Communication of December 23, 2020 - Implementation for Financial Intermediaries of EBA Guidelines on Reporting Obligations under Regulation 873/2020 (CRR Quick-fix)

1 Communication of December 23, 2020 - Implementation for Financial Intermediaries of the European Banking Authority Guidelines on Reporting Obligations related to the provisions contained in Regulation 873/2020 (so-called CRR Quick-fix).

1. Introduction With the third update of Circular no. 288/2015 “Supervisory provisions for financial intermediaries”, the application of the prudential provisions of Regulation (EU) no. 876/2019 (so-called CRR2), as amended by EU Regulation no. 873/2020 in the context of the COVID-19 pandemic (so-called CRR Quick-fix), regarding own funds, consolidation methods, credit risk, and transitional arrangements, has been extended. With this communication, the Bank of Italy implements, with reference to financial intermediaries, the European Banking Authority (EBA) Guidelines on reporting and disclosure obligations for supervisory purposes in accordance with the «quick fix» for the CRR in response to the COVID-19 pandemic (EBA/GL/2020/11). The EBA Guidelines provide clarifications and indications on the completion of supervisory reporting templates in light of the introduced changes to regulatory requirements. They apply to financial intermediaries limited to the prudential aspects applicable to them, namely credit risk and own funds (1).

2. Content The EBA Guidelines on reporting and public disclosure requirements provide indications on the reporting treatment to be adopted in relation to the following regulatory changes introduced by the CRR Quick fix (2): a) for the purpose of calculating capital requirements for credit risk, the more favorable prudential treatment provided for SMEs, for infrastructure exposures, and for loans to pensioners and employees (with permanent contracts) guaranteed by the borrower's pension or salary (Articles 123, 501 and 501a CRR); b) for reporting related to own funds: i) the introduction of a temporary prudential filter for unrealized gains and losses on financial assets measured at fair value with an impact on overall profitability towards counterparties referred to in Articles 115, para. 2 and 116 para. 4 of the CRR (Article 468 CRR); ii) changes to the transitional provisions for mitigating the impact of IFRS 9 on CET1 which provide, among other things, an increase in the percentage of expected losses to be reintegrated into own funds and a two-year extension of the transitional period (Article 473a CRR).

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1 For banks, the Guidelines were adopted with a communication of September 8, 2020; cf. https://www.bancaditalia.it/compiti/vigilanza/normativa/archivio-norme/comunicazioni/com%2020200908/Com_8settembre2020.pdf. 2 The Guidelines also provide indications regarding further regulatory changes introduced by the CRR Quick fix, which, however, do not apply to financial intermediaries and have not been extended to them in the update of Circular no. 288/2015.

2 Given the context of necessity and urgency and the contained nature of the changes, the Bank of Italy did not conduct a public consultation or a regulatory impact analysis (3). This communication is a general regulatory act binding on financial intermediaries and groups and enters into force on the day of its publication on the Bank of Italy's website. The provisions contained in the Guidelines apply starting from the reports related to the first reference date following the entry into force of this communication.

3 Cf. Article 8, paragraph 1, of the Provision of July 9, 2019 “Regulation on the adoption of normative acts or acts of a general nature by the Bank of Italy in the exercise of supervisory functions, pursuant to Article 23 of Law no. 262 of December 28, 2005”.