European Banking Authority

Complementary cost-benefit assessment of the Integrated Reporting Framework - Additional analytical value and operational aspects

Retrieved on: 
Friday, April 5, 2024
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Key Points: 

    Complementary cost-benefit assessment on the Integrated Reporting Framework - Closer alignment with FINREP solo

    Retrieved on: 
    Friday, April 5, 2024
    Reproduction, The, European Banking Authority, Level, Exercise, Integration, Frankfurt, OJ, Sale, Council, Prudential, BIRD, PDF, ITS, ECB, Chapter Three, International, ESCB, CRR, Feasibility study, Data collection, A5, Collection, Financial instrument, Person, A4, EBA, Content, Part, Classification, Chapter Four, Commission, CBA, Publication, Chapter Five, Chapter Six, Fair value, European Central Bank, NCBS, Central bank, Chapter Two, European Parliament, Analysis, Capital Requirements Regulation 2013, Data, BAD, AnaCredit, Risk management

    Complementary cost-benefit assessment on the Integrated Reporting Framework ?

    Key Points: 
      • Complementary cost-benefit assessment on the Integrated Reporting Framework ?
        Executive summary

        2

        towards closer alignment of the two frameworks, rather than implementing all
        changes at once.

      • Complementary cost-benefit assessment on the Integrated Reporting Framework ?
        Executive summary

        3

        1

        Introduction
        The complementary IReF cost-benefit assessment (CBA) followed an earlier
        consultation on an initial CBA that was launched in 2020.

      • The report summarises the feedback received from the banking industry on the
        possible closer alignment of the IReF with FINREP solo.
      • Complementary cost-benefit assessment on the Integrated Reporting Framework ?
        Introduction

        4

        2

        General question on closer alignment
        with FINREP solo
        Closer alignment between the IReF and FINREP solo could allow more substantial
        use of the IReF dataset for supervisory purposes, with the potential benefit of
        reducing ad hoc requests to reporting agents due to a more analytical and stable
        dataset.

      • The ECB legal framework for collecting FINREP solo information (Regulation (EU)
        2015/34)4 currently sets up four different levels of reporting for proportionality
        measures:
        ?

        FINREP data points;

        ?

        over-simplified FINREP;

        ?

        simplified FINREP;

        ?

        full FINREP.

      • Closer alignment does not mean that data
        under the IReF will be collected from reporting agents at the level of the legal entity
        in its entirety.
      • Complementary cost-benefit assessment on the Integrated Reporting Framework ? General
        question on closer alignment with FINREP solo

        5

        Chart 2.1
        General assessment on closer alignment between the IReF and FINREP solo

        Notes: The percentages are calculated for each driver as the simple average of the corresponding frequencies across euro area
        countries.

      • See Annex B of the report ?Complementary cost-benefit assessment of the Integrated Reporting Framework ? Extension of
        the IReF Regulation to cover country-specific requirements? published on the ECB?s website for information on how national results
        are calculated.
      • Members also raised the point that IReF
        information required for closer alignment with FINREP solo would only be collected
        from institutions that are currently subject to FINREP solo reporting.
      • The open text comments that were received in the complementary CBA show that
        different approaches to reporting at the level of the reporting agent may result in
        different expectations regarding closer alignment.
      • There
        were also several comments regarding the frequency and timeliness of the reporting
        of attributes needed for closer alignment with FINREP.
      • Many comments questioned which accounting standards will underpin IReF
        reporting, as those applicable to statistical reporting are often different from those
        relating to FINREP solo reporting.
      • Complementary cost-benefit assessment on the Integrated Reporting Framework ? General
        question on closer alignment with FINREP solo

        7

        3

        Extensions related to concepts already
        available in the IReF baseline scenario
        The IReF baseline scenario includes several accounting concepts that only apply to
        specific financial instruments.

