ABoR

Administrative Board of Review

AML

Anti-money laundering

Banking union

one of the building blocks for completing Economic and Monetary Union, which consists of an integrated financial framework with a single supervisory mechanism, a single bank resolution mechanism, and a single rulebook, including for harmonised deposit guarantee schemes, which may evolve into a common European deposit insurance scheme.

Basel Committee on Banking Supervision (BCBS)

the primary global standard-setter for the prudential regulation of banks and a forum for cooperation on banking supervisory matters. Its mandate is to strengthen the regulation, supervision and practices of banks worldwide with the purpose of enhancing financial stability. BCBS members include organisations with direct banking supervisory authority and central banks.

Basel III

a comprehensive set of reform measures, developed by the Basel Committee on Banking Supervision as a reaction to the financial crisis of 2008. Basel III builds upon the Basel II rulebook. Its aim is to strengthen the regulation, supervision and risk management of the banking sector. The measures aim to improve the banking sector’s ability to absorb shocks arising from financial and economic stress, improve risk management and governance, and strengthen banks' transparency and disclosures.

BCBS

Basel Committee on Banking Supervision

BCPs

Basel core principles

BRM

Breach reporting mechanism

BRRD

Bank Recovery and Resolution Directive

CCyB

Countercyclical capital buffers

CET1

Common Equity Tier 1

CFT

Combating the financing of terrorism

CGO

Compliance and Governance Office

CJEU

Court of Justice of the European Union

COI

Centralised On-Site Inspections Division

Common procedures

procedures which apply to both SIs and LSIs. The common procedures enable the ECB to apply the single European rulebook in a consistent way. Common procedures include: granting a banking licence to a new company or extending an initial licence; authorising an acquisition of a participation in an existing institution; withdrawing a banking licence.

Comprehensive assessment

financial health checks which the ECB is required to carry out prior to assuming direct supervision over a credit institution. Comprehensive assessments help to ensure that the banks are adequately capitalised and can withstand possible financial shocks. The assessment comprises an asset quality review and a stress test.

COREP

Common reporting

CRD

Capital Requirements Directive

CRR

Capital Requirements Regulation

CRR/CRD IV

Capital Requirements Regulation and Directive: Regulation (EU) No 575/2013 on prudential requirements for credit institutions and investment firms (CRR) and Directive 2013/36/EU on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms (CRD IV). They are often jointly referred to as CRD IV.

CSSF

Commission de Surveillance du Secteur Financier

EBA

European Banking Authority

ECB

European Central Bank

ESCB

European System of Central Banks

ESCB/IO

European System of Central Banks and International Organisations

ESMA

European Securities and Markets Authority

ESRB

European Systemic Risk Board

EUCLID

European centralised infrastructure for supervisory data

European Banking Authority (EBA)

an independent EU authority established on 1 January 2011 as part of the European System of Financial Supervision to ensure effective and consistent prudential regulation and supervision across the EU banking sector. Its main task is to contribute to the creation of the European single rulebook in banking, the objective of which is to provide a single set of harmonised prudential rules throughout the EU.

Failing or likely to fail (FOLTF)

there are four reasons why a bank can be declared failing or likely to fail: (i) it no longer fulfils the requirements for authorisation by the supervisor; (ii) it has more liabilities than assets; (iii) it is unable to pay its debts as they fall due; (iv) it requires extraordinary financial public support. At the time of declaring a bank failing or likely to fail, one of the above conditions must be met or be likely to be met.

FCMC

Financial and Capital Market Commission

Financial Stability Board (FSB)

an international body that promotes international financial stability. It does so by coordinating national financial authorities and international standard-setting bodies as they work towards developing strong regulatory, supervisory and other financial sector policies. It fosters a level playing field by encouraging coherent implementation of these policies across sectors and jurisdictions.

FinCEN

Financial Crimes Enforcement Network

FINREP

Financial reporting

Fit and proper assessment

supervisory authorities assess whether candidates for the management bodies in banks are fit and proper. The ECB takes such fit and proper decisions for directors of the 119 biggest banks in the euro area, whereas fit and proper decisions for less significant institutions are taken by the national supervisors, except where a new banking licence is being granted.

FMI

Financial market infrastructures

FOLTF

Failing or likely to fail

FSAP

Financial Sector Assessment Program

FSB

Financial Stability Board

FTE

Full-time equivalent position

GDP

Gross domestic product

G-SIB

Global systemically important bank

G-SII

Global systemically important institutions

ICAAP

Internal Capital Adequacy Assessment Process

IFRS

International Financial Reporting Standards

ILAAP

Internal Liquidity Adequacy Assessment Process

IMAS

SSM Information Management System

Internal Capital Adequacy Assessment Process (ICAAP)

comprises strategies and processes used by banks to assess and maintain, on an ongoing basis, the amounts, types and distribution of internal capital that they consider adequate to cover the nature and level of the risks to which they are or might be exposed. The competent authorities review the ICAAP as part of the SREP.

Internal Liquidity Adequacy Assessment Process (ILAAP)

comprises strategies, policies, processes and systems used by banks to identify, measure, manage and monitor liquidity risk over an appropriate set of time horizons, including intra-day, in order to ensure that institutions maintain adequate liquidity buffers. The competent authorities review the ILAAP as part of the SREP.

Internal model

any risk measurement and management approach applied in the calculation of own funds requirements that is proprietary to a credit institution and requires prior permission by the competent authority in accordance with Part Three of the CRR.

