CONSOLIDATED ANNUAL ACTIVITY REPORT OF THE EUROPEAN BANKING AUTHORITY

YEAR 2016

EBA CONSOLIDATED ANNUAL ACTIVITY REPORT 2016

Consolidated Annual Activity Report of the European Banking Authority

Year 2016

[In pursuance of FR 1605/2002, FFR No 12711/2013]

1 Regulation (EU) No 1271/2013 of 30 September 2013 on the framework financial regulation for the bodies referred to in Article 208 of Regulation (EU, Euratom) No 966/2012 of the European Parliament and of the Council.

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Contents

Board of Supervisors’ analysis and assessment 4

Introduction 5

Executive Summary 6

Part I – Policy Achievements of the year 9

Part II – Management 14

2.1 Management Board 14 2.1.1 Management Board composition as of 31 December 2016 14 2.1.2 Board of Supervisors composition as of 31 December 2016 15

2.2 Major developments 17 2.3 Budgetary and financial management 17

2.4 Human Resources (HR) management 17 2.5 Assessment by management 19

2.5.1 Overall budget implementation rate 19 2.5.2 Legality and regularity 20 2.5.3 Validation of the accounting system 20 2.5.4 Procurement procedures 20

2.6 Budget implementation tasks entrusted to other services and entities 20 2.7 Assessment of audit results during the reporting year 20

2.7.1 Internal Audit Service (IAS) 20 2.7.2 Internal Audit Capability (IAC) 20 2.7.3 European Court of Auditors (ECA) 21

2.8 Follow-up of recommendations and action plans for audits 21 2.8.1 Internal Audit Service (IAS) 21 2.8.2 Internal Audit Capability (IAC) 21 2.8.3 European Court of Auditors (ECA) 21

2.9 Follow-up of observations from the discharge authority 22

Part III – Assessment of the effectiveness of the internal control systems 23

3.1 Risk Management 23 3.1.1 Ethics guidelines and conflict of interest policy 23 3.1.2 Anti-fraud measures 24

3.2 Compliance and effectiveness of Internal Control Standards (ICS) 24

Part IV – Management assurance 26

4.1 Review of the elements supporting assurance 26 4.2 Reservations 26 4.3 Overall conclusions on assurance 26

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Part V – Declaration of Assurance 27

Annex I – Core business statistics 28

Annex II – Statistics on financial management 30

Annex III – Organisational chart (as of 31 December 2016) 38

Annex IV – Establishment plan 39

Annex V – Human and financial resources by activity 42

Annex VI – Annual Accounts 44

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Board of Supervisors’ analysis and assessment

The EBA Board of Supervisors (BoS) takes note of the Consolidated Annual Activity Report 2016, submitted by the Authorising Officer in accordance with Article 47(1) of the Financial Regulation applicable to the EBA.

Analysing and assessing the Annual Activity Report 2016, the BoS has made the following observations.

This report, together with the EBA Annual Report 2016, contains a comprehensive account of the activities carried out by the EBA in the implementation of its mandate and Work Programme during 2016. The EBA has met its obligations under Article 47(1), providing a detailed account of the results achieved in relation to the objectives set in the Work Programme for 2016, financial and management information.

The BoS takes note of the reports of the European Court of Auditors and the Internal Audit Service, and of the EBA’s response to these reports.

The BoS notes that the Executive Director has no reservations or critical issues to report which would affect the presentation of the annual accounts for the financial year 2016 to the discharge authority.

London, 15 June 2017 Andrea Enria Chair of the Board of Supervisors

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Introduction

The European Banking Authority (EBA) was established on 1 January 2011 under Regulation (EU) No 1093/20101 of the European Parliament and of the Council of 24 November 2010. The authority is part of the European System of Financial Supervision (ESFS) and took over all existing responsibilities and tasks of the Committee of European Banking Supervisors.

The EBA works to ensure effective and consistent prudential regulation and supervision across the European banking sector. Its overall objectives are to maintain financial stability in the EU and to safeguard the integrity, efficiency and orderly functioning of the banking sector.

The main task of the EBA is to contribute, through the adoption of binding Technical Standards (BTS) and Guidelines, to the creation of the European Single Rulebook in banking. The Single Rulebook aims at providing a single set of harmonised prudential rules for financial institutions throughout the EU, helping create a level playing field and providing high protection to depositors, investors and consumers.

The Authority also plays an important role in promoting convergence of supervisory practices to ensure a harmonised application of prudential rules. Finally, the EBA is mandated to assess risks and vulnerabilities in the EU banking sector through, in particular, regular risk assessment reports and pan-European stress tests.

Other tasks set out in the EBA's mandate include:

investigating alleged incorrect or insufficient application of EU law by national authorities, taking decisions directed at individual competent authorities or financial institutions in

emergency situations, mediating to resolve disagreements between competent authorities in cross-border

situations, acting as an independent advisory body to the European Parliament, the Council or the

Commission, taking a leading role in promoting transparency, simplicity and fairness in the market for

consumer financial products or services across the internal market.

To perform these tasks, the EBA can produce a number of regulatory and non-regulatory documents including binding Technical Standards, Guidelines, Recommendations, Opinions and ad-hoc or regular reports.

