EBA publishes a no-action letter on the boundary between the banking book and the trading book provisions

The European Banking Authority (EBA) has issued a no-action letter stating that competent authorities should not prioritize any supervisory or enforcement action in relation to the new banking book-trading book boundary provisions.
The Capital Requirements Regulation (CRR) modifications incorporated specific Basel criteria on the trading book / non-trading book border structure, which will take effect on June 28, 2023.
As part of the ongoing legislative process to alter the CRR, both the Council and the Parliament recommended, in their separate stances, deferring the application date of the border requirements until January 1, 2025.
But, if the legislative procedure finishes beyond June 28, 2023, the lawmakers‘ efforts to postpone the implementation date of the border requirements are null and invalid.
As compared to the remainder of the Fundamental Review of the Trade Book (FRTB) structure, the front-loaded implementation of the border provisions presents numerous important operational issues:
+ Institutions would be subject to a two-step implementation of the border framework that would be operationally complicated and fragmented.
+ They would face an operationally demanding and costly fragmented implementation of the regulations governing position classifications and internal risk transfer between trading and non-trading books.
+ No worldwide jurisdictions anticipated such a two-step implementation of the border and internal-risk transfer regimes. This would effectively subject global institutions to significantly varied regulatory standards depending on where risk management is undertaken, resulting in fragmentation in the regulatory environment and, thus, in financial markets, as well as possible unlevel playing field difficulties.
To remedy this, the EBA has issued an opinion stating that competent authorities should not prioritise supervisory actions or enforcement measures in relation to the new banking and trading book segregation provisions.