NBB Circular NBB_2020_42: Implementation of EBA Guidelines on Harmonised Models and Definitions for Credit Institutions' Funding Plans

NBB_2020_42 – 27 October 2020 Circular – Page 1/3 14 Berlaimont Boulevard – BE-1000 Brussels tel. +32 2 221 38 12 company number: 0203.201.340 RPM Brussels www.bnb.be

Circular
Brussels, 27 October 2020
Reference: NBB_2020_42 your contact:
Sabina Bernardo tel. +32 2 221 58 68 sabina.bernardo@nbb.be

EBA Guidelines on harmonised models and definitions for credit institutions' funding plans in accordance with Recommendation A4 of the European Systemic Risk Board (ESRB) of 20 December 2012 on credit institutions' funding (EBA/GL/2019/05 of 9 December 2019)

Scope
Belgian credit institutions and financial services groups headed by a Belgian regulated entity, a financial company or a Belgian mixed financial company that are declared significant entities under the direct prudential supervision of the European Central Bank (ECB), hereinafter referred to as 'institutions'.

Summary/Objectives
This circular implements the 'EBA Guidelines of 9 December 2019 on harmonised models and definitions for credit institutions' funding plans in accordance with ESRB/2012/2 Recommendation A4 on credit institutions' funding'.

Madam, Sir,

This circular implements within the Belgian prudential framework the EBA Guidelines of 9 December 2019 on harmonised models and definitions for credit institutions' funding plans in accordance with Recommendation 'A4' of ESRB/2012/2. It reproduces in its entirety, in the annex, the French version of the text established by the EBA. The annex is also available on the website of the National Bank of Belgium.

The EBA guidelines aim to establish consistent and effective supervisory practices by harmonising models and definitions for funding plans, in order to ensure compliance with Recommendation A4 of the ESRB/2012/2 recommendations on credit institutions' funding.

The objectives pursued by the establishment of models for funding plans are multiple. They are indeed called upon to facilitate the monitoring and evaluation by the institution of its own funding risks and the management of this type of risk, which is fundamental to assessing the ability of credit institutions, financial companies and mixed financial companies to implement their funding plans in a prudent manner.

From an aggregate perspective, at the national and European level, the analysis of the funding plans of the institutions concerned constitutes an important element in the assessment of the consistency and feasibility of said plans at the level of the national and European banking system.

Furthermore, the aggregate assessment ensures that funding plans will not hinder the supply of credit to the real economy. The examination of funding plans also aims to ensure that these plans do not hinder the supply of credit to the Belgian and European economies.

It has been decided, in cooperation with the ECB 1, that all Belgian credit institutions that are declared significant entities under the direct prudential supervision of the ECB are required to submit their funding plans to the Bank. In this way, the funding plans will cover more than 75% of the total national banking assets, this figure being the threshold indicated in the EBA guidelines. Institutions are invited to submit the funding plans at the highest level of Belgian consolidation, both at the level of the credit institution and at the level of the financial or mixed financial company (if applicable). Belgian subsidiaries of the institutions concerned are therefore exempt from submitting such a plan.

The changes brought by these guidelines aim to improve the understanding of credit institutions' funding plans and the quality of data while reducing the costs related to reporting by harmonising definitions and breakdowns with those used in FINREP. In addition, a new net income statement forecast model has been introduced in order to track trends in the evolution of corporate profitability and its impact on funding. Here is a presentation of the other tables and the main changes made:

• In the presented funding plan models, institutions are asked to declare their balance sheet positions (assets and liabilities) at the time of drawing up the plan and to establish a projection of this data over a three-year period. In the asset part, the breakdown has been revised to include the counterparty sectors for loans and advances (FINREP table F 05.01), debt securities and equity instruments. Additional information on non-performing loans is also requested in order to assess changes following the introduction by the EBA of guidelines on the management of non-performing exposures and restructured exposures. As for liabilities, a breakdown of long-term unsecured debt securities issued has been added.

• A three-year projection of the components of the short-term liquidity ratio (Liquidity Coverage Ratio, LCR) and the long-term (Net Stable Funding Ratio, NSFR) has been introduced.

• Institutions are also requested to provide detailed information on the funding of deposits, funding by the public sector and innovative financing instruments. This information will give an idea of the importance of deposits covered by the deposit guarantee, the degree of dependence on the public sector and innovative but potentially less stable funding sources. The latter have been expanded to include national and supranational financing programmes through repurchase operations of more than one day but less than one year (e.g. main refinancing operations of the ECB). Information on the pricing of loans and deposits as well as on currency asymmetries completes this table, allowing the viability of the funding plans concerned to be assessed.

• The issuance and buy-back of debt securities will be subject to a separate table which also includes several levels of breakdown.

An institution's funding plan is not intended to represent the institution's assessment of its funding capacity under adverse conditions. It should

1 https://www.nbb.be/doc/cp/fr/2017/20170705_eu_ecb_2017_1198.pdf

NBB_2020_42 – 27 October 2020 Circular – Page 3/3 represent the institution's interpretation of the evolution of the forecast balance sheet, excluding unexpected tension elements (in other words 'under normal times'). By their prospective nature, the models presented are therefore complementary to other reporting models (retrospective).

Institutions are requested to submit funding plans on an annual basis with a reference date of 31 December, by 15 March of the following year at the latest via OneGate.

This circular enters into force on 31 December 2020 and replaces Circular NBB_2017_03 which will be repealed on the same date.

A copy of this is addressed to the auditor(s), approved auditor(s) of your institution.

Please accept, Madam, Sir, the expression of our distinguished salutations.

Pierre Wunsch
Governor

Annex 1: EBA Guidelines on harmonised models and definitions for credit institutions' funding plans in accordance with Recommendation A4 of the ESRB/2012/2 (EBA/GL/2019/05 of 9 December 2019)
Annex 2: Instructions
Annex 3: Templates