Funding Plans

The European Banking Authority (EBA) published its "Guidelines on harmonised definitions and templates for funding plans of credit institutions under Recommendation A4 of ESRB/2012/2" on 19 June 2014.  According to these guidelines, the supervisory authorities are required to monitor and assess the refinancing risks and refinancing management of credit institutions.

The aims of these new guidelines are to promote a unified framework to strengthen sustainable refinancing for credit institutions, to improved the assessment of the feasibility of financing plans, to improve the assessment of the impact on the availability of credit to manufacturing, and the development of a better understanding of innovative financial products and their risks for the sake of market participants and national regulators.

At the heart of the reporting requirements is the question: how is a bank funded?  The reporting requirements include current and planned funding activities, e.g., a prognosis on a 3-year horizon of assets and liabilities, refinancing structures and sources, pricing, acquisition, decommissioning and disposal plans and a forecast of currency mismatches. Both qualitative and quantitative data should be filed. And the competent national supervisory authority (in Germany, the Bundesbank) may request additional information.

Affected are the largest banks, which together hold 75% of the consolidated assets of the national banking system. These institutes face a considerable challenge with respect to adapting their planning process, the development of appropriate data bases, in the representation of the future-oriented business strategies, the expansion of existing validation rules to ensure consistency within the various reporting requirements (cross-validation) as well as additional internal documentation and backtesting.

Regnology offers with ABACUS/DaVinci a reporting software that covers the funding plan reporting requirements of the EBA.