      • See
        Annex B of the report ?Complementary cost-benefit assessment of the Integrated Reporting Framework ? Extension of the IReF
        Regulation to cover country-specific requirements? published on the ECB?s website for information on how national results are
        calculated.
      • See
        Annex B of the report ?Complementary cost-benefit assessment of the Integrated Reporting Framework ? Extension of the IReF
        Regulation to cover country-specific requirements? published on the ECB?s website for information on how national results are
        calculated.
      • See
        Annex B of the report ?Complementary cost-benefit assessment of the Integrated Reporting Framework ? Extension of the IReF
        Regulation to cover country-specific requirements? published on the ECB?s website for information on how national results are
        calculated.
      • See
        Annex B of the report ?Complementary cost-benefit assessment of the Integrated Reporting Framework ? Extension of the IReF
        Regulation to cover country-specific requirements? published on the ECB?s website for information on how national results are
        calculated.
      • See
        Annex B of the report ?Complementary cost-benefit assessment of the Integrated Reporting Framework ? Extension of the IReF
        Regulation to cover country-specific requirements? published on the ECB?s website for information on how national results are
        calculated.
      • See
        Annex B of the report ?Complementary cost-benefit assessment of the Integrated Reporting Framework ? Extension of the IReF
        Regulation to cover country-specific requirements? published on the ECB?s website for information on how national results are
        calculated.
      • See
        Annex B of the report ?Complementary cost-benefit assessment of the Integrated Reporting Framework ? Extension of the IReF
        Regulation to cover country-specific requirements? published on the ECB?s website for information on how national results are
        calculated.
      • See
        Annex B of the report ?Complementary cost-benefit assessment of the Integrated Reporting Framework ? Extension of the IReF
        Regulation to cover country-specific requirements? published on the ECB?s website for information on how national results are
        calculated.
      • Complementary cost-benefit assessment on the Integrated Reporting Framework ? Annex A
        Results by type and size of respondent

        57

        ? European Central Bank, 2024
        Postal address
        Telephone
        Website

        60640 Frankfurt am Main, Germany
        +49 69 1344 0
        www.ecb.europa.eu

        All rights reserved.

    The impact of regulatory changes on rating behaviour

    Retrieved on: 
    Tuesday, April 2, 2024
    Długosz, Disagreement, Pi bond, Direct lending, Key, Research Papers in Economics, Finance Secretary (India), University of Oxford, STS, Journal of Economic Perspectives, International, American Economic Review, Life, Columbia Business School, British Academy of Management, Risk assessment, ABS, Rating, EBA, Development, Reputational damage, OBS, CRA, Bond credit rating, Cras, Journal of Monetary Economics, CDO, Becker, Paper, 2007–2008 financial crisis, Raja, University, Environment, Journal of Financial Economics, Perception, H3, Website, Securitization, Working paper, Market, Collection, Total, European Banking Authority, Quarterly Journal of Economics, BBB, Whetten, Column, ESMA, European Journal, Issuer, Asset quality, Information revolution, Federal Reserve Bank, OLS, Statistics, PDF, Private, ECB, Surety, Weighted-average life, CCC, European Commission, Social science, Journal of Financial Stability, JEL, Real, Bias, Journal, Research, Classification, Certification, Commission, Credit, The Journal of Finance, Literature, Karel Škréta, European Central Bank, AA, Finance Research Letters, Origination (telephony), Monetary economics, Section 5, Xia, Kraft Foods, Government, AAA, Mukherjee, Finance, Deku, DOI, White, Risk, IOSCO, MBS, OECD, Wang, Section 4, University Challenge 2013–14, Section 3, Ashcraft, Financial management, Accounting, Financial economics, Fannie Mae, Conference, Pressure, Central bank, Griffin, University of Michigan, Systematic review, EPRS, Freddie Mac, Loan, BCBS, Palgrave Macmillan, R2, Microeconomics, Quarterly Journal, Financial statement analysis, The Japanese Economic Review, Christian Social Union (UK), Green, University of Huddersfield, PSM, Management, Security (finance), Security, Civil service commission, Private placement, American Economic Journal, GFC, Reproduction, IMF, Small business, Trustee, Data