The Binding Technical Standards are legal acts which specify particular aspects of an EU legislative text (Directive or Regulation) and aim at ensuring consistent harmonisation in specific areas. The EBA develops draft BTS which are finally endorsed and adopted by the European Commission. Contrary to other documents such as Guidelines or Recommendations, the BTS are legally binding and directly applicable in all Member States.

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Executive Summary

In 2016, the EBA Work Programme was built around eight strategic areas:

A. To play a central role in the regulation and policy framework with the development and maintenance of the Single Rulebook;

B. To promote the development and coordination of resolution policy and resolution plans, and to develop common approaches for the resolution of failing financial and credit institutions and financial market infrastructures;

C. To promote the convergence of supervisory practices to a high standard so as to ensure that regulatory and supervisory rules are implemented equally across all Member States;

D. To identify and analyse trends, potential risks and vulnerabilities stemming from the microprudential level across borders and sectors;

E. To maintain and develop the common supervisory reporting framework, as well as to strengthen its role as an EU data hub for the collection, use and dissemination of data on EU banks;

F. To protect consumers and monitor financial innovation; G. To ensure secure, easy and efficient payment services across the EU; and H. For the EBA to be a competent, responsible and professional organisation, with effective

corporate governance and efficient processes.

These strategic areas included 342 activities, and each activity, in turn, included a list of main deliverables to be submitted in 2016. The 2016 Annual Report mirrors the key objectives set out in the 2016 Work Programme. Overall, the EBA managed to deliver the great bulk of regulatory products in line with the Work Programme’s objectives.

Overview of regulatory products delivered against the EBA Work Programme

*Including cross-sectoral trainings

2 Of these activities, 27 are related to core business. The achievements in core business activities are described in Part I of this report and the operational activities are covered in the subsequent parts of this document.

Guidelines 12 14

Implementing Technical Standards 7 2

Regulatory Technical Standards 15 8

Opinion/Advice 17 1

Published Reports 37 2

Recommendation 1

Peer review 2

Stress test 1

Transparency exercise 1

Consultation Papers 30

Discussion Papers 3

Trainings organised for Competent Authorities* 26

0 10 20 30 40

Delivered

Delayed from 2016 to 2017

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Below is a list of the key regulatory products published by the EBA in 2016.

Summary of key regulatory products in 2016

Topic Key regulatory products completed in 2016

Own funds Standardised templates for Additional Tier 1 (AT1) instruments3 Report on monitoring AT1 instruments4

Internal Ratings Based (IRB) Approach

3 Regulatory Technical Standards (RTS) on assessment methodology for IRB Approach5 Opinion on the Implementation of the regulatory review of the IRB Approach6

Credit risk Guidelines on the application of the definition of default7 RTS on the materiality threshold for credit obligations past due8 Quantitative Impact Survey (QIS) Report on default definition9

Market risk Report on standardised approach for counterparty credit risk and own funds requirements10 RTS on internal model approach for assessment methodology11

Leverage ratio Report on leverage ratio calibration12

Liquidity risk Report on core funding ratio13 Report on liquidity measures and the review of the phase-in of the liquidity coverage requirement14

Large exposures Report on the review of the large exposures regime15 Securitisation and covered bonds

Report on covered bonds16 Guidelines on implicit support for securitisation transactions17

Investment firms Opinion on the first part of the CfA on investment firms18

3 https://www.eba.europa.eu/documents/10180/1360107/Final+AT1+standard+templates+.pdf 4 https://www.eba.europa.eu/documents/10180/1360107/AT1+Report+October+2016.pdf 5 https://www.eba.europa.eu/regulation-and-policy/credit-risk/regulatory-technical-standards-on-assessment-methodology-for-irb-approach 6 https://www.eba.europa.eu/documents/10180/1359456/EBA-Op-2016-01+Opinion+on+IRB+implementation.pdf 7 https://www.eba.europa.eu/documents/10180/1597103/Final+Report+on+Guidelines+on+default+definition+%28EBA-GL-2016-07%29.pdf 8 https://www.eba.europa.eu/documents/10180/1597002/Final+draft+RTS+on+the+materiality+threshold+for+credit+obligations+%28EBA-RTS-2016-06%29.pdf 9 https://www.eba.europa.eu/documents/10180/1360107/QIS+report+on+default+definition+October+2016.pdf 10 https://www.eba.europa.eu/documents/10180/1648752/Report+on+SA+CCR+and+FRTB+implementation+%28EBA-Op-2016-19%29.pdf 11 https://www.eba.europa.eu/regulation-and-policy/market-risk/rts-on-assessment-methodology-for-market-risk-internal-models 12 https://www.eba.europa.eu/documents/10180/1360107/EBA-Op-2016-13+%28Leverage+ratio+report%29.pdf 13 https://www.eba.europa.eu/documents/10180/1568410/EBA+Report+on+Core+Funding+Ratio+%28EBA-2016-Op-15%29 14 https://www.eba.europa.eu/documents/10180/1700800/EBA+report+on+liquidity+measures+and+the+review+of+the+phase-in+of+the+liquidity+coverage+requirement+%28EBA-Op-2016-22%29.pdf 15 https://www.eba.europa.eu/documents/10180/1632518/EBA+report+on+the+review+of+the+large+exposures+regime+%28EBA-Op-2016-17%29.pdf 16 https://www.eba.europa.eu/documents/10180/1699643/EBA+Report+on+Covered+Bonds+%28EBA-Op-2016-23%29.pdf 17 https://www.eba.europa.eu/documents/10180/1603711/Final+report+on+Guidelines+on+implicit+support+for+securitisation+transactions+%28EBA-GL-2016-08%29.pdf/b2f467dd-569e-4024-ae1d-8cafc2fe32f1 18 https://www.eba.europa.eu/documents/10180/1639033/Opinion+of+the+European+Banking+Authority+on+the+First+Part+of+the+Call+for+Advice+on+Investment+Firms+%28EBA-Op-2016-16%29.pdf

