ECB Annual Report on supervisory activities

The Basel III reforms have not been
finalised yet
In January 2017 the GHoS welcomed the progress made by the BCBS towards
completing the post-crisis regulatory reforms. It noted, however, that more time was
needed to finalise the reform proposals before the GHoS could review them. The
work is expected to be completed in the near future.
More generally, <strong>ECB</strong> Banking Supervision participates in more than 30 groups, subgroups
and task forces of the BCBS. In addition to the revised market risk
framework, the following reforms were agreed during the course of 2016: treatment
of interest rate risk in the banking book, revisions to the securitisation framework,
and a standard for the regulatory capital treatment of banks’ investments in total
loss-absorbing capacity (TLAC). The BCBS also issued public consultations on the
regulatory treatment of accounting provisions and Pillar 3 disclosure requirements.
Contribution to the work of the EBA
At the EU level, <strong>ECB</strong> Banking Supervision continued to work together with the EBA
towards the shared objective of harmonising prudential rules for financial institutions,
which is key to ensuring consistent supervision across the European banking sector.
In 2016 <strong>ECB</strong> Banking Supervision representatives participated in more than 35 EBA
sub-structures (standing committees and sub-groups) and in the main committee,
the EBA Board of Supervisors, in which <strong>ECB</strong> Banking Supervision participates as a
non-voting member.
<strong>ECB</strong> Banking Supervision actively contributes to all the working groups in which it
participates. On Pillar 2, for instance, <strong>ECB</strong> Banking Supervision worked in close
cooperation with the EBA in 2016 regarding the development and implementation of
actions aimed at deepening supervisory convergence in Supervisory Review
and Evaluation Processes (SREP) and Pillar 2 measures. In particular, it has
actively participated in the development of guidelines on the SREP (EBA Guidelines
2014/13), on interest rate risk in the banking book (EBA Guidelines 2015/08 on
IRRBB), on the EBA opinion on the interaction of Pillar 1, Pillar 2 and combined
buffer requirements and restrictions on distributions published on 16 December
2015, and in the development of a common EU approach to Pillar 2 capital guidance.
In addition, <strong>ECB</strong> Banking Supervision cooperated with the EBA in the preparation of
the EBA annual report on supervisory convergence.
<strong>ECB</strong> Banking Supervision also worked closely with the EBA in developing the
regulatory products defined as part of the Internal Ratings-Based Approach
(IRB) 35 review. The <strong>ECB</strong> co-chairs the EBA Task Force on Model Validation, whose
objective is to assist the EBA in fulfilling its regulatory mandates related to credit risk,
with a particular emphasis on IRB-related tasks.
35
The internal ratings-based approach (commonly referred to as “the IRBA”) is one of the possible
approaches that institutions can use to calculate capital requirements for credit risk. The framework
includes two broad approaches that a bank can follow: the foundation approach (FIRB), whereby banks
calculate their own probability of default (PD) parameter, whereas the other risk parameters are
provided in the CRR; and the advanced approach (AIRB), whereby banks calculate all their own risk
parameters.
<strong>ECB</strong> <strong>Annual</strong> <strong>Report</strong> on supervisory activities 2016 − The SSM as part of European and
global supervisory architecture 48