Kommissionsvorschlag CRR II/CRD V
Link and Learn CRR II/CRD VOverview and update on the new regulatory packageDublin, 9 November 2017
AgendaOverview3Basel III10 Large Exposures Leverage ratio Exposure to Central Counterparties Net Stable Funding ratioBasel IV22 Fundamental review of the trading book (FRTB) Standardised Approach for Counter party credit risk (SA-CCR) Interest rate risk in the book (IRRBB) DisclosureRecovery and Resolution49 Total loss absorbing capacity- TLACOther Topics2017 Deloitte572
Overview2017 Deloitte
OverviewThe CRR II encompasses the finalisation of Basel III, the initialmeasures of Basel IV and other topics such as Total Loss AbsorbingCapacity (TLAC)Basel IVBasel III Large ExposuresLeverage RatioExposures to CCPsNet Stable FundingRatio Market risk (FRTB) Counterparty Credit risk Interest Rate Risk theBanking Book (IRRBB) DisclosuresCRR II/CRD VOther Topics Proportionality ofregulatory reporting forsmaller institutions Intermediary ParentUndertaking New supervisory regime forinvestment firms SME Supporting FactorRecovery &ResolutionTotal loss absorbingcapacity (TLAC)2017 Deloitte4
OverviewCRR II proposals largely adopt the Basel guidelines with someamendments notedBasel IIILarge exposuresApr2014BCBS # 283Article 395, 390, 507CRRBasel IVMarket Risk/FRTBPart. National definitionNet Stablefunding ratioLeverage RatioExposures toCCPsJun2015Jan2014Apr2016Apr2014BCBS # 324Art. 428, 510 CRRCounterpartyCredit Risk (CCR)DisclosuresPart 1: BCBS # 270Art. 92, 429 CRRPart 2: BCBS # 365/CP1BCBS # 282Article 50, 89, 300, 304, 306,308-310, 497 CRRInterest Rate Riskin the BankingBookJan2016Mar/Apr2014BCBS # 352BCBS # 279Item 273-282, 298, 299Jan2015Part 1: BCBS # 309EBA guidelines(EBA-CP-2016-07)Mar2016Part 2: BCBS # 356/CP1Apr2016Article 433, 435, 455CRREBA-GL-2015-08BCBS # 368Amendment to Basel paper2017 DeloitteArt. 94, 102-106,325, 501 CRRLowKind. 448CRRMediumArticle 84,98 CRDHigh5
OverviewCRR II does not include all of the Basel IV guidelines2017 DeloitteTopicCurrent Stand BCBSStandardised Approach for Credit Risk(BCBS # 347, Dec. 2015)Standardised Approach for theMeasurement of Operational Risk(BCBS # 355, March 2016)Capital Floors(BCBS # 306, Dec. 2014)Review of Credit Valuation AdjustmentRisk Framework(BCBS # 325, July 2015)6
OverviewThe CRR II / CRD V package is expected to be finalised in 20191. January 2014Entry intoforce CRR INovember 23rd, 2016Commission proposal onthe CRR II / CRD VQ2/Q3 2019 (?)Finalised CRRII / CRD V2021/2022 (?)Entry into force ofthe CRR II / CRD V(2 years afterfinalisation On November 23rd, 2016 Published Commission adopted the first draft of a revisedCRR II and CRD V. The reform package also includes a revised version of the BRRD andthe SRMR. Further votes on the acts are carried out in the so-called "Trilogue"(coordinationbetween EU Commission, EU Parliament, EU Council).2017 Deloitte7
OverviewThe CRR II / CRD V negotiation updates The EU negotiations are progressing more slowly than anticipated, and the fast-trackingof some elements of the package (e.g.IFRS9 phase-in) have slowed down talks on itsother components. More detailed negotiations on the NSFR and FRTB are due to kick-off this Autumn, forthe first time, as the Estonian Presidency of the European Council seeks to makeprogress on a broader range of components. US regulatory developments, including the US Treasury’s recommendation to pauseimplementation of the NSFR and FRTB are being frequently cited by EU negotiators asjustification for potentially extending the delay of certain standards (particularly FRTBapplication). It is unlikely that the Council will conclude its internal negotiations on CRR II / CRD Vbefore the end of the year, this now looks more likely to happen in H1 2018.2017 Deloitte8
OverviewThe CRR II / CRD V negotiation updates The European Parliament’s Economic and Monetary Affairs Committee (ECON) is alsodelayed in its parallel negotiations on CRR II / CRD V. These developments, taken together, will push back the date when the Council andParliament can begin negotiations with each other on a final CRR II / CRD V text (talkswhich are expected to take roughly one additional year to complete). As a result, we are updating our projection for the finalisation of CRR II / CRD V fromQ1 2019 to Q2/Q3 2019. This will have a knock-on effect for the implementation of CRR II / CRD V componentsthat are due to apply only 2 years after the law is finalised (e.g. NSFR, FRTB, etc.).2017 Deloitte9