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Topic Key regulatory products completed in 2016 Authorisations and qualifying holdings

ITS on the procedures and forms for proposed acquisitions and increases of qualifying holdings19

Remuneration

Report on the benchmarking of remuneration practices and high earners20 Opinion on the application of the principle of proportionality to the remuneration provisions in the CRD21

International Financial Reporting Standards (IFRS) 9 Report on impact assessment of implementation of IFRS 922

Capital Requirements Regulation (CRR)/Capital Requirements Directive (CRD) (general)

Review of questions and answers (Q&As) for Commission's CRD/CRR review and responses to various Commission calls for advice

19 https://www.eba.europa.eu/regulation-and-policy/other-topics/its-on-the-procedures-and-forms-in-respect-of-acquisitions-and-increases-of-qualifying-holdings 20 https://www.eba.europa.eu/documents/10180/1359456/EBA+Op-2016-05++%28Report+on+Benchmarking+of+Remuneration+and+High+Earners+2014%29.pdf 21 https://www.eba.europa.eu/documents/10180/1667706/EBA+Opinion+on+the+application+of+the+principle+of+proportionality+to+the+remuneration+provisions+in+Dir+2013+36+EU+%28EBA-2016-Op-20%29.pdf 22 https://www.eba.europa.eu/documents/10180/1360107/EBA+Report+on+impact+assessment+of+IFRS9

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Part I – Policy Achievements of the year

In 2016, the EBA Single Rulebook applicable to the EU banking sector was largely completed. The EBA continued to engage actively at the EU and international level to support the finalisation of the so-called Basel III package and the completion of the implementation of the Basel package in the EU, for instance in responding to calls for advice on the leverage ratio (LR) and net stable funding ratio (NSFR). 2016 was also a period for reflection on the regulatory reforms that immediately followed the financial crisis to understand better the effects of the reforms on bank structures, business models and risk-taking alive to the need to minimise complexity where possible. The EBA also continued to enhance its monitoring of different aspects of the Single Rulebook, including on own funds, remuneration practices and significant risk transfers in securitisations.

The following tables display the EBA achievements and products delivered in 2016. The activities refer to the core business activities as described in the EBA 2016 Work Programme.23

Activity 1: Capital Main outputs Production of standardised templates on AT1 instruments.

Recurrent reports for the monitoring of the CET1 list and AT1 issuances. Analysis of interactions with loss absorbency requirements.

Activity 2: Internal governance, remuneration and anti-money laundering Main outputs Benchmarking report on diversity practices, Article 91(11) of the CRD.

Report on remuneration benchmarking and high earners data, Article 75(1) and (3) of the CRD. EBA Opinion on the application of customer due diligence measures to customers who

are asylum seekers from higher risk third-countries and territories. CfA Opinion on the application of the principle of proportionality to the remuneration

provisions. Delayed to 2017 Guidelines on internal governance, Article 74 of the CRD.

Guidelines on the assessment of the suitability of members of the management body and key function holders, Article 91(12) of the CRD. Guidelines on enhanced due diligence under the 4th MLD. Guidelines on risk-based supervision under the 4th MLD. Guidelines on simplified due diligence under the 4th MLD. RTS on central contact points under the 4th MLD. Joint opinion on the risks of money laundering and terrorist financing with regard to

their effects on the EU’s financial sector. Activity 3: Liquidity risk Main outputs RTS on Cross-border flows within a Group or an IPS.

Opinion on the Commission intention no to endorse RTS on additional collateral. Report on Stable Funding Requirements.

Delayed to 2017 Guidelines on the disclosure of LCR. 23 https://www.eba.europa.eu/about-us/work-programme/archive

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Activity 4: Leverage ratio Main outputs Report on leverage ratio with regard to its calibration and impact on business models. Activity 5: Credit risk and credit risk modelling Main outputs RTS on the definition of default thresholds for past due items.

Guidelines on the default of an obligor, including quantitative impact study (QIS). Monitoring of ECAI mappings. 3 RTS on the assessment methodology for IRB approach. Opinion on the Implementation of the review of the IRB Approach. Follow-up report on the future of the IRB approach. RTS on risk weights for specialised lending exposures. Ad-hoc QIS for RTS on materiality threshold and GL on definition of default of an

obligor. ITS on mapping of external credit assessments for securitisation positions. Opinion on EC amendments to ITS on mapping of credit assessments. Report on reliance on external ratings. Report on SMEs. Decision on use of unsolicited ratings.