    Abstract

    Key Points: 
      • Abstract
        We examine rating behaviour after the introduction of new regulations regarding Credit Rating
        Agencies (CRAs) in the European securitisation market.
      • There is empirical evidence of rating catering in the securitisation market in the pre-GFC period (He et al.,
        2012; Efing and Hau, 2015).
      • Competition among
        CRAs could diminish ratings quality (Golan, Parlour, and Rajan, 2011) and promotes rating shopping by
        issuers resulting in rating inflation (Bolton et al., 2012).
      • This paper investigates the impact of the post-GFC regulatory changes in the European
        securitisation market.
      • In 2011, in addition to the creation of
        European Securities and Markets Authority (ESMA), a regulatory and supervisory body for CRAs was
        introduced.
      • We examine how rating behaviours have changed in the European securitisation market after the
        introduction of these new regulations.
      • We utilise the existence of multiple ratings and rating agreements between
        CRAs to identify the existence of rating shopping and rating catering, respectively (Griffin et al., 2013; He
        et al., 2012; 2016).
      • We find that the regulatory changes have been effective in tackling conflicts of interest between issuers
        and CRAs in the structured finance market.
      • Rating catering, which is a direct consequence of issuer and
        CRA collusion, seems to have disappeared after the introduction of these regulations.
      • There is empirical evidence of rating catering in the securitisation market in
        the pre-GFC period (He et al., 2012; Efing and Hau, 2015).
      • Competition among CRAs could diminish ratings quality (Golan, Parlour,
        and Rajan, 2011) and promotes rating shopping by issuers resulting in rating inflation (Bolton et
        al., 2012).
      • This paper investigates the impact of the post-GFC regulatory changes in the European
        securitisation market.
      • In 2011, in addition
        to the creation of European Securities and Markets Authority (ESMA), a regulatory and
        supervisory body for CRAs was introduced.
      • We find that the regulatory changes have been effective in tackling conflicts of interest
        between issuers and CRAs in the structured finance market.
      • Rating catering, which is a direct
        consequence of issuer and CRA collusion, seems to have disappeared after the introduction of
        these regulations.
      • Investors who previously demanded higher spreads for rating agreements for a
        multiple rated tranche, did not consider the effect of rating harmony as a risk in the post-GFC
        period.
      • Regarding rating shopping, we find that the effectiveness of the changes has been limited,
        potentially for two reasons.
      • Additionally, we also find that rating over-reliance might still be an issue, especially
        Rating catering is a broad term and it can involve rating shopping.
      • They re-examine the rating shopping and rating
        catering phenomena in the US market by looking at the post-crisis period between 2009 and 2013.
      • Using 622 CDO tranches, they also observe the existence of rating shopping and the diminishing
        of the rating catering.
      • Firstly, our main focus is the EU?s CRA Regulation and its effectiveness in reducing
        rating inflation and rating over-reliance.
      • To the best of our knowledge, this paper is the first to
        examine the effectiveness of the EU?s CRA regulatory changes on the investors? perception of
        rating inflation in the European ABS market.
      • Hence, the coverage and quality of our dataset constitutes significant addition
        to the literature and allows us to test the rating shopping and rating catering more authoritatively.
      • The following section reviews the literature
        on securitisation concerning CRAs and conflicts of interest, and outlines the regulatory changes
        introduced in the post-GFC period.
      • Firstly, ratings became ever more important as the Securities and
        Exchange Commission (SEC) 5 began heavily relying on CRA assessments for regulatory purposes
        (i.e.
      • the investment mandates that highlight rating agencies as the main benchmark for investment
        eligibility) (SEC, 2008; Kisgen and Strahan, 2010; Bolton et al., 2012).
      • issuers) as one of the main explanations for the rating inflation (He et al., 2011; 2012; Bolton
        et al., 2012; Efing and Hau, 2015).
      • Bolton et al., (2012) demonstrate that competition
        promotes rating shopping by issuers, leading to rating inflation.
      • The last phase, CRA III, was implemented in mid-2013 and involves an additional
        set of measures on reducing transparency and rating over-reliance.
      • As mentioned above, rating inflation can be caused by rating shopping
        In order to be eligible to use the STS classification, main parties (i.e.
      • The higher the difference in the number of ratings for a
        given ABS tranche, the greater the risk of rating shopping.
      • Alternatively, the impact of the new
        regulations could be limited when it comes to reducing rating shopping.
      • This is because, firstly,
        the conflict of interest between securitisation parties is not necessarily the sole cause for the
        occurrence of rating shopping.
      • L is a set of variables (Multiple ratings, CRA reported, Rating agreement) that
        we utilise interchangeably to capture the rating shopping and rating catering behaviour.
      • Hence, issuers are incentivised to report the highest possible rating and
        ensure each additional rating matches the desired level.
      • All in all, our results suggest that
        the new stricter regulatory measures have been effective in tackling conflicts of interest and
        reducing rating inflation caused by rating catering.
      • Self-selection might be a concern in analysing the impact of the
        new measures and investors? response with regard to the rating inflation.
      • This
        result is in line with the earlier findings suggesting that regulatory changes have reduced investors?
        suspicion of rating inflation and increased trust of CRAs.
      • Conclusion
        Several regulatory changes were introduced in Europe following the GFC aimed at tackling
        conflicts of interest between issuers and CRAs in the ABS market.
      • Utilising a sample of 12,469
        ABS issued between 1998 and 2018 in the European market, this paper examined whether these
        changes have had any impact on rating inflations caused by rating shopping and rating catering
        phenomena.
      • We find that the
        effectiveness of the changes has been more limited on rating shopping potentially for two reasons.
      • Tranche Credit Rating is the rating reported for a tranche at launch.

