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The new rules
The new rules
The new rules are broadly noted below:
- Introducing the proportionality principle aimed at smaller and less complex entities in the Luxembourg financial market. This is expected to impact their specific administrative and reporting disclosure requirements. This rule takes a different approach to the one-size-fits-all perspective to reduce the burden of risk-based supervisory review. For example, the calculation of NSFR for small and non-complex institutions has been simplified. There is a similar application of proportionality over market risk and liquidity risk rules as well.
- Creation of EU intermediate parent for non-EU banks that have a significant spread of operations in the EU. The rule requires all third country banks to assign or create a parent entity in the EU.
As mentioned previously, the banking package focuses on enhancing transparency in the banking sector. Therefore, the banking package has added disclosures or increased their frequency. For example, risk remuneration in several risk positions to calculation of own funds for market risk, large exposures, rating downgrades, et al.
As for next steps, the legislation will be signed off in May 2019 and is expected to be printed in the Official Journal of the European Union in June. The legislation is enforceable 20 days after publication. Most of the rules go live in the later part of 2021.
The VIP round table event on 24 June 2019 kickstarts KPMG´s Risk Advisory teams response to market queries received over the past few months. Get in touch with our key contacts for workshops, training, impact assessment and implementation plans.
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