Delayed to 2017 3 Guidelines on LGD in default ELBE and IRB shortfall calculation, Guidelines on downturn LGD calculation and Guidelines on PD estimation. 2 RTS on economic downturn conditions for LGD and credit conversion factor

(clarification about the optimal way forward). Activity 6: Market risk Main outputs Guidelines on the corrections to the modified duration of debt instruments.

RTS on assessment methodology. Monitoring of the CVA multiplier. List of Closely Correlated Currencies (ITS related). List of diversified indices (ITS related). Opinion on EC amendments on ITS on Benchmarking of internal approaches. Advice on the review of own funds requirements for exposures to central

counterparties (CCPs). Report on the implementation of SA-CCR and its implication for OEM. Report on the implications of the introduction of the FRTB in the EU.

Delayed to 2017 Update RTS on Proxy spreads for CVA. RTS on exclusion of CVA for third-country NFCs. RTS on Prudent Valuation (COREP Templates)

Activity 7: Market infrastructure Main outputs RTS on risk-mitigation techniques for OTC derivative contracts not cleared by a CCP.

Opinion on EC amendments on RTS on risk-mitigation techniques for OTC derivative contracts not cleared by a CCP. Report on interaction with EMIR.

Activity 8: Securitisation and covered bonds Main outputs Guidelines on implicit support with regard to securitisation.

Guidelines on qualified holdings. Annual report on securitisation retention rules. Report on Covered Bonds (ESRB).

Delayed to 2017 RTS on disclosures of unencumbered assets.

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Activity 9: Analysis and operational risks Main outputs ITS on common procedures, forms and templates on authorisation.

Discussion paper on Prudential regime for Investment Firms. Opinion on the First Part of the EC's Call for Advice on Investment Firms. Support regarding the notification system. Internal data support for regulation-related analysis.

Delayed to 2017 ITS and RTS on authorisation of credit institutions. Activity 10: Structural reforms, shadow banking and large exposures Main outputs Opinion on the review of the large exposures framework (Call for Advice on the CRR

review). Activity 11: Accounting, audit and scope of consolidation Main outputs Quantitative and qualitative analysis of IFRS 9.

Monitoring of accounting standards. Guidelines for communication between supervisors and auditors. Report on 1st impact assessment of IFRS9 to EU banks

Activity 12: Q&As and other activities

Main outputs Providing answers to stakeholders on the implementation of the prudential regulations via the EU Single Rulebook Q&A tool. [Integration of the DGS in the Q&A tool] Update of the supervisory disclosure technical standard. Review of Q&As for Commission's CRR-CRD review (part 1).

Activity 13: Resolution planning Main outputs Providing training to CAs on the content of the technical standards and Guidelines.

Participation in the FSB’s work to build a framework for international cross-border resolution. Contributing to the identification of impediments to resolvability, including

benchmarking reports on resolution plans. Opinion on EC amendments on RTS on MREL criteria. Report on MREL – Resolution. Report on MREL - Resolution (final).

Delayed to 2017 ITS on MREL templates. Activity 14: Resolution colleges Main outputs Mapping of resolution colleges.

Monitoring of resolution colleges’ activities, status of joint decisions regarding resolution planning, and Crisis Management Groups. Feedback to home authorities and an annual report (to the EBA’s Resolution

Committee) on the functioning of resolution colleges. Subject to the conclusion of a first framework cooperation arrangement with the third-

country authorities of Switzerland, Hong Kong, Japan and the USA, the EBA is to develop further framework cooperation arrangements with other relevant third-country authorities. Guidelines on providing information in a summary or collective form.

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Activity 15: BRRD, DGSD and non-bank resolution initiatives Main outputs Reports on the implementation of the MREL24 and possible legislative initiatives to

remedy inconsistencies and fill gaps. Guidelines on DGSD cross-border cooperation agreements. Guidelines on DGSD stress testing. Report on the reference point used for setting the target level for resolution financing

arrangements. Report on the administrative penalties under the BRRD. Q&As on regulatory products.

Activity 16: Recovery planning and early intervention Main outputs Report on benchmarking recovery plans.

Activity 17: Supervisory convergence Main outputs Comprehensive training programme for EU supervisors to promote convergence

(expecting a major increase). Annual report on supervisory convergence. Report on supervisory response to conduct risk. Guidelines on ICAAP and ILAAP information.

Delayed to 2017 Report on material and emerging technology risks. Activity 18: Functioning of supervisory colleges Main outputs Regular feedback to college leads.

Annual report on the functioning of colleges. Activity 19: Third countries’ equivalence assessments Main outputs Recommendations on the equivalence of the confidentiality regime. Activity 20: Identifying and addressing risks and vulnerabilities Main outputs EU-wide stress testing exercise.

Risk assessments of the European banking system. Report on Non-Performing Loans (NPL) Report on Asset Encumbrance 2016 RTS on G-SII identification ITS on G-SII identification GL on G-SII identification Opinion on macro-prudential measures

Delayed to 2017 Report on funding plans. Activity 21: Consistency of RWAs Main outputs 2016 benchmarking exercise and report on credit and market risk.