Basel III2017 Deloitte
Large Exposures2017 Deloitte
Large ExposuresOverviewLegal basis Item 395, 390, 507 CRR (Part 4 of the CRR)Calculation logic The calculation logic has not changed in principleExposure (post CRM) to a group of connected customers may not exceed 25% (15% for GSIIs):UpperLimitExposure Tier 1 Capital (T1) 25% (15% forGSII to GSII)Reporting Reporting obligation for 20 largest exposures on a consolidated basis New requirement to report top 10 exposures to unregulated and shadow banking entities Reporting frequency depends on the size of the institution (annual for smaller institutions)Significant changes by CRR II2017 Deloitte The own funds denominator in the calculation of large exposures now excludes Tier 2 capital For exposures from one G-SII to another, a lowered upper limit of 15% of Tier 1 capital is applied Counterparty Credit Risk to be calculated using the CRR II proposed revised approaches. Large Exposure treatment of public sector exposures denominated in non domestic currencies of member statesto be fast tracked (along with IFRS9) Mandatory substitution by reporting institutions using guarantees (no longer optional)12
Leverage ratio2017 Deloitte
Leverage RatioOverviewLegal basis Art. 92, 429a CRR (Part 7 of the CRR)Calculation logic In the CRR II, a binding leverage ratio has been set at 3%Current CRR calculation logic is largely retained with some updatesArt. 429f CRR II: Off-balance sheet exposures can be reduced by credit risk adjustmentsArt. 429c CRR II: Counterparty Credit risk for derivatives will be calculated based on the proposed SA-CCRapproach outlined in Part 3, Title II, Chapter 6, Section 3LeverageRatioTier 1 capital Total Exposures (art 429 (4) 3%Reporting Reporting of the leverage ratio will be annually or more frequently by larger institutions. For small institutions (art430a) there will be an annual requirement.Significant changes by CRR II 2017 DeloitteIntroduction of a the binding 3% leverage ratio with the possibility of a larger buffer for G-SIIs still possibleExtended exemptions for certain exposure types (art 429a)Introduced SA-CCR for determining the exposure values for derivatives included in the LR calculationAllowance for reduction of off-balance sheet items by credit risk adjustmentsInstitutions can reduce exposures to Qualifying CCPs by the amount of the initial margin received from clients (art429c)14
Exposures to CCPs2017 Deloitte
Exposures to Central Counterparties (CCP)The CRR II seeks to align with BCBS final rules (BCBS 282)Risk Exposures to CCPsA 306 CRRCCPA 307 CRRDefault FundClearing memberA 304 CRRCustomerA 305 CRRDraft Regulation Provides additional definitions in art 300 (e.g. Cash transactions and multi level client structure) Clarifies that Initial Margin for the purposes of exposure to CCPs does not include contributions to a CCPfor mutualised loss sharing arrangements (art 301) Transactions settled in cash (e.g. equities, fixed income) are to be treated as trade receivables undersettlement risk rules and the default fund contribution risk weight is set at 0% for these transactions (art301). Calculation of clearing members exposure to clients (and vice versa) is aligned to revised CRR II SA-CCRand internal models methodologies (art 304 and 305) Securities Financing Transactions (SFTs) specifically included in scope (art 304) New simplified methodology for calculating own funds requirements for contributions to the default fund ofthe QCCP (art 308 – EMIR updated also) and modification of formula for non qualifying CCP (art 309). Unfunded contributions to the default fund of a qualifying CCP are subject to a risk weight of 0% (art 310) Removal of the alternative calculation method of the own funds requirement for exposures to a qualifyingCCP (CRR I art. 310)ImpactNo significant increase in capital requirements arise specifically due to changes in the CCP regime, as the riskweight for QCCP trade exposures remains at 2%.2017 Deloitte16
Net Stable Funding Ratio2017 Deloitte
