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 in response to the COVID-19 pandemic
The European Commission proposal and interpretive communication, published on 28 April 2020, intends to facilitate bank lending to households and businesses in the EU to help mitigate the economic impact of the Coronavirus.
Proposal for a Regulation amending CRR and CRRII
The legislative proposal (COM(2020)310) includes targeted amendments to EU banking rules in the Capital Requirements Regulation (EU) No 575/2013 (‘CRR’) as amended by the Second Capital Requirements Regulation (EU) 2019/876 (‘CRRII’). These are aimed to maximise the ability of banks to lend and absorb losses related to Coronavirus.
The amendments include changes to the timeline of the application of international accounting standards on banks’ capital (IFRS9) to allow banks more time to mitigate the impact of increase in expected credit losses. They also temporarily extend preferential prudential treatment to non-performing loans that are guaranteed by Covid government schemes.
The amendments also bring forward CRRII provisions that are expected to benefit lending to the real economy, in particular lending to SMEs, infrastructure projects, and employees, by allowing for capital relief for these exposures. Finally, the proposal modifies the offsetting mechanism for central bank exposures in the CRRII leverage ratio requirement, which is due to apply from June 28, 2021 in the EU. It also delays the application of the new leverage ratio buffer for Globally Systemically Important Banks (G-SIBs) by one year, in line with the deferred deadline for implementing the final Basel III revisions.