Updates to the ITS on reporting 2016. ITS amending regulation on benchmarking.

Activity 22: Risk infrastructure and tools Main outputs Risk dashboards and other tools for internal and external data users.

Training on data and analysis tools. Implementing the full list of validation rules and additional quality checks in SAS.

24 Work related to resolution planning activity.

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Activity 23: Transparency Main outputs Disclosure of data.

Guidelines on implementing the BCBS’ proposals on disclosure in the EU. Monitoring and improving Pillar 3 disclosures.

Activity 24: Protecting consumers Main outputs RTS and ITS on disclosure documents under PRIIPs Regulation (JC).

The EBA’s benchmark rate in accordance with Annex II of the MCD (2014/17/EU). 2016 Joint Consumer Day. Guidelines on remuneration requirements for sales staff. 2016 Consumer Trends Report Opinion on the PRIIPs RTS

Activity 25: Monitoring innovation Main outputs Output on the work on automation in financial advice (JC).

Draft Discussion Paper on innovative use of consumer data by financial institutions. Opinion on virtual currencies. Develop approaches for the monitoring of, and for intervention in, the market for

structured deposits under MiFIR. Assess the extent of risks and consumer detriment arising from innovative types of

payment, and decide which, if any, mitigating action to take to address the issues identified. Assess the risks and extent of consumer detriment arising from the commercial use of

banking consumer data and decide which, if any, mitigating action to take to address the issues identified. Continue monitoring virtual currencies to assess whether any follow-up work is

required with a view to promoting the safety and soundness of markets and convergence of regulatory practice. Continue monitoring crowdfunding to assess whether any follow-up work is required

with a view to promoting the safety and soundness of markets and convergence of regulatory practice. Monitor the market for other innovative products or for the innovative use of existing

ones. Activity 26: Payments Main outputs RTS on the separation of payment card schemes and processing entities under the IFR.

RTS specifying the cooperation and exchange of information – Notification. Activity 27: Policy analysis and coordination processes Main outputs Annual and multi-annual work programme.

Performing IA as an accompaniment to the EBA’s regulatory proposals, including producing half-yearly CRD IV/CRR Basel II Monitoring Reports. Provision of external training to CAs. Peer review of the ITS on supervisory reporting. Support to the EBA’s participation in the EU and international institutions/bodies. Development of internal policies/processes to support the EBA’s activities. Annual report on the impact of LCR. LCR phase-in report. Report on the Cyclicality of Capital Requirements.

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Part II – Management

2.1 Management Board

In accordance with the EBA Founding Regulation, the Management Board should ensure that the EBA carries out its mission and performs the tasks assigned to it. It is composed of the EBA Chairperson and six other members of the Board of Supervisors elected by and from its voting members. The Executive Director and a representative of the Commission also participate in its meetings.

Two new members (representing the Czech and French competent authorities) joined the Management Board as of 01 January 2016. Furthermore, the Board of Supervisors re-elected in June 2016 the member from the Italian competent authority for a second term; finally, following the resignation of the member from the UK’s competent authority in June, it elected a new member (Danish competent authority) in September 2016. At end December 2016, the Management Board was composed of three members from participating SSM Member States (France, Italy and Spain) and three members from non-participating SSM Member States (Czech Republic, Denmark and Poland). This composition was deemed by the Board of Supervisors to be in line with the requirements of balanced and proportionate representation as set out in the EBA Founding Regulation, reflecting the Union as a whole.

To guarantee the transparency of the Management Board decision-making, the minutes of its meetings are published on the EBA website immediately after they are approved. In 2016, the Management Board met five times at the EBA premises in London.

2.1.1 Management Board composition as of 31 December 2016

Country Institution Name

Czech Republic Česká Národni Banka David Rozumek Denmark Finanstilsynet Jesper Berg

France Autorité de Contrôle Prudentiel et de Résolution Édouard Fernández-Bollo

Italy Banca d'Italia Luigi Federico Signorini Poland Komisja Nadzoru Finansowego Andrzej Reich Spain Banco de España Fernando Vargas Bahamonde – European Commission Olivier Guersent

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2.1.2 Board of Supervisors composition as of 31 December 2016

Voting members

Country Institution Type of membership Name

Austria Österreichische Finanzmarktaufsicht

Head Helmut Ettl Alternate Michael Hysek

Belgium Nationale Bank van België/Banque Nationale de Belgique

Head Jo Swyngedouw

Alternate David Guillaume

Bulgaria Bulgarian National Bank Head Dimitar Kostov Alternate Stoyan Manolov

Croatia Hrvatska Narodna Banka Head Damir Odak Alternate Zeljko Jakus

Cyprus Central Bank of Cyprus Head Stelios Georgakis Alternate Elena Gregoriadou

Czech Republic Česká Národni Banka Head David Rozumek Alternate Zuzana Silberova

Denmark Finanstilsynet Head Jesper Berg Alternate Sean Hove

Estonia Finantsinspektsioon Head Andres Kurgpõld Alternate Kilvar Kessler

Finland Finanssivalvonta Head Anneli Tuominen Alternate Marja Nykänen

France Autorité de Contrôle Prudentiel et de Résolution

Head Édouard Fernández-Bollo Alternate Frédéric Visnovsky

Germany Bundesanstalt für Finanzdienstleistungsaufsicht

Head Raimund Roeseler Alternate Peter Lutz

Greece Bank of Greece Head Spyridoula Papagiannidou Alternate Kyriaki Flesiopoulou

