EBA publishes Discussion Paper on EU implementation of the revised market and counterparty credit risk frameworks

The European Banking Authority (EBA) published today a Discussion Paper on the implementation in the European Union (EU) of the revised market risk and counterparty credit risk frameworks, i.e. the Fundamental Review of the Trading Book (FRTB) and the Standardised Approach for Counterparty Credit Risk (SA-CCR). This paper discusses some of the most important technical and operational challenges to implement the FRTB and SA-CCR in the EU. The paper aims at providing some preliminary views on how these implementation issues could be addressed and, at the same time, seeks early feedback from the stakeholders on the proposals. The paper also puts forward a roadmap for the development of the regulatory deliverables on the FRTB and SA-CCR included in the CRR2 proposal. The consultation runs until 15 March 2018.

The CRR2 legislative proposal published on 23 November 2016 by the European Commission proposes, inter alia, to transpose into EU law the FRTB and SA-CCR developed by the Basel Committee on Banking Supervision (BCBS). The successful implementation in the EU of these frameworks will represent an important collective challenge over the next years. The EBA is, therefore, of the view that an open discussion on how to jointly address this challenge is necessary.

Without pre-empting the outcome of ongoing legislative discussions with respect to the CRR2 legislative proposal, with this Discussion Paper, the EBA intends to provide preliminary views on how to address some of the most important implementation issues related to the FRTB and SA-CCR. The Discussion Paper covers eight implementation issues, two on SA-CCR and six on the FRTB, and requests stakeholders views on additional implementation issues they may have identified, and which are not included in the scope of the paper.

In addition, the Discussion Paper outlines a roadmap and prioritisation for the development of the regulatory deliverables on FRTB and SA-CCR included in the current CRR2 proposal. The roadmap provides a clear indication of intent of how the EBA is currently prioritising its future work in this area, although priorities may change as part of the ongoing considerations of legislators.

The stakeholders’ preliminary feedback is expected to facilitate the smooth implementation of the FRTB and SA-CCR in the EU once the legislative proposal is adopted, and provide the EBA with valuable information for the development of its future deliverables in this area. The Discussion Paper will, therefore, contribute to the timely implementation of the revised standards in the EU, as planned by the international standard setters, while remaining independent of the final FRTB calibration, which will be agreed by the BCBS.

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 15 March 2018.

A public hearing will take place at the EBA premises on 5 February 2018 from 14 to 17 UK time.

All contributions received will be published following the end of the consultation, unless requested otherwise.

Lavanya Rathnam

Lavanya Rathnam is an experienced technology, finance, and compliance writer. She combines her keen understanding of regulatory frameworks and industry best practices with exemplary writing skills to communicate complex concepts of Governance, Risk, and Compliance (GRC) in clear and accessible language. Lavanya specializes in creating informative and engaging content that educates and empowers readers to make informed decisions. She also works with different companies in the Web 3.0, blockchain, fintech, and EV industries to assess their products’ compliance with evolving regulations and standards.

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