Regulations and Guidelines related to the Capital Requirements Regulation

Guidelines of the European Central Bank on the exercise of options and discretion allowed by the Union

The European Central Bank (ECB), as the supervisor of important credit institutions, has issued a  Regulation [1] providing on the exercise of options and discretion regarding significant credit institutions. The Regulation is binding on significant credit institutions.

The ECB has, in line with the principle of proportionality, identified certain options and discretions that should also be applied to less significant credit institutions. A Guideline [2] published by the ECB lays down how national competent authorities should apply, in relation to less significant institutions, the possibility to exercise options of general application which should be fully aligned in terms of principles concerning all banks supervised within the scope of the Single Supervisory Mechanism. The Guidelines are legally binding on national competent authorities.

The Financial Supervisory Authority is a national competent authority referred to in the ECB Guidelines, and it has applied the ECB Guidelines as of 1 January 2018.

Since Finland has implemented the option referred to in Article 493 of the CRR to exempt certain exposures fully or partly from the quantitative restrictions concerning large exposures, Article 9 of the ECB Guide or Article 6 of the ECB Guidelines do not directly apply to Finnish credit institutions. Quantitative restrictions concerning exceptionally large exposures are provided in a Decree of the Ministry of Finance on exemptions applying to large exposures of credit institutions, investment firms and financial and insurance conglomerates. Furthermore, the Credit Institutions Act provides on exceptions to the limitations, where so-called intragroup items are concerned.

The ECB has issued a Guide  [3] on options and discretions allowed by law regarding such cases involving discretion, which require a case-by-case permission from the competent authority.

In order to ensure a level playing field and a consistent supervisory approach for credit institutions, the ECB has issued a Recommendation [4] to national competent authority on how they should apply their discretionary power to less significant credit institutions. The Recommendation is not legally binding. Its purpose is to harmonise the use of options and discretions in cases that are not of a general application and therefore require case-by-case consideration. The Recommendation also provides guidelines for national supervisory authorities for case-by-case assessment.

The FIN-FSA applies the abovementioned ECB recommendations in considering applications for permission by individual less-significant credit institutions.

[1] REGULATION (EU) 2016/445 OF THE EUROPEAN CENTRAL BANK of 14 March 2016 on the exercise of options and discretions available in Union law (ECB/2016/4) and Regulation (EU) 2022/504 of the European Central Bank of 25 March 2022 amending Regulation (EU) 2016/445 on the exercise of options and discretions available in Union law
[2] GUIDELINE (EU) 2017/697 OF THE EUROPEAN CENTRAL BANK of 4 April 2017 on the exercise of options and discretions available in Union law by national competent authorities in relation to less significant institutions (ECB/2017/9) and Guideline (EU) 2022/508 of the European Central Bank of 25 March 2022 amending Guideline (EU) 2017/697 of the European Central Bank on the exercise of options and discretions available in Union law by national competent authorities in relation to less significant institutions
[3] ECB Guide on options and discretions available in Union law, March 2022.
[4] RECOMMENDATION OF THE EUROPEAN CENTRAL BANK  (ECB/2017/10) of 4 April 2017 on common specifications for the exercise of some options and discretions available in Union law by national competent authorities in relation to less significant institutions and Recommendation of the European Central Bank (ECB/2022/13) of 25 March 2022 amending Recommendation ECB/2017/10 on common specifications for the exercise of some options and discretions available in Union law by national competent authorities in relation to less significant institutions

EBA guidelines with different language versions

Standardised approach to credit risk (section 6),

• Guidelines on the application of the definition of default under Article 178 of Regulation (EU) No 575/2013 (EBA/GL/2016/07) 
• Guidelines on specification of types of exposures to be associated with high risk (EBA/GL/2019/01)
  
  

Internal ratings based approach (section 7),

• Guidelines on the application of the definition of default under Article 178 of Regulation (EU) No 575/2013 (EBA/GL/2016/07)
• Guidelines on PD estimation, LGD estimation and the treatment of defaulted exposures (EBA/GL/2017/16).
• Guidelines for the estimation of LGD appropriate for an economic downturn (EBA/GL/2019/03)
• Guidelines on credit risk mitigation for institutions applying the IRB approach with own estimates of LGDs (EBA/GL/2020/5)

Market risk (section 9)

• Guidelines on Stressed Value at Risk (Stressed VaR) (EBA/GL/2012/2)
• Guidelines on the Incremental Default and Migration Risk Charge (IRC) (EBA/GL/2012/3))
• Guidelines on corrections to modified duration for debt instruments, as referred to in Article 340(3)(2) of Regulation (EU) No 575/2013 (EBA/GL/2016/09)
• Guidelines on the treatment of structural FX positions under Article 352(2) of Regulation (EU) No 575/2013 (Capital Requirements Regulation) (EBA/GL/2020/09)
• Guidelines on criteria for the use of data inputs in the risk-measurement model referred to in Article 325bc of Regulation (EU) No 575/2013 (EBA/GL/2021/07)

Securitisation (section 10):

• Guidelines on Significant Credit Risk Transfer relating to Articles 243 and 244 of Regulation (EU) No 575/2013 (EBA/GL/2014/05)
• Guidelines on implicit support for securitisation transactions, in accordance with Article 248 of Regulation (EU) No 575/2013 (EBA/GL/2016/08)
• Guidelines on the determination of the weighted average maturity of contractual payments due under the tranche of a securitisation transaction in accordance with point (a) of Article 257(1) of Regulation (EU) No 575/2013 (EBA/GL/2020/04)

