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European Commission announces targeted “quick fix” amendments to EU banking rules Katie Fisher Reports
T
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, have been provided by EU Member States or banks.
an opportunity for banks to accelerate their digital finance development. 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 share- The ‘Quick Fix’ holders and assuming a conserva- The European Commission proposes tive approach to variable remuner- some ‘quick fix’ amendments to EU prudential banking rules due to the ation payments. coronavirus. The targeted changes Moreover, the Commission illusaffect specific aspects of the Capitrates the role banks can play in tal Requirements Regulation (CRR). helping businesses and citizens durIt aims to maximise the capability of ing the pandemic. This includes digibanks to lend and to absorb COVtal services, such as contactless and ID-related losses, while still offering digital payments. The Interpretative security.Valdis Dombrovskis, Executive Communication highlights this as
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