Hungary Magyar Nemzeti Bank Head Csaba Kandrács Alternate Gábor Gyura

Ireland Central Bank of Ireland Head Cyril Roux Alternate Gerry Cross

Italy Banca d'Italia Head Luigi Federico Signorini Alternate Andrea Pilati

Latvia Finanšu un Κapitāla Τirgus Κomisija

Head Pēters Putniņš Alternate Ludmila Vojevoda

Lithuania Lietuvos Bankas Head Vytautas Valvonis Alternate Renata Bagdoniene

Luxembourg Commission de Surveillance du Secteur Financier

Head Christiane Campill Alternate Martine Wagner

Malta Malta Financial Services Authority Head Marianne Scicluna Alternate Ray Vella

Netherlands De Nederlandsche Bank Head Jan Sijbrand Alternate Olaf Sleijpen

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Country Institution Type of membership Name

Poland Komisja Nadzoru Finansowego (KNF)

Head Andrzej Reich Alternate Krzysztof Góral

Portugal Banco de Portugal Head Pedro Duarte Neves Alternate José Rosas

Romania Banca Naţională a României Head Nicolae Cinteza Alternate Adrian Cosmescu

Slovakia Národná Banka Slovenska Head Vladimír Dvořáček Alternate Tatiana Dubinová

Slovenia Banka Slovenije Head Primož Dolenc Alternate Damjana Iglič

Spain Banco de España Head Fernando Vargas Bahamonde Alternate Cristina Iglesias-Sarria

Sweden Finansinspektionen Head Martin Noréus Alternate Uldis Cerps

UK Bank of England's Prudential Regulation Authority

Head Sam Woods Alternate Sasha Mills

EEA EFTA members

Country Institution Type of membership Name

Iceland Fjármálaeftirlitið Member Jon Thor Sturluson Alternate Sigurdur Freyr Jonatansson

Liechtenstein Finanzmarktaufsicht Liechtenstein (FMA)

Member Patrick Bont Alternate Heinz Konzett

Norway Finanstilsynet Member Morten Baltzersen Alternate Emil Steffensen

– EFTA Surveillance Authority Member Frank Büchel Alternate Ólafur Jóhannes Einarsson

Observers

Institution Name

SRB Dominique Laboureix

Other non-voting members

Institution Name

ESMA Verena Ross

EIOPA Fausto Parente

ECB Supervisory Board Korbinian Ibel

European Commission Olivier Guersent

ESRB Francesco Mazzaferro

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2.2 Major developments

No major internal events had an impact on the work of the EBA in 2016.

As for external events, the June 2016 British referendum, which resulted in a majority of voters in favour of the United Kingdom leaving the European Union, did not have an impact on the core work of the EBA in 2016. It affected, however, the management of the budget, due to the drop in value of the pound sterling against the euro, and the recruitment of staff (see following section).

2.3 Budgetary and financial management

The EBA budget execution in 2016 was 96.8%. The EBA considered this an acceptable result as 2016 was a difficult year for its budget management, principally due to the UK referendum on EU membership. Whereas in 2015 the EBA requested an increasing amending budget due to the drop in the value of the euro against the pound sterling, in 2016 the exchange rates went the opposite direction and in the summer, the EBA requested a decreasing amending budget of EUR 1.572 million, which reduced the EBA budget from EUR 38.064 million to EUR 36.492 million. The impact of the referendum continued through the second semester resulting in further strengthening of the euro. The political uncertainty also negatively impacted the EBA recruitment plans and thus expenditure on staff. It should be noted that 68% of the EBA budget is spent on staff costs (Title I). The EBA processed 33 internal budget transfers in 2016, moving EUR 660 000 from Title I to Title II (EUR 250 000) and Title III (EUR 410 000). None of the transfers required management board approval. The larger transfers were driven by the need to take on interim staff and consultants due to recruitment issues and lack of internal expertise, and by increased demand for missions, meetings and translation costs.

Carry forward to 2017 of 8.4% is at its lowest level ever, improving on the 10.7% figure for 2016. This is in the context of a 9% increase in the EBA budget from 2015 to 2016 (after amendments). Execution on carry forward from 2016 was low at 90.8%, also driven partly by savings on pound legal commitments.

Regarding financial management, of the 1 164 invoices paid by the EBA in 2016, just 10 (0.9%) were paid late; and for the third year in a row the EBA paid zero late payment interest.

Annex II contains detailed tables of statistics on financial management.

2.4 Human Resources (HR) management

The EBA 2016 Establishment Plan (EP) had foreseen 127 temporary agent (TA) posts, 31 CA and 31 SNE posts authorised under the EU budget. No modification to the Establishment Plan was necessary in 2016. Of the planned 127 TA posts, 126 were filled before end of year, leaving 1 TA post vacant by the end of 2016 due to a rejection of an offer.

