Regulation (EU) 2020/873

What it is

to temporarily ease capital requirements to maximise the ability of banks to lend and absorb losses related to the COVID-19 pandemic, while preserving their resilience. PROPOSED ACT: Regulation of the European Parliament and of the Council. ROLE OF THE EUROPEAN PARLIAMENT: the European Parliament decides in accordance with the ordinary legislative procedure on an equal footing with the Council. BACKGROUND: Regulation (EU) No 575/2013 of the European Parliament and of the Council (the Capital Requirements Regulation or CRR) establishes together with Directive 2013/36/EU (the Capital Requirements Directive or CRD) the prudential regulatory framework for credit institutions operating in the Union. The European Parliament adopted a legislative resolution on the proposal for a regulation of the European Parliament and of the Council amending Regulations (EU) No 575/2013 and (EU) 2019/876 as regards adjustments to be made in response to the COVID-19 pandemic. As a reminder, the proposal aims to introduce targeted changes to EU banking prudential rules (the Capital Requirements Regulation or CRR) with a view to introducing temporary relief from capital requirements in order to maximise banks' ability to lend and absorb losses related to the COVID-19 pandemic, while preserving their resilience. - adjusting the timing of the implementation of international accounting standards for bank capital to mitigate the impact of IFRS 9 on regulatory capital ; - temporarily extend preferential treatment to non-performing loans (NPLs) benefiting from a government guarantee as part of measures to mitigate the economic impact of the COVID-19 pandemic, in compliance with EU state aid rules ; - postpone the date of application of the leverage ratio buffer by one year, until January 2023, in order to give credit institutions more operational capacity and allow them to focus on the more immediate challenges related to the COVID-19 pandemic; - bringing forward the dates of application of certain capital relief measures in the CRR, such as the SME and infrastructure support factors allowing more favourable treatment of certain SME and infrastructure exposures, the possibility for banks to treat certain software as their own capital, and provisions for certain loans secured by pensions or salaries. The European Parliament’s position adopted at first reading in accordance with the ordinary legislative procedure supports the amendment of the Capital Requirements Regulation (CRR). However, it amended the Commission proposal as follows: Temporary prudential filter in view of financial market volatility In view of the extraordinary impact of the COVID-19 pandemic and the extreme levels of volatility in the financial markets that could lead to increased yields on public debt, which in turn would result in unrealised losses on public debt securities held by banks, Members agreed to introduce a temporary prudential filter to neutralise the negative impact of this volatility. Temporary treatment of public debt issued in the currency of another Member State Public financing through the issuance of government bonds denominated in the national currency of another Member…

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