Net Stable Funding RatioOverviewLegal basis Art. 428, 510 CRR (Part 6 of the CRR)Calculation logic The calculation logic has not changed in principleThe amount of the Available Stable Funding must always meet or exceed the Required Stable Funding:Components of ASF and RSF are subject to factors as defined by the CRR IIIAvailable Stable FundingNSFR 100%Required Stable FundingReporting In addition to the obligation to comply with the minimum reporting frequency, a duty of regular monitoring andreporting to the supervisory authority in the event of a shortfall in the NSFR is established in CRR II. There is a proposed quarterly reporting requirement for the NSFR.Significant changes by CRR II2017 Deloitte CRR II sets NSFR to equal or exceed 100% Definition of the calculation factors and categories for the available and required stable funding are based on thedefinitions and categories of the 2015 LCR delegated act Some derogations allowed from requirement to report gross values for for derivatives (art 428d) and Securedlending and capital market driven transactions (art art 428e) Specification of interdependent assets and liabilities (including covered bonds) (art 428f) and assignment of 0%ASF (liabilities with interdependent asset) and RSF (assets with interdependent liability) factors Maturity-based consideration of deferred tax liabilities as available stable funding18
Net Stable Funding RatioInstitutions with high derivatives and SFT volumes as well as coveredbond and securitisation exposure benefit from lower RSF factorsRSF acc. CRR II proposals (1/2)1Very high-quality assets, e.g. receivables fromcentral Banks with Res maturity 6 months0%Unencumbered level 1 assets5%2Including unencumbered assets and assets fromSecured Lending Transactions with financialcustomers with Res maturity 6 months andcollateralised by Level 1 assets (Net where art.428e applies)5%10%3Very high quality Covered Bonds7%15%Including other unencumbered assets and otherassets from Secured Lending Transactions withfinancial customers with Res maturity 6months (Net where art. 428e applies).4(Negative) Market value of netting sets inrelation to derivative contracts which are notsubject to variation margin requirements10%Trade finance and other assets arising fromtransactions with financial customers with Resmaturity 6 months ago15%5Level 2a assets15%6(Negative) Market value of netting sets in relationto derivative contracts with Margining20%7Certain level 2b securitisations depending on thequality of collateral25%2017 Deloitte20%30%The Basel III Liquidity standard provides anRSF factor of of 5% for level 1 assetsAccording to Basel IIIframework to multiply by10%Introduction ofthe Netting-Rulesfor SecuredLendingCovered Bonds aregenerally lessstringently treated inthe CRR than underBasel IIIDerivatives contractswithout Margining Aremuch better placed inthe CRRRSF factor of 15%under Basel IIIIntroduction ofthe Netting-Rulesfor derivativesCertain level 2b assets such as securitisation aretreated more strictly under Basel III19
Net Stable Funding RatioThe reduction of the RSF factor for Retail Loans represents a significantrelief compared to the original NSFR designRSF acc. CRR II proposals (2/2)8Level 2b Covered Bonds30%50%9Certain level 2b securitisations35%50%Level 2b assets (excl. e.g. Covered Bonds)Operational deposits with other financialinstitutions10Assets with Central Govts, PSE, non-financialcompanies, private customers and other assetswith Res Maturity 1 yearCovered Bonds and securitisations aregenerally less stringently treated in the CRRcompared to Basel III. The applicable RSFfactor depends on the rating of the CoveredBonds and for securitisations is post haricutapplied by the LCR DA (LCR DA art 13 (14))50%Assets and receivables from central banks andcredit institutions with Res maturity between 6months and 1 year11Unencumbered mortgage loans and retail loansWith 35% risk weight with Res mat 1 year65%85%Retail loans attract a significantly lower factorcompared to the Basel III first draftframework; The final Basel III paper applies65% factor50%Commodities (physically traded) incl. Gold wereoriginally set at 50%Unencumbered performing loans with a riskweight exceeding 35% and with Res mat 1year12Initial margin posted for derivative contracts85%Commodities Incl. GoldBasically all categories not covered above100%For unencumbered shares or units in CIUs, afactor equal to the respective haircuts according2017 Deloitteto article 15 (2) A to H of LCR DA 2015/61 apply0%55%131420