Out of the total number of 126 temporary agents, the largest number is classified in the grades AD 7 (22.2%) and AD 6 (19.8%). The average grade in 2016 was 7.5.

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The EBA staff (both temporary and contract agents) is comprised of 27 nationalities (26 in 2015). The EBA employs 50.3% females and 49.7% males. The breakdown of the EBA staff (TA, CA, SNE) by gender is becoming more balanced compared to previous years (45% females and 55% males in 2015).

The EBA employs 5 senior managers and 10 middle managers, who represent 9% of the total staff.

The number of days of annual leave taken in 2016 went up from 25.29 days per staff member in 2015 to 27.51 in 2016 and thus showed an improvement in the timely consumption of annual leave days by staff.

The total number of annual leave days carried over from 2016 to 2017 is 1 263 days. Individual number of days carried over ranges from a minimum of 0.02 to a maximum of 75.5 days (an average of 7.83 days per staff member carried over).

In 2016, a total of 1 026.5 days of special leave were taken. On average, 6.38 days per staff member were taken, which is a decrease from 7.95 days in 2015.

The number of sick leave days in 2016 increased mainly due to long-term sick leaves of two staff members. A total of 1 199.5 days of sick leave were taken (not including absences for medical appointments). From this total, for 784 (65%) days a medical certificate was provided and 415.5 (35%) days were administered as “sick leave without certificate”. The total absence due to sickness (with or without certificate) in 2016 represents 4.9 full time equivalents (FTE) and is thus higher than in 2015 (2.76 FTE).

In 2016, EBA staff continued to benefit from to the flexitime regime, launched in May 2014. The average number of flexi leave days taken per staff member grew slightly from 7.42 days in 2015 to 7.76 in 2016.

The total staff turnover on 31 December 2016, on the basis of total staff figure 169 (TAs, CAs, and SNEs including), represents 10.6% turnover rate due to resignation, non-renewal, and contract expiry.

The fourth reclassification exercise started on 14 June 2016 and concluded on the 28 July 2016. A total of 68 temporary and contract agents were eligible for reclassification. In total 18 (35.2 %) of the 51 eligible TAs were reclassified and 9 (52.9 %) of the 17 eligible CAs were reclassified in 2016. The EBA did not go above the multiplication rates as indicated in Annex I to the Staff Regulation in the 2016 reclassification exercise.

In 2016, the EBA continued to pay the school fees directly to the schools up to the thresholds approved by decisions of the Management Board. For the school year 2015/2016 the threshold of the EBA Education Contribution was set at GBP 11 100 for the primary and at GBP 13 500 for the secondary education levels. For the school year 2016/2017, the thresholds increased to GBP 12 200 for the primary and GBP 14 400 for the secondary education levels. Amounts exceeding these thresholds were borne by the staff members. The EBA also contributed to

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nursery costs. The monthly threshold of the nursery contribution was set at GBP 1 200/month for the school year 2015/2016.

In 2016, there were in total 7 trainees engaged at the EBA, following the call for applications for traineeship published in the autumn of 2015.

Following the assessment of training needs for 2016, as identified within the performance appraisal covering the period January–December 2015, a comprehensive training plan for 2016 was developed. The 2016 training plan focused on the following areas: 1) technical training, 2) management training, 3) soft skills and ICT training, 4) horizontal all staff relevant training sessions focusing on wellbeing, and 5) organisation of all staff day (subject to the availability of resources). In total 253 participants attended various training courses organised in-house or outside the EBA in 2016. The total number of training days provided was 361.5, and the average number of training days was 2.14 training days/staff member (considering 169 staff members (TA, CA, SNE) on 31 December 2016).

The EBA also supports and promotes training of shared interest and organises e-learning days. In September 2016, the Authority launched a coaching programme for managers. The EBA also provided access to in-house language training to its staff in three EU languages (French, Portuguese and Spanish) chosen by EBA staff as their third language.

The work on analysis and adoption of implementing rules continued in 2016. The EBA adopted its fixed-term contract renewal policy and its policy on external mobility, and the adoption of further implementing rules to the Staff Regulations is foreseen.

The total headcount at the EBA has increased from 188 (31/12/2015) to 200 (31/12/2016). New staff has been engaged in the operational tasks increasing the percentage of total staff there to 81.75% (80.1% in 2015) (for data please see Annex IV).

2.5 Assessment by management

2.5.1 Overall budget implementation rate

The initial budget for the year was EUR 38 064 000. This was reduced in December 2016 by EUR 1 572 622 by an amending budget – the need for which was driven by the drop in the value of the pound against the euro and the impact of this on the second semester’s salary correction coefficient. The amount of the reduction was calculated during the summer. The continued fall in the pound in the second semester resulted in a lower percentage execution than in the past two years.

Nevertheless, thanks to improved budget monitoring, the target of 95% for implementation of the budget was achieved. The final 2016 budget execution stands at 96.8%.

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2.5.2 Legality and regularity

Ex-ante verification was performed on each of the 1 608 payment transactions processed by the EBA. In addition, three ex-post control exercises were run during the year, on 102 transactions representing EUR 2 706 477 by payment value. Overall, the verified transactions were in all material aspects legal and regular.

