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EBA Banking Stakeholder Group – Summary of Meeting Minutes (14 December 2017)

Core Content

The EBA Banking Stakeholder Group (BSG) meeting on 14 December 2017 was held in London. The session covered a range of topics, including the role of the BSG, updates on key developments within the EBA, and discussions on specific issues affecting the EU banking sector.

Main Points and Key Information

1. Welcome and Adoption of the Agenda

• The meeting commenced with a welcome from the BSG Chairperson and the EBA Chairperson.
• The agenda was approved, and the EBA staff circulated the previous meeting’s minutes for written approval.

2. Role of the BSG

• The BSG was tasked with providing advice in exceptional circumstances, in line with the EBA's founding Regulation.
• The group agreed to continue seeking consensus in its recommendations.
• There was a suggestion to review and possibly update the BSG’s Rules of Procedure and enhance the BSG section on the EBA website.

3. BSG Update on Recent Developments

• The BSG Chairperson provided an update on the responses to EBA's consultation papers and allocated the preparation of responses among the Technical Working Groups (TWGs).
• TWG leaders presented their ongoing work.

4. EBA Update on General Developments

• EBA Headquarters Move: The EBA planned to relocate to Paris by March 2019, aligning with the UK's exit from the EU.
• BCBS Agreement: The EBA welcomed the agreement but noted challenges in its implementation due to the new Commission and upcoming elections.
• EU-Wide Stress Testing: The EBA published the final methodology for 2018 stress testing, incorporating IFRS 9 standards. Results were expected by 2 November 2018.
• Policy Research Workshop: A workshop on the future role of quantitative models in financial regulation was held in late November 2017.
• Peer Review on O-SIIs: The EBA’s peer review report showed compliance with its guidelines, although some requirements were not fully applied across all jurisdictions.
• Significant-Plus Branches: New guidelines on significant branches were finalized to support banks restructuring due to Brexit.
• PSD2 Transition: The EBA was finalizing an opinion on the transition from PSD1 to PSD2, expected before year-end 2017, to ensure a smooth implementation.

5. EBA Update on Key Risks in the EU Banking Sector

• The EBA highlighted improved capital positions and asset quality, but noted that NPLs remain a challenge.
• Banks' profitability showed positive signs, but the cost of equity was still higher than return on equity.
• The EBA acknowledged concerns about the impact of PSD2 and Fintech on profitability and suggested further analysis.
• Cyber risks were discussed, with the EBA planning to enhance qualitative assessments in future questionnaires.
• CT1 and Additional T1 instruments were mentioned, with a decrease in spreads noted.

6. EBA Work Programme (A-Point)

• Pillar 2 Framework: The EBA was updating its SREP, IRRBB, and Stress Testing guidelines. The Pillar 2 Guidance was described as a management buffer to be held above Overall Capital Requirements.
• NPLs: The EBA outlined its work on NPL management, including guidelines, disclosure requirements, and templates for NPL transactions. It also mentioned collaboration with ECB, ESMA, and other bodies to strengthen data infrastructure.
• Single Rulebook Q&A Review: The EBA aimed to assess the practical use of Q&As and improve transparency in the process.
• Consumer Protection: The EBA updated on its work under PSD2, including the publication of a Financial Education Report (FER) and a Consumer Trends Report (CTR). It also discussed the Fintech Discussion Paper and the access of third-party providers under PSD2.

7. Discussion on Topics Presented by BSG Members

• Tracker Mortgages in Ireland: A BSG member raised concerns about misleading practices in Ireland, where customers were unable to return to their original tracker rates after a short-term fixed rate period, leading to financial distress.
• CRD V / CRR II / BRRD II / SRM II Legislative Packages: BSG members discussed various concerns, including the timing of Basel FRTB implementation, proportionality for small institutions, remuneration focus, and the scope of the legislation.

8. Other Business (AOB)

• The group noted the future meeting dates of the BSG.

Participants

• BSG Members: Included representatives from banks, consumer associations, academia, and national authorities across several EU countries.
• EBA Staff: Represented by Andrea Enria (Chairperson), Adam Farkas (Executive Director), and other senior officials.

Summary

The meeting focused on the EBA's role in shaping regulatory frameworks, addressing key risks, and supporting the transition from PSD1 to PSD2. It also included discussions on the impact of Brexit, NPL management, and consumer protection. The BSG emphasized the importance of consensus, transparency, and practical implementation of regulatory measures.