    OTP Bank, one of the leading banking groups in Central and Eastern Europe chooses eMACH.ai based complete Digital Core and Lending platform to transform their banking experience

    Retrieved on: 
    Friday, December 8, 2023
    Cloud, Intellect, Bank, DSK Bank, OTP, European, Heart, API, EUR, European Banking Authority, Digital, Retail, Partnership, Headless, IDC, Computation, Workflow, CEE, OTP Bank, Cryptocurrency, Video game

    BUDAPEST, Hungary, Dec. 8, 2023 /PRNewswire/ -- OTP Bank has chosen Intellect Digital Core (IDC) core banking system by Intellect Global Consumer Banking (iGCB), the consumer banking arm of Intellect Design Arena Limited to power its banking experience. The contract was signed by OTP Bank represented by Péter Csányi, Deputy CEO, Chief Digital Officer of OTP Bank and András Becsei Deputy CEO for Retail, and Rajesh Saxena, the CEO of Intellect Global Consumer Banking, Intellect Design Arena today further to the cooperation agreement signed in May 2023.

    Key Points: 
    • OTP Group is one of the largest independent financial service providers in the Central Eastern European region.
    • OTP Group is the 4th most stable banking group in Europe, based on the European Banking Authority's stress test in 2023.
    • Microservices-based, API-enabled, Cloud Native, Headless with underlying AI models) are the most comprehensive Open Finance enabled core banking solution and lending platform globally.
    • Starting today, Intellect platforms will be implemented in parallel in two members of OTP Group: OTP Bank and its subsidiary in Bulgaria, DSK Bank.

    OTP Bank, one of the leading banking groups in Central and Eastern Europe chooses eMACH.ai based complete Digital Core and Lending platform to transform their banking experience

    Retrieved on: 
    Friday, December 8, 2023
    Cloud, Intellect, Bank, DSK Bank, OTP, European, Heart, API, EUR, European Banking Authority, Digital, Retail, Partnership, Headless, IDC, Computation, Workflow, CEE, OTP Bank, Cryptocurrency, Video game

    BUDAPEST, Hungary, Dec. 8, 2023 /PRNewswire/ -- OTP Bank has chosen Intellect Digital Core (IDC) core banking system by Intellect Global Consumer Banking (iGCB), the consumer banking arm of Intellect Design Arena Limited to power its banking experience. The contract was signed by OTP Bank represented by Péter Csányi, Deputy CEO, Chief Digital Officer of OTP Bank and András Becsei Deputy CEO for Retail, and Rajesh Saxena, the CEO of Intellect Global Consumer Banking, Intellect Design Arena today further to the cooperation agreement signed in May 2023.

    Key Points: 
    • OTP Group is one of the largest independent financial service providers in the Central Eastern European region.
    • OTP Group is the 4th most stable banking group in Europe, based on the European Banking Authority's stress test in 2023.
    • Microservices-based, API-enabled, Cloud Native, Headless with underlying AI models) are the most comprehensive Open Finance enabled core banking solution and lending platform globally.
    • Starting today, Intellect platforms will be implemented in parallel in two members of OTP Group: OTP Bank and its subsidiary in Bulgaria, DSK Bank.

    European Supervisory Authorities publish joint criteria on the independence of supervisory authorities

    Retrieved on: 
    Thursday, November 9, 2023
    Review, European Insurance and Occupational Pensions Authority, European Securities and Markets Authority, European Banking Authority, ESMA, EBA, EIOPA, Pension, Pension fund, Property management, European, EU

    25 October 2023

    Key Points: 
    • 25 October 2023
      The three European Supervisory Authorities– the European Banking Authority (EBA), European Insurance and Occupational Pensions Authority (EIOPA) and European Securities and Markets Authority (ESMA) (EBA, EIOPA and ESMA – the ESAs) – today published their joint criteria on the independence of supervisory authorities.
    • Supervisory independence is key to ensure that fair, effective and transparent decisions are taken by appropriately resourced supervisory authorities.
    • Building on these reports and based on the 2021 EIOPA’s criteria and international standards, the ESAs further worked together to issue joint criteria on the independence of supervisory authorities.
    • The criteria can be used by supervisory authorities as a tool to enhance their independence and, at a later stage, by the ESAs to assess supervisory independence in the EU.

