The European Banking Authority is a regulatory agency of the European Union headquartered in Paris. Its activities include conducting stress tests on European banks to increase transparency in the European financial system and identifying weaknesses in banks' capital structures. The EBA has the power to overrule national regulators if they fail to properly regulate their banks. The EBA is able to prevent regulatory arbitrage and should allow banks to compete fairly throughout the EU. The EBA will prevent a race to the bottom because banks established in jurisdictions with less regulation will no longer be at a competitive advantage compared to banks based in jurisdictions with more regulations as all banks will henceforth have to comply with the higher pan European standard.
The main task of the EBA is to contribute, through the adoption of binding Technical Standards and Guidelines, to the creation of the European Single Rulebook in banking. The Single Rulebook aims at providing a single set of harmonised prudential rules for financial institutions throughout the EU, helping create a level playing field and providing high protection to depositors, investors and consumers. The Authority also plays an important role in promoting convergence of supervisory practices to ensure a harmonised application of prudential rules. Finally, the EBA is mandated to assess risks and vulnerabilities in the EU banking sector through, in particular, regular risk assessment reports and pan-European stress tests. Other tasks set out in the EBA's mandate include:
investigating alleged incorrect or insufficient application of EU law by national authorities
taking decisions directed at individual competent authorities or financial institutions in emergency situations
mediating to resolve disagreements between competent authorities in cross-border situations
acting as an independent advisory body to the European Parliament, the Council or the Commission.
taking a leading role in promoting transparency, simplicity and fairness in the market for consumer financial products or services across the internal market.
To perform these tasks, the EBA can produce a number of regulatory and non regulatory documents including binding Technical Standards, Guidelines, Recommendations, Opinions, Questions and Answers and ad-hoc or regular reports. The Binding Technical Standards are legal acts which specify particular aspects of an EU legislative text and aim at ensuring consistent harmonisation in specific areas. The EBA develops draft BTS which are finally endorsed and adopted by the European Commission. Contrary to other documents such as Guidelines or Recommendations, the BTS are legally binding and directly applicable in all Member States.
Common Reporting Framework
Common Reporting is the standardised reporting framework issued by the EBA for the Capital Requirements Directive reporting. It covers credit risk, market risk, operational risk, own fund and capital adequacy ratios. This reporting framework has been adopted by almost 30 European countries. Regulated institutions are periodically required to file COREP reports, on both a solo and consolidated basis using XBRL in architecture taxonomies. All regulated organisations in the UK must use COREP to make their regular statutory reports from 1 January 2014 onwards.
