The European Banking Authority (EBA) launched today a consultation on the criteria that competent authorities should use to assess a breach of the large exposure limits. The consultation paper also details the criteria to determine the period of time and the measures for institutions to return to compliance with those limits.
The
consultation runs until 17 May 2021.
The guidelines clarify that any breach of the large exposure limits
of Article 395(1) of the Capital Requirements Regulation (CRR) should
always be considered as an exceptional case. To support competent
authorities in their assessment and harmonise the approach across the
Single Market, the EBA has developed guidelines with criteria to assess
such breaches. Competent authorities should consider at least the
following three criteria: whether the breach was a rare event; whether
the institution could foresee the event when it had applied a proper and
effective risk management; and whether it was caused by reasons beyond
the institution’s control. If the breach does not fulfil those criteria,
the competent authority should not grant the institution more than
three months to restore compliance with the large exposure limit.
Likewise, the guidelines provide competent authorities with a set of
criteria to determine the appropriate time that they could grant
institutions to return to compliance with the large exposure limits.
When an institution is granted more than three months to comply with the
limits, it should present a compliance plan to the competent authority
with a number of measures as listed in the guidelines.
The Guidelines will apply from 1 March 2022.
Consultation process
Comments to this consultation can be sent to the EBA by clicking on
the "send your comments" button on the consultation page. Please note
that the deadline for the submission of comments is 17 May 2021.
A public hearing will take place via conference call on Tuesday 30 March from 13:00 to 15:00 CET.
Legal basis and background
The EBA has developed the draft Guidelines pursuant to the mandate in
Article 396(3) of Regulation (EU) No 575/2013 and in accordance with
Article 16 of its founding Regulation, which mandates the Authority to
issue guidelines and recommendations addressed to competent authorities
or financial institutions with a view to establishing consistent,
efficient and effective supervisory practices within the European System
of Financial Supervision, and to ensuring the common, uniform and
consistent application of Union law.
© EBA
Key
![](Images/bluesquare.png)
Hover over the blue highlighted
text to view the acronym meaning
![](Images/info_small.png)
Hover
over these icons for more information
Comments:
No Comments for this Article