IPS

Institutional protection scheme

IRRBB

Interest rate risk in the banking book

IRT

Internal Resolution Teams

ITS

Implementing Technical Standards

Joint Supervisory Team (JST)

a team of supervisors composed of ECB and NCA staff in charge of the supervision of a significant supervised entity or group.

JSS

Joint Supervisory Standards

JST

Joint Supervisory Team

LCR

Liquidity coverage ratio

Less significant institution (LSI)

any institution that is directly supervised by NCAs, and indirectly supervised by the ECB. In contrast, significant institutions are directly supervised by the ECB.

LSI

Less significant institution

MEP

Member of the European Parliament

Minimum requirement for own funds and eligible liabilities (MREL)

requirement for all EU credit institutions, with the aim of enabling credit institutions to absorb losses in case of failure. The MREL was issued by the European Commission in the Bank Recovery and Resolution Directive (BRRD). It has the same goal as the TLAC requirement. However, the specific capital requirements prescribed by the MREL are calculated differently, following criteria set by the EBA.

MMSR

Money market statistical reporting

MoU

Memorandum of understanding

MREL

Minimum requirement for own funds and eligible liabilities

National competent authority (NCA)

a public authority or body officially recognised by national law, which is empowered by national law to supervise institutions as part of the supervisory system in operation in the Member State concerned.

NCA

National competent authority

Non-objection procedure

standard decision-making process established by the SSM Regulation for the ECB’s supervisory activities. The ECB’s Supervisory Board takes draft decisions, which are submitted to the ECB’s Governing Council for adoption. Decisions are deemed to be adopted unless the Governing Council objects within a defined period of time, not exceeding ten working days.

Non-performing loans (NPLs)

under paragraph 145 of Annex V of the EBA ITS on Supervisory Reporting, these are loans that satisfy either or both of the following criteria (a) material exposures which are more than 90 days past due; (b) the debtor is assessed as unlikely to pay its credit obligations in full without realisation of collateral, regardless of the existence of any past-due amount or of the number of days past due.

NPL

Non-performing loan

NRA

National resolution authorities

ORC

Overall recovery capacity

OSI

On-site inspection

O-SII

Other systemically important institution

Passporting procedures

procedures concerning the freedom of establishment and the freedom to provide services in other Member States of any credit institution authorised and supervised by the competent authorities of another Member State, provided that such activities are covered by the authorisation (as regulated by Articles 33 to 46 of the CRD IV).

Qualifying holding

a holding in a credit institution which represents 10% or more of the capital or of the voting rights, or which makes it possible to exercise a significant influence over the management of that credit institution.

Recovery plan

banks are required to draft recovery plans to prepare for possible financial difficulties and restore their viability in a timely manner during periods of financial distress. The core of the recovery plan outlines a wide range of credible and feasible recovery options to restore viability, for example to improve the capital or liquidity situation.

Resolution plan

in contrast to recovery plans, resolution plans are not drawn up by the banks but are prepared and regularly updated by the SRB and national resolution authorities. A resolution plan comprises a comprehensive description of credible and feasible resolution actions which may be implemented under the SRM if a bank meets all the conditions for resolution. It prepares the measures and the process for the potential orderly resolution of a bank by ensuring the continuity of its critical functions.

RTS

Regulatory technical standards

RWA

Risk-weighted assets

SEP

Supervisory examination programme

SI

Significant institution

Significant institution (SI)

the criteria for determining whether banks are considered significant – and therefore under the ECB’s direct supervision – are set out in the SSM Regulation and the SSM Framework Regulation. To qualify as significant, banks must fulfil at least one of these criteria. Notwithstanding the fulfilment of the criteria, the SSM may declare an institution significant to ensure the consistent application of high-quality supervisory standards. Overall, the ECB oversees directly 119 significant banking groups.

Single Supervisory Mechanism (SSM)

a mechanism composed of the ECB and NCAs in participating Member States for the exercise of the supervisory tasks conferred upon the ECB. The ECB is responsible for the effective and consistent functioning of this mechanism, which forms part of European banking union.

SQA

Supervisory Quality Assurance

SRB

Single Resolution Board

SREP

Supervisory Review and Evaluation Process

SRMR

Single Resolution Mechanism Regulation

SSG

SSM Simplification Group

SSM

Single Supervisory Mechanism

SSM Framework Regulation

the regulatory framework setting out the practical arrangements concerning the cooperation between the ECB and the national competent authorities within the Single Supervisory Mechanism, as provided for in the SSM Regulation.

SSM Regulation

the legal act creating a single supervisory mechanism for credit institutions in the euro area and, potentially, other EU Member States, as one of the main elements of European banking union. The SSM Regulation confers on the ECB specific tasks concerning policies relating to the prudential supervision of credit institutions.

Supervisory Examination Programme (SEP)

for each significant bank, the JST produces a Supervisory Examination Programme, which sets out the main supervisory tasks and activities for the following 12 months, their tentative schedules and objectives and the need for on-site inspections and internal model investigations.

Supervisory Review and Evaluation Process (SREP)

the process used to guide the supervisory review of significant and less significant credit institutions and to determine whether (on top of minimum requirements) possible additional requirements should be applied with respect to own funds, disclosure or liquidity, or whether any other supervisory measures should be applied.

TRIM

Targeted review of internal models