EBA Publishes Final Technical Standards On The Treatment Of Equity Exposures Under The IRB Approach

The European Banking Authority (EBA) published today its final draft Regulatory Technical Standards (RTS) specifying the treatment of equity exposures under the internal ratings-based (IRB) approach. These RTS will be part of the Single Rulebook aimed at enhancing regulatory harmonisation in the banking sector in the European Union.

These RTS establish that competent authorities are allowed to grant institutions a temporary exemption from the IRB treatment for certain equity exposures provided such exemption was being applied on the last day of application of the Capital Requirements Directive I (CRD I) – 31 December 2007.

This exemption, which was already introduced in the CRD I to partly relieve institutions' capital requirements for equity exposures under the IRB approach, will end on 31 December 2017 and is deemed to have immaterial impact on most institutions.

Legal basis and next steps

These final draft RTS have been developed in accordance with Article 495(3) of Regulation (EU) 575/2013 (Capital Requirements Regulation – CRR) which mandates the EBA to draft regulatory technical standards specifying the conditions according to which competent authorities shall grant institutions a temporary exemption from IRB treatment of certain equity exposures.

The final draft standards have been sent today to the European Commission for their adoption as EU Regulations that will be directly applicable throughout the EU.