The measures grant relief for EU banks to enhance bank lending to companies and households.
By Axel Schiemann and Dominik Schöneberger
On 18 June 2020, the European Parliament approved the so-called CRR “quick fix” to Regulation (EU) 575/2013 (Capital Requirement Regulation (CRR)) and Regulation 2019/876 (Capital Requirement Regulation 2 (CRR2)) to mitigate the economic consequences of COVID-19. The temporary measures are, inter alia, intended to enhance credit flows to companies and households, thereby supporting the EU’s economy.
The key changes include:
- More favorable prudential treatment of SME and infrastructure exposures as well as loans to pensioners and employees (with a permanent contract) backed by the borrower’s pension or salary. The changes would have been implemented under CRR2 middle of next year anyway and are now implemented early.
- Guarantees provided in the context of the COVID-19 pandemic by national governments or other public entities will be treated more favorably for purposes of minimum coverage requirements under the CRR.
- The application of the leverage buffer requirement for globally systemically important institutions, implemented by CRR2, is deferred by one year to 1 January 2023.
- The transitional arrangements for mitigating the impact on own funds of the introduction of IFRS 9 have been extended by two years.
- The possibility of excluding certain exposures to central banks from the calculation of an institution’s total exposure measure was advanced, and the offsetting mechanism has been modified.
The CRR “quick fix” is part of a series of measures taken by the European Union to mitigate the economic impact of the COVID-19 pandemic across the Member States. The measures also include a Commission Interpretative Communication on the application of accounting and prudential frameworks to facilitate EU bank lending, as well as questions and answers for COVID-19-related measures.
For further details, please refer to the text as adopted by the European Parliament.
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