Net Stable Funding RatioThe ASF factors were largely unchanged in the current CRR designASF acc. to CRR II proposalsOwn funds including additional Tier 1 and Tier 2instruments with Res Mat 1 year, except forinstruments with implicit option which would leadto a reduction in residual maturity to less than 1year if exercised1100%Other deposits, liabilities or instruments witheffective Res mat 1 year, except forinstruments with implicit option which would leadto a reduction in residiaul maturity to less than 1year if exercised2Stable (private customer) Deposits § Article 24 ofthe LCR DA 2015/61 with Res mat 1 year3"Other" (less stable) Deposits § art. 25 of the LCRDA 2015/61 with Res mat 1 year95%90%Operational Deposits § Article 27 of the LCR DA2015/614Liabilities with central governments, PSE,multilateral development banks, creditcooperatives and non-financial companies withRes maturity 1 year50%Stable business relationship (e.g. loan relationship, longcontract duration, etc.) and payment transactionsaccounts; internet deposits are considered "other"deposits by the LCR delegated act and are attract a 90%factorPreferential treatment of liabilities to Credit Unions,Which are included by the Commission on account oftheir excess liquidity and their stable funding structureLiabilities with financial customers and centralbanks with contractual Res mat 6 mths and 1 yearOther liabilities except deferred tax liabilities andminority interests Res mat over 6 mths and 51 yr (50% factor) and 1 year (100%2017 Deloittefactor)0%21
Basel IV2017 Deloitte
Fundamental Review of theTrading Book (FRTB)2017 Deloitte
Fundamental review Of The Trading Book (FRTB)OverviewLegal basis Item 94, 102-106, 325, 501 CRR (Part 3)Calculation logicNew Standardised Approach (For all trading book and FX or commodity position risk generated by banking book positions)Risk Sensitivities and Risk ClassesDelta R.Risk SensitivitiesGeneral int rate rIdentify all risk factorsapplying to an asset andthe exposures for eachrisk factorVega R.Credit spread risk (sec/CTP)Apply risk factorshocks to theexposures identifiedfor each instrumentCurvature REquity riskIntra bucket withinrisk class (e.g. GIRR USD) aggregation(correlation effects)Residual R.Default R.Commodity riskInter bucketaggregation by riskclass (e.g. GIRR)(correlation effects)FX riskAggregation of theCapital Requirementsfor all Risk Classes(no diversification) Increased data requirements for the application of the Sensitivity-based Method Current CRR approach for calculating position, FX and commodity risk is renamed as "Simplified StandardisedApproach„ and can be applied where trading book is below 10% of the balance sheet total and below EUR 300million ("medium-sized“ Trading book activity).Reporting Reporting as part of quarterly COREP reportsSignificant changes by CRR II2017 Deloitte Restricter classifications for trading and banking books with specified requirements for switching between the 2New proportionality for smaller books: exceptions for Institutions with Small/Medium Trading Books New standardised approach for calculating capital requirements to include use of risk sensitivities and therefore becloser aligned (in approach) to internal models approach (desireable from a floor perspective) Stricter model requirements (both in terms of risk management, quality requirements, and internal validation) toensure that the capital requirements derived from internal models represent the trading book risk appropriately24
Fundamental Review of the Trading Book (FRTB)Changed demarcation of the trading bookItems that are mandatory to beassigned to the trading book (104)Items that are mandatory to beassigned to the banking book Positions of Correlation Trading portfolios Instruments designated for secutisation warehousing Instruments managed at trading desks Real Estate holdings Instruments that give rise to a net short credit orequity position Retail and SME credit Instruments resulting from Underwritingcommitments Collective Investment Undertakings (CIU), where nolook through is possible or daily prices are unavailable Derivatives relating to the items above Hedge instruments for the items aboveGeneral presumption ofassignment to the trading book Financial assets and liabilities measured at fair value Instruments as a result of market-making activities CIUs (excluding non-transparent funds) Listed Equities Trading related securities financing transactions Options including bifurcated embedded derivativesfrom instruments in the non-trading book that relateto credit or equity risk2017 Deloitte Will only be assigned to the Trading book if there isan intention to trade or hedge trading activity Institutions must be able to satisfy the compententauthority as to trading/non trading intention. Competent Authorities can also prescribe aninstrument to be classified as a trading or bankingbook instrument.25
