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Increasing transparency
As part of its efforts to assist in restoring con-
fidence in bank balance sheets, the EBA also
carried out work on RWAs which was aimed
at providing consistency in the way RWAs are
calculated across institutions to reflect their
true risk profile. RWAs are a measure of a
bank’s assets or off-balance sheet exposures,
weighted according to risk.
The EBA has also been supporting the work of
relevant competent authorities in the assess-
ment of asset quality in individual banks. One
notable step was initiated in late 2012 to pro-
vide common definitions in relation to prob-
lems encountered in the repayment of loans.
With completion expected in early 2013, the
definitions of ‘forbearance’ and ‘non-perform-
ing loans’ will provide supervisors and col-
leges with a tool to monitor the asset quality
of banks’ books on a common basis, and will
provide crucial input into future stress tests.
The EBA also worked closely with the Europe-
an Systemic Risk Board (ESRB) to identify in-
stances where accounts or funds may appear
to contain more capital than they actually do.
The EBA has also been asked to produce
guidelines on transparency requirements and
coordinate the identification of best practices
regarding covered bonds and other instru-
ments that generate encumbrance. Work
on asset encumbrance templates is nearing
completion and work has already begun on the
development of funding plan templates.
In 2012, the EBA intensified efforts for improv-
ing the quality and robustness of the reported
data to improve banking supervision. Follow-
ing a public consultation, the EBA worked on
finalising common technical standards on
supervisory reporting and these will be pub-
lished once the final text of the CRR/CRD IV
is available. The new reporting framework will
provide a common base upon which college-
related information can be exchanged.
During 2012, the EBA finalised its risk ‘dash-
board’, which provides an overview on the per-
formance of the banking system and uses a
colour-code system to easily identify major
sources of risks and trends in banks’ risk pro-
files. A firm-specific version of the dashboard
will also become an additional tool for the col-
leges of supervisors.
Supervisory colleges
Colleges of supervisors were established
to enhance cross-border supervision of the
banking sector, through greater cooperation
between national bodies and improved infor-
mation sharing. They consist of two or more
national supervisors and in some cases can
include non-European Economic Area (EEA)
The EBA is tasked with supporting the con-
sistent functioning of colleges of supervisors
established in the EEA. In 2012, the EBA con-
ducted a mapping exercise, working closely
with national competent authorities, to help
monitor colleges in a way appropriate to their
size and complexity and published a good prac-
tices paper for supervisors on joint decisions.
An additional area of activity in 2012 was the
assessment of colleges’ arrangements for
supervisory activities during potential crisis
situations. The EBA engagement and guid-
ance led to a significant increase in the num-
ber of such crisis supervision frameworks
developed by national competent authorities.
The EBA also worked hard to increase har-
monisation of college practices in the run
up to the development of binding technical
standards (BTS) for home-host cooperation
and college functioning. The EBA is currently
drafting nine technical standards relating to
supervisory colleges.