets (RoA) as a core individual risk indicator because credit unions, as not-for-profit cooperatives, do not seek to maximise RoA. Credit unions generally also have lower RoAs than large banks because of their financial inclusion mission, lower percentage of fee income (as opposed to interest income) as a share of total income in a low interest rate environment, and their smaller economies of scale. 

A copy of the comment letter can be viewed here.

Tags
Comment Letter, ENCU, European Banking Authority