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European Commission announces targeted “quick fix” amendments to EU banking rules Katie Fisher Reports
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he Interpretative Communication defines how banks and regulators can flexibly apply the accounting and prudential rules. The flexibility in the EU’s regulatory framework covers the rules regulating how banks’ risk-assess of a borrower. It takes into account the inevitable event that some borrowers will not repay a loan due to the sudden economic crisis ensued by the COVID-19 pandemic will affect the amount of money set aside by the bank for any possible losses. It also considers flexibility within the prudential rules on the classification of non-performing loans in the case that relief measures, such as
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guarantee schemes and moratoria, an opportunity for banks to accelhave been provided by EU Member erate their digital finance developStates or banks. ment. However, the Commission The Interpretative Communication also advises banks to approach digalso underlines areas where banks ital banking with caution.The risk of are encouraged to act responsibly. financial crime is likely to increase It highlights circumstances regarding under the current COVID circumdividends and variable remuneration. stances. For example, banks should avoid the distribution of dividends to shareholders and assuming a conservative approach to variable remuneration payments. Moreover, the Commission illustrates the role banks can play in helping businesses and citizens during the pandemic. This includes digital services, such as contactless and digital payments. The Interpretative Communication highlights this as
The ‘Quick Fix’ The European Commission proposes some ‘quick fix’ amendments to EU prudential banking rules due to the coronavirus. The targeted changes affect specific aspects of the Capital Requirements Regulation (CRR). It aims to maximise the capability of banks to lend and to absorb COVID-related losses, while still offering security.Valdis Dombrovskis, Executive
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