EBA Rolls Out Updates for Operational Risk Capital & Supervisory Reporting

Key Takeaways

• Streamlined BI Calculations: The EBA’s updates refine how banks calculate operational risk capital, ensuring better alignment with current accounting standards.
• Simplified Reporting: New ITS for mapping to FINREP will reduce complexity and implementation costs for banks.
• M&A and Disposal Flexibility: Banks now have clearer rules on how to adjust BI for mergers, acquisitions, and disposals, including a materiality threshold for small disposals.
• Efficient Supervision: The EBA’s changes enhance transparency and provide regulators with better data for assessing compliance with operational risk capital requirements.
• Future Guidance: Institutions will receive updated technical tools, including validation rules and taxonomy, in Q4 2025, with the first reference date for reporting set for March 31, 2026.

Deep Dive

The European Banking Authority (EBA) has just published three new technical standards that will reshape how banks calculate and report operational risk capital. These updates are part of the ongoing EU Banking Package, and they aim to streamline processes, reduce costs, and improve overall transparency for both institutions and regulators alike.

On June 16, 2025, the EBA unveiled a set of final draft technical standards that focus on improving how operational risk is assessed across the European banking landscape. These standards are vital in ensuring that institutions are not only compliant with new regulations but also better equipped to handle the complex and evolving nature of operational risk.

What exactly do these changes mean? Well, first up, the Regulatory Technical Standards (RTS) introduced by the EBA will redefine how banks calculate the Business Indicator (BI), a key measure that forms the backbone of operational risk capital requirements. This BI adjustment isn’t just about keeping up with the times; it’s about ensuring that banks can more accurately assess their exposure to operational risk, while also making sure that the information they report is clear and aligned with current accounting standards.

In addition, the Implementing Technical Standards (ITS) aim to simplify the process of mapping the BI to the Financial Reporting (FINREP) framework. By doing so, the EBA hopes to reduce the complexity and costs associated with implementing these standards, making life easier for banks and ensuring consistency in supervisory reporting.

But the changes don't stop there. The Amending ITS are designed to keep the operational risk reporting framework relevant and robust. These amendments focus on refining the data that banks must report, offering more detailed insight into the BI’s components and aligning this with the latest regulations. For regulators, this means they will now have access to even more accurate data when assessing an institution’s compliance with its capital requirements.

What It Means for Banks

One of the most important updates for banks to note is the handling of mergers, acquisitions, and disposals. The new RTS mandate that banks should use actual three-year historical data when these events occur, offering flexibility with alternative methodologies if this data isn’t available. For institutions dealing with regular low-impact disposals, the EBA has introduced a materiality threshold that allows for adjustments without the need for supervisory approval. This is particularly helpful for institutions that frequently divest smaller, lower-risk assets.

Moreover, the updates to the mapping process ensure that the standard BI components are now neatly aligned with the corresponding reporting cells in FINREP. This simple yet critical change means that data will be easier to report, helping banks meet their compliance obligations without unnecessary confusion.

The goal behind these updates is not only to ensure compliance but to make the entire process more efficient and manageable. The EBA is aware of the strain that excessive regulatory demands can place on banks, and these changes are designed to reduce unnecessary burdens. By simplifying reporting and clarifying requirements, the EBA is striving to strike a balance that both protects the financial system and supports the smooth operation of banks.

Compliance and Practicality

Now that the final drafts are out, the ball is in the European Commission’s court. The EBA has submitted the final draft ITS for adoption, and once that happens, institutions will be able to access new technical tools, including validation rules and taxonomy, to help them submit their reporting data in line with the new standards. This package is set to be published by Q4 2025, and it will include everything institutions need to prepare for the new reporting requirements—due to take effect by March 31, 2026.

But that’s not all. The EBA is also planning to release an updated mapping tool for supervisory reporting and disclosure requirements on operational risk, ensuring that the shift to these new standards is as seamless as possible for banks.

The revised standards provide a much-needed opportunity for banks to enhance their risk management frameworks, improve transparency, and, most importantly, contribute to a more secure and stable financial system. After all, a stable financial system benefits everyone, from the banks and their customers to regulators and the broader economy.

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