Large exposures (section 12)

• Guidelines on limits on exposures to shadow banking entities which carry out banking activities outside a regulated framework under Article 395(2) of Regulation (EU) No 575/2013 (EBA/GL/2015/20)
• Guidelines on connected clients under Article 4(1)(39) of Regulation (EU) No 575/2013 (EBA/GL/2017/15)
• Guidelines specifying the conditions for the application of the alternative treatment of institutions’ exposures related to ‘tri-party repurchase agreements’ set out in Article 403(3) of Regulation (EU) 575/2013 for large exposures purposes (EBA/GL/2021/01)
• Guidelines specifying the criteria to assess the exceptional cases when institutions exceed the large exposure limits of Article 395(1) of Regulation (EU) No 575/2013 and the time and measures to return to compliance pursuant to Article 396(3) of Regulation (EU) No 575/2013 (EBA/GL/2021/09)

Disclosure of capital adequacy and liquidity risk information (section 14)

• • • Guidelines on materiality, proprietary and confidentiality and on disclosure frequency under Articles 432(1), 432(2) and 433 of Regulation (EU) No 575/2013 (EBA/GL/2014/14)
    • Guidelines on disclosure of encumbered and unencumbered assets (EBA/GL/2014/03)
    • Guidelines on disclosure requirements under Part Eight of Regulation (EU) No 575/2013 (EBA/GL/2016/11)
    • Guidelines on LCR disclosure to complement the disclosure of liquidity risk management under Article 435 of Regulation (EU) No 575/2013 (EBA/GL/2017/01)
    • Guidelines on uniform disclosures under Article 473a of Regulation (EU) No 575/2013 as regards the transitional period for mitigating the impact of the introduction of IFRS 9 on own funds (EBA/GL/2018/01)
    • Guidelines on disclosure of non-performing and forborne exposures (EBA/GL/2018/10)
    • Guidelines on reporting and disclosure of exposures subject to measures applied in response to the COVID-19 crisis (EBA/GL/2020/07)
    • Guidelines on supervisory reporting and disclosure requirements in compliance with CRR “quick fix” in response to the COVID‐19 pandemic (EBA/GL/2020/11)
    • Guidelines amending Guidelines EBA/GL/2018/01 on uniform disclosures under Article 473a of Regulation (EU) No 575/2013 (CRR) on the transitional period for mitigating the impact of the introduction of IFRS 9 on own funds to ensure compliance with the CRR “quick fix” in response to the COVID-19 pandemic (EBA/GL/2020/12)

• ECB Guide to internal models – General topics chapter, November 2018
• ECB Guide to internal models – Risk type specific chapters, July 2019
• ECB guide to internal models, October 2019 (consolidated version)

• REGULATION (EU) No 575/2013 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012

• COUNCIL REGULATION (EU) No 1024/2013 of 15 October 2013 conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institutions

• REGULATION (EU) No 1093/2010 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 24 November 2010 establishing a European Supervisory Authority (European Banking Authority), amending Decision No 716/2009/EC and repealing Commission Decision 2009/78/EC

• COMMISSION IMPLEMENTING REGULATION (EU) 2016/1646 of 13 September 2016 laying down implementing technical standards with regard to main indices and recognised exchanges in accordance with Regulation (EU) No 575/2013 of the European Parliament and of the Council on prudential requirements for credit institutions and investment firms

• COMMISSION DELEGATED REGULATION (EU) No 241/2014 of 7 January 2014 supplementing Regulation (EU) No 575/2013 of the European Parliament and of the Council with regard to regulatory technical standards for Own Funds requirements for institutions

• COMMISSION DELEGATED REGULATION (EU) 2018/171 of 19 October 2017 on supplementing Regulation (EU) No 575/2013 of the European Parliament and of the Council with regard to regulatory technical standards for the materiality threshold for credit obligations past due

• Commission Delegated Regulation (EU) No 1187/2014 of 2 October 2014 supplementing Regulation (EU) No 575/2013 of the European Parliament and of the Council as regards regulatory technical standards for determining the overall exposure to a client or a group of connected clients in respect of transactions with underlying assets

• COMMISSION DELEGATED REGULATION (EU) 2018/959 of 14 March 2018 supplementing Regulation (EU) No 575/2013 of the European Parliament and of the Council with regard to regulatory technical standards of the specification of the assessment methodology under which competent authorities permit institutions to use Advanced Measurement Approaches for operational risk

• COMMISSION DELEGATED REGULATION (EU) 2015/61 of 10 October 2014 to supplement Regulation (EU) No 575/2013 of the European Parliament and the Council with regard to liquidity coverage requirement for Credit Institutions

• Commission Delegated Regulation (EU) 2022/439 of 20 October 2021 supplementing Regulation (EU) No 575/2013 of the European Parliament and of the Council with regard to regulatory technical standards for the specification of the assessment methodology competent authorities are to follow when assessing the compliance of credit institutions and investment firms with the requirements to use the Internal Ratings Based Approach
• Commission Delegated Regulation (EU) 2021/930 of 1 March 2021 supplementing Regulation (EU) No 575/2013 of the European Parliament and of the Council with regard to regulatory technical standards specifying the nature, severity and duration of an economic downturn referred to in Article 181(1), point (b), and Article 182(1), point (b), of that Regulation

All Regulations and Decisions of the European Commission  implementing the regulatory technical standards prepared by the European Banking Authority are available on the Commission’s website at Banking Prudential Requirements Regulation (europa.eu)