    The EBA issues Opinion on a measure to address macroprudential risk following a notification by the Swedish Financial Supervisory Authority

    Retrieved on: 
    Thursday, November 9, 2023
    Review, Civil service commission, SME, European Commission, Council, Opinion, European, EBA, Housing, IRB, Intention, Swedish financial transaction tax, European Banking Authority, Bank

    The measure entails a credit institution-specific minimum level of 25% for the average risk weight of Swedish housing loans applicable to credit institutions that have adopted the internal ratings-based (IRB) approach to calculate their capital requirements..

    Key Points: 
    • The measure entails a credit institution-specific minimum level of 25% for the average risk weight of Swedish housing loans applicable to credit institutions that have adopted the internal ratings-based (IRB) approach to calculate their capital requirements..
    • The measure targets retail exposures secured by real estate, both small and medium-sized (SME) and non-SME exposures.
    • In its Opinion, addressed to the Council, the European Commission, and the Swedish Financial Supervisory Authority, the EBA do not object to the extension of the current measure.
    • The EBAtakes note of ongoing concerns regarding systemic risk relating to the housing market and the persistence of macroprudential vulnerabilities in the Swedish financial system.

    EBA releases the technical package for phase 3 of its 3.3 reporting framework

    Retrieved on: 
    Thursday, November 9, 2023
    ITS, European Commission, XBRL, Bos, Jews and the American Slave Trade, DPM, European, Interest rate risk, European Banking Authority, EBA, Medical device

    30 October 2023

    Key Points: 
    • 30 October 2023
      The European Banking Authority (EBA) today published the technical package for phase 3 of version 3.3 of its reporting framework.
    • This provides the standard specifications that include the validation rules, the Data Point Model (DPM) and the XBRL taxonomies to support the new reporting on Interest Rate Risk in the Banking Book (IRRBB).
    • This technical package will be first used in the ad-hoc data collection for the banks under the QIS (Quantitative Impact Study) with reference date 31 December 2023, in line with the BoS decision EBA BS 2023 514.
    • In the future, this technical package will also be used for the Implementing Technical Standards (ITS) on supervisory reporting concerning IRRBB, currently being adopted by the European Commission (Reporting framework v3.4).

    The EBA consults on draft regulatory technical standards on liquidity requirements and on draft Guidelines on liquidity stress testing of relevant issuers of tokens, under MiCAR

    Retrieved on: 
    Thursday, November 9, 2023
    Crypto, LCR, Undertakings for Collective Investment in Transferable Securities Directive 2009, Policy, ECB, European Securities and Markets Authority, Réseau de télécommunications sociosanitaire, EIOPA, GL, The, Emergency medical technician, Article, European Central Bank, Central bank, Guideline, RTS, European, Investment fund, European Banking Authority, ESMA, Thema International Fund, EBA, Cryptocurrency, Security (finance), EU
    Key Points: 

    The EBA consults on draft technical standards on own funds requirements and stress testing of issuers under MiCAR

    Retrieved on: 
    Thursday, November 9, 2023
    Crypto, Policy, ECB, European Securities and Markets Authority, Time, Réseau de télécommunications sociosanitaire, EIOPA, Member state, Authority, The, Emergency medical technician, Market, European Central Bank, Central bank, RTS, European, European Banking Authority, ESMA, Article, EBA, Cryptocurrency, Security (finance), EU

    08 November 2023

    Key Points: 
    • 08 November 2023
      The European Banking Authority (EBA) today a launched two consultations on draft Regulatory Technical Standards (RTS) on own funds requirements and stress testing of issuers under the Markets in Crypto-Assets Regulation (MiCAR) which form part of the prudential package of MiCAR products.
    • The first RTS specify the adjustment of own funds requirements and stress testing of issuers of asset-referenced tokens and e-money tokens.
    • The second RTS specify the procedure and timeframe to adjust its own funds requirements for issuers of significant asset-referenced tokens or of e-money tokens.
    • These consultations, together with other consultations papers published today, form part of the third batch of MiCAR policy products.