Credit Institutions Directly Supervised by the Central Bank

Regulatory Requirements

In line with announcements made by the European Central Bank (ECB) and the European Banking Authority (EBA) to provide flexibility for credit institutions on various regulatory measures, the Central Bank has also assessed where flexibility may be afforded for aspects of the regulatory framework under its remit, and has determined the following:

Postponement of Deadlines for Remedial Actions/Measures by Six Months

The Central Bank is applying a level of flexibility in relation to the deadlines for remedial actions/measures. The following covers those remedial actions/measures related to prudential banking supervision only.

Noting the approach of the SSM for Significant Institutions to postpone by six months existing deadlines for remedial actions imposed in the context of on-site inspections and the verification of compliance with qualitative SREP measures amongst others, the Central Bank recognises that COVID-19 requires regulated entities to take the actions and steps needed to cope with significantly changed operational demands, to remain resilient, and to continue to serve their customers and the economy. The Central Bank expects those regulated entities in a position to meet the existing RMP implementation dates to continue to do so. Individual firms can engage directly with their supervisor where they have difficulties in relation to meeting specific RMP submission dates including the reasons why. Those supervisors will consider on a case-by-case basis whether the postponement of such measures may be necessary in order to achieve the objectives stated above.

For 2020 recovery plans, banks should review their recovery options and assess their plausibility and can expect supervisory engagement on this.

Extension to Regulatory Returns Remittance Dates

In line with the recommendation in the EBA Statement on supervisory reporting and Pillar 3 disclosures in light of COVID-19, the Central Bank is extending remittance dates for a number of reports with reporting dates between March and end May 2020, as listed in Table 1 below.

Table 1: Changes to remittance dates for credit institutions

Return Type Reporting Date (s) Original Remittance Date(s) Revised Remittance Date
COREP OF 31 March 2020 12 May 2020 12 June 2020
COREP LR 31 March 2020 12 May 2020 12 June 2020
FINREP 31 March 2020 12 May 2020 12 June 2020
Asset Encumbrance 31 March 2020 12 May 2020 12 June 2020
Large Exposures 31 March 2020 12 May 2020 12 June 2020
Stable Funding 31 March 2020 12 May 2020 12 June 2020
LCR DA 31 March 2020 and 30 April 2020 15 April 2020 and 15 May 2020 No Change
ALMM 31 March 2020 and 30 April 2020 15 April 2020 and 15 May 2020 No Change
Funding Plans 31 December 2019 31 March 2020 2 June 2020
Basel III Monitoring Exercise 31 December 2019 8 April 2020 10 June 2020
Supervisory Benchmarking Credit Risk (SBP) 31 December 2019 14 April 2020 14 May 2020
Related Party Lending Return 31 March 2020 15 May 2020 12 June 2020
Quarterly Financial Summary Return: Retail Banks 31 March 2020 30 April 2020 12 June 2020
Quarterly Financial Summary Return: Non-Retail Banks 31 March 2020 15 May 2020 12 June 2020
Deposit Guarantee Return 31 March 2020 12 May 2020 12 June 2020

Reliable supervisory reporting is crucial in times when the financial system faces many challenges caused by the COVID-19 outbreak. To examine the effects of COVID-19 on the financial sector, the Central Bank will require additional targeted information to be submitted by credit institutions during this period. While we aim to be measured and pragmatic with these data requests in terms of the type and frequency of requests, recognising the rapidly evolving nature of the situation we are faced with, we expect credit institutions to continue to engage constructively with us and respond to such requests in an expedient manner.

Pillar 3 Disclosures

In line with the EBA Statement on supervisory reporting and Pillar 3 disclosures in light of COVID-19, the Central Bank expects credit institutions to advise of any delay, the reasons for such delay and, to the extent possible, the estimated publication date of their Pillar 3 reports, if they are delayed. In order to address the importance of transparency and uncertainties on the risks faced by credit institutions, credit institutions should assess the need for additional Pillar 3 disclosures on prudential information that may be necessary in order to properly convey the risk profile of the credit institution in the context of the COVID-19 outbreak.

When doing this assessment, credit institutions should take into account the extraordinary measures that competent authorities, central banks, national governments, and other EU bodies have announced to address the adverse systemic economic impact of the outbreak.

ECB/SSM Announcements

The Central Bank has been engaged in efforts to respond to COVID-19 as part of the Eurosystem and the European System of Financial Supervision. Accordingly, in line with the ECB announcement of 12 March 2020, and subsequent FAQs, the Central Bank is implementing a number of measures to provide its directly supervised credit institutions with flexibility in meeting certain capital and liquidity requirements.

Credit institutions will be permitted to use capital instruments that do not qualify as Common Equity Tier 1 (CET1) capital, namely Additional Tier 1 or Tier 2 instruments, to partially meet the Pillar 2 Requirements (P2R) in accordance with Article 104a(4) of CRDV. This brings forward a measure that was scheduled to come into effect in January 2021, as part of the latest revision of the Capital Requirements Directive (CRDV).

Capital and liquidity buffers have been designed to support credit institutions to withstand stressed scenarios. Given the challenges presented by the COVID-19 crisis, the Central Bank will allow credit institutions to operate temporarily below the level of capital defined by the Pillar 2 Guidance (P2G), the capital conservation buffer (CCB) and the liquidity coverage ratio (LCR).

The above measures provide significant capital relief to credit institutions to support of the economy. Credit institutions should continue to apply sound underwriting standards, pursue adequate policies regarding the recognition and coverage of non-performing exposures, and conduct solid capital and liquidity planning and robust risk management.

EBA Announcements

In line with announcements made on regulatory flexibility from the EBA, the Central Bank confirms that it will apply the measures as outlined in the EBA’s recent announcements:

Remuneration and dividends

Following on from recent EBA and ECB statements, the Central Bank expects that:

  • Credit institutions review their remuneration policies and practices and awards to ensure that they are consistent with and promote sound and effective risk management also reflecting the current economic situation;
  • Remuneration, in particular, its variable portion should be set at a conservative level. Credit institutions should consider whether a larger part of variable remuneration should be subject to longer deferral periods and whether the proportion granted in the form of instruments should be increased; and
  • Credit institutions should not pay dividends for the financial years 2019 and 2020 until at least 1 October 2020 and should refrain from share buy-backs aimed at remunerating shareholders.

The economic and financial markets face a period of uncertainty until the full impact of COVID-19 becomes clear. As a result, the Central Bank will continue to review its approach to regulatory flexibility for the duration of the current disruption.

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