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The amendments to existing rules
The amendments to existing rules
The amendments to existing rules are broadly listed below:
- Capital, MREL and TLAC: Changes and enhancements to the total loss absorbing capacity (TLAC) introduced for globally systemic important institutions (GSIIs), as well as minimum requirement of own funds and eligible capital (MREL) rules. There is an emphasis on calculation of own funds, common equity tier 1 and additional tier I and tier II instruments rules.
- Liquidity risk - Net Stable Funding Ratio: Enhancement of the rules to strengthen the long-term liquidity stability aspect in banks by stipulating a binding NSFR ratio.
- Leverage ratio: Introduction of a stipulated leverage ratio requirement for all institutions as well as a leverage ratio buffer for all global systemically important institutions (G-SIIs).
- Standardized Approach - Counterparty Credit Risk (SA-CCR): Amendments to the counterparty credit risk rules and calculation. In theory, the new package identifies SA-CCR as a more risk-sensitive approach compared to others, and that it is a better reflection of the risks of banks’ derivative transactions.
- Increased emphasis on lending to SMEs: This is in line with the EU’s growth drivers. The package includes an increase in the lending amount threshold and reduction of capital requirements.
- Fundamental review of the trading book: The Market Risk Framework will amend banking and trading book methodologies, and has a wider focus on risk regarding the nature, scale and complexity of the various models used by banks.
- Disclosures required for operational risk management: bank practices where they are explicitly required to disclose the own funds requirement , methodologies used for management of operational risk as well as the scope and coverage of the operational risk methodology used.
- Disclosures required for environmental, social and governance (ESG) risks have been added.
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