Fundamental Review of the Trading Book (FRTB)At European level, exemptions are provided for institutions withsmall/smaller trading booksSize of the trading book12017 Deloitte2On and off balance sheettrading book (absolutemarket values excl. FX andcommodity items) 50mand 5% of total assets Calculation of equity positions for interest andequity instruments in accordance with thecredit risk regulations for the banking book(analogous to current rules for small tradingbooks)On and off balance sheettrading book (absolutemarket values excl. FX andcommodity items) 300Million EUR and 10% oftotal assets Calculation of own funds requirements inaccordance with the current standard approach(to be called ‚simplified‘ under CRR II)All other Institutions Application of the new standardised andinternal approaches Phase-in of regulations (3 years from entry intoforce only 65% own funds requirement)326
Fundamental Review of the Trading Book (FRTB)The SA is revised to include greater sensitivities in the variousmarket risk classesAspects of the SA Consistent methodology for all instruments and all asset classes Use of risk sensitivities (Delta, Vega and Curvature) applied to individual risk factors Consideration of risks not included in the SA via Add-Ons ("Residual risks") Capital requirements are sum of Sensitivity based calculations default risk residuals risks Compared to the current standard approach, higher capital charges are to be expected as default and residualrisks are now calculatedInstrumentsSensitivity basedCalculationsRiskSensitivitiesDelta RiskVega RiskCurvature RiskGIRRCredit Spread (Non Sec.)Credit Spread (Sec/CTP)EquityCommodityFXRisk FactorsDefault Risk2017 DeloitteResidual Risks27
Internal Models Key ChangesOverviewSignificant changes by CRR II Status validation and some tests apply at Trading desk level. Use conditions stre
Basel III Large exposures BCBS # 283 Apr 2014 Article 395, 390, 507 CRR Part. National definition Net Stable funding ratio BCBS # 324 Jun 2015 Art. 428, 510 CRR Leverage Ratio Part 1: BCBS # 270 Jan 2014 Art. 92, 429 CRR Part 2: BCBS # 365/CP1 Apr 2016 Exposures to CCPs BCBS # 282 Apr 2014 Article 50, 89, 300, 304, 306, 308-310, 497 CRR Basel IV
For instance, as proposed in 2016, CRR 2 allows firms with trading book size of under 50m and less than 5% of their total assets to apply the credit risk framework for banking book positions for their trading books. Also, in line with the 2016 proposals, the final CRR 2 framework
CRD is more useful when the experiments are conducted inside the lab. CRD is well suited for the small number of treatments and for the homogeneous experimental material. Layout of CRD Following steps are needed to design a CRD: Divide the entire experimental material or area into a number of experimental units, say n.
2.3.3 - Diesel Control Systems GF50 CRD Electronic Controls GK50 CRD Injector Coding GL50 CRD Intake & Exhaust Systems 2.3.4 - Actuators and Outputs VD50 CRD Injector Leak Back Testing VK80 Diesel Pressure Regulator Performance VK85 Diesel Pressure Regulator Voltage Low VK90 Diesel Pressure Regulator Voltage High 2
Cyber Resilience Review (CRR) Purpose: The CRR is an assessment intended to evaluate an organization's operational resilience and cybersecurity practices of its critical services Delivery: The CRR can be - Facilitated - Self-administered Helps public and private sector partners understand and measure cyber security .
Management, Training and Awareness, and Situational Awareness. Through the CRR, an organization will develop an understanding of its ability to manage cyber risk during normal operations and in the event of an incident. During FY 2018, the CSA program conducted 62 CRR assessments with SLTT government entities across the Nation, including 24 CRR
COMPLETELY RANDOM DESIGN (CRD) Description of the Design -Simplest design to use. -Design can be used when experimental units are essentially homogeneous. -Because of the homogeneity requirement, it may be difficult to use this design for field experiments. -The CRD is best
CRD-320WT, and 700 are specific sizes of Greenheck's model DFD-350 dampers equipped with hardware to facilitate installation with Greenheck model SP ceiling exhaust fans. The CRD-3xx(L, WT) series and CRD-700 dampers are classified to function as a heat barrier in air handling penetrations through fire resistive membrane ceilings.
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