On Mar. 26, FINFSA consulted on risk management regs, guidelines.
FINFSA called for comments on compilation of draft regulations and guidelines X/2024 on procedure for risk management in mortgage banking.
Background
Draft regulations issued on basis of the Act on mortgage credit banks and covered bonds (Act 151/2022) which implemented the covered bonds directive 2019/2162 into national law, and entered into force on Aug. 7, 2022.
Proposed regulations and instructions would repeal regulations, instructions 6/2012.
Purpose of regulations and guidelines is to guide procedures of mortgage credit banks and licensed credit institutions where guidance is not available from the legislation.
Effectiveness
The response period ends on Apr. 23, 2024; feedback planned to be published in May.
Among other things, updated regulations and guidelines includes FINFSA's recommendation on annual confirmation by supervised entity's Board.
Specifically, Board of Directors of the business plan should be presented in connection with license application under s. 8, UKPL, and elements of business plan included.
FINFSA issues regulations on calculation and valuation methods of overcollateralization as per s. 24, UKLPL and on monitoring of overcollateralization rates.
Also, a regular assessment of the impact of alternative scenarios on the amount of overcollateralization and considering effects when determining risk appetite/limits.
FINFSA also issues a recommendation on the information to be entered in the bond register as per s. 27, UKLPL and on storage of records of bond register entries.
As per new regulations FINFSA will issue order requiring documentation of the calculation method for a liquidity coverage requirement as per s. 31 of the UKLPL.
Also, that the method has been approved by supervised entity's Board of Directors.
Includes recommendation on a regular assessment of the impact of alternative scenarios on the cash flows and maximum net outflow quantities of contracts.
Also, considering these effects when determining risk appetite and risk limits.
FINFSA issues a recommendation on content of the application for postponement of the maturity of a covered bond referred to in s. 32, UKLPL and application procedures.
An authorized credit institution that is not a mortgage credit bank as per Collection of Regulations and Guidelines organizes its risk management on mortgage banking.
Specifically comprising into a single entity, so that it has the capacity to separate the function into an independent entity in the event of resolution.
Regulations and Guidelines 2/2024 repeal Regulations and Guidelines 6/2012.
FINFSA states that Regulations and Guidelines 2/2024 are effective Jan. 1, 2025.
