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Mr. Shekhar Aiyar, Mai Chi Dao, Mr. Andreas A. Jobst, Ms. Aiko Mineshima, Ms. Srobona Mitra, and Mahmood Pradhan
This paper evaluates the impact of the crisis on European banks’ capital under a range of macroeconomic scenarios, using granular data on the size and riskiness of sectoral exposures. The analysis incorporates the important role of pandemic-related policy support, including not only regulatory relief for banks, but also policies to support businesses and households, which act to shield the financial sector from the real economic shock.
International Monetary Fund. Monetary and Capital Markets Department
This paper on Austria includes a targeted review of banking regulation and supervision, with a focus on topics related to the supervision of less significant institutions. The national transposition and implementation of EU directives and regulations has significantly closed some of the gaps identified in 2013. Oversight of bank loan portfolios was strengthened by guidance from the European Central Bank and European Banking Authority (EBA) concerning nonperforming loans and forborne exposures, and by EU regulation. As noted in the previous Basel Core Principles assessment, the Austrian Banking Act (BWG) and regulations do not establish an adequate framework for monitoring and addressing transactions with related parties; and the BWG does not require ex-ante approval for acquiring qualifying holdings in undertakings outside the financial sector. Although the BWG amendments strengthened the duties and responsibilities of credit institutions’ supervisory boards, operationally the role may be made more robust by increasing interaction between the supervisory board and banking supervisors.
International Monetary Fund. Monetary and Capital Markets Department
This Technical Assistance report on Bulgaria reviews the formalization and implementation of a comprehensive Supervisory and Review and Evaluation Process (SREP) that includes an explicit and detailed supervisory Pillar 2 capital requirement. The paper highlights that unsound banking practices or regulatory breaches cannot be compensated by complementary capital charges. Loan loss provisions and capital charges for loans created as a result of such practices cannot be created and judged on the basis of the common standards. Banking Supervision Department has developed a methodology for the combined risk assessment and subsequent definition of an additional capital requirement for credit risk. Individual outcomes of the top-down stress tests carried out by the Macroprudential Supervision and Financial Stability Directorate can make a valuable contribution to the SREP. It allows the assessment of the quality of internal control in the institution and its capacity to timely produce complete and reliable data. While capital positions globally are adequate, and soundness indicators have improved, partly as a result of the 2016 Asset Quality Review, nonperforming loans remain high in Bulgaria, with notable differences between the banks.