2.5.3 Validation of the accounting system

The EBA uses the accounting systems provided by the European Commission. Those systems were validated by the accounting officer in compliance with Article 50.1(e) of the EBA Financial Regulation in December 2012 on the basis of work carried out by an independent accounting firm covering the systems and the financial circuits. Two changes introduced in 2014 to the working of the systems have been tested before they were implemented and do not call into question the validation of the accounting systems. No additional change was introduced in 2016.

2.5.4 Procurement procedures

In 2016, the EBA ran five procurement procedures above the directive threshold, each of which resulted in a contract being awarded. The EBA concluded 11 negotiated procedures above EUR 15 000 and 97 below this value. In addition, the EBA joined inter-institutional procurements with Commission DGs and with other agencies.

2.6 Budget implementation tasks entrusted to other services and entities

Not applicable.

2.7 Assessment of audit results during the reporting year

2.7.1 Internal Audit Service (IAS)

In February 2016, the European Commission’s Internal Audit Service performed a full Risk Assessment of all processes of the Agency (administrative, financial, operational and IT) to serve as a basis for the preparation of the new SIAP covering the period of 2017–2019. The new Strategic Audit Plan was prepared and topics were approved.

As a result, in November 2016, the first audit took place on Supervisory Convergence – Colleges and training. The assessment concerned support of the coordination and convergence of the supervision of cross–border banking groups at a practical level. We are awaiting receipt of the report.

2.7.2 Internal Audit Capability (IAC)

Not applicable.

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2.7.3 European Court of Auditors (ECA)

The European Court of Auditors (ECA) transmitted their preliminary observations on the 2016 annual accounts on 1 June 2017.

The ECA opinion on the 2016 accounts was that they presented fairly, in all material respects, the EBA’s financial position as at 31 December 2016, and that the transactions underlying the accounts were legal and regular in all material aspects. The Court made no other observations.

The report included two emphases of matter relating to the UK decision to withdraw from the European Union. These mentioned the potential cost of relocation and a possible future decrease of contributions.

2.8 Follow-up of recommendations and action plans for audits

2.8.1 Internal Audit Service (IAS)

In September 2016, IAS conducted a Follow-up Desk Review on the outstanding recommendations from the 2013 audit. The objective was to assess the progress made by the EBA in implementing the accepted very important recommendation and one important recommendation, which were reported by the Agency as implemented.

This follow-up audit focused on the specific recommendations in the original audit and it was communicated that the remaining recommendations have been adequately and effectively implemented and have been closed.

The remaining important recommendation from 2013 has been also closed by the end of 2016.

During 2016, no critical recommendations were issued or closed and on 1 January 2017 there was no open critical recommendation.

2.8.2 Internal Audit Capability (IAC)

Not applicable.

2.8.3 European Court of Auditors (ECA)

In their 2015 report, the Court of Auditors reported that one of the two outstanding observations from the previous years was ongoing and the other was N/A. The ongoing observation concerns the EBA education contribution and in particular the lack of signed agreement with a small number of schools (one out of 21 in 2015). This increased to three schools in 2016 and in each case the EBA is working to put the requisite agreement in place.

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2.9 Follow-up of observations from the discharge authority

On 27 April 2017, the discharge authority granted discharge to the EBA Executive Director in relation to the implementation of the Authority’s budget for the financial year 2015 and approved the closure of the 2015 accounts.25 The adopted text of the 2015 discharge resolution included 28 paragraphs of observations, the majority of which were either positive notes or acknowledgements.

The discharge authority welcomed in particular:

1. The 40% decrease in the value of carry forward to 2016; 2. The acceptance by the EBA of Internal Audit Service (IAS) recommendations arising from

an audit of human resources management, and the development of appropriate action plans;

3. That, among the ESAs, the EBA provides the most appropriate extent of disclosure of information on meetings of its staff members with stakeholders;

4. The detailed information provided by the Authority on its current contractual commitments and liabilities linked to its physical presence in the UK.

The discharge authority expressed particular satisfaction with:

1. EBA management of budget transfers, with the level and nature of all transfers remaining within the limits of the financial rules;

2. The EBA’s annual job-screening exercise, which showed that 80,1 % of the jobs were directly focused on the implementation of the Authority’s mandate;

3. The authority-wide fraud risk assessment conducted in 2016; 4. The creation of a dedicated anti-fraud section on the EBA’s intranet, with a

communication channel for whistle-blowers; 5. The implementation of measures to ensure transparency regarding public speaking

events and meetings with stakeholders.

Discharge authority observations requiring action include in particular calls for:

1. The publication of curricula vitae of the Board of Supervisors and Management Board members;

2. More timely publication of Board of Supervisors meeting minutes; 3. The establishment of a secure channel for whistle-blowers; 4. Parliament to be informed of the exact amount of the dilapidations cost once known; 5. The European Parliament and Council to be kept informed about the EBA’s activities in a

timely, regular and comprehensive manner.

Discharge authority observations the Agency will take note of:

1. The EBA to allocate more resources to supervisory convergence and enforcement; 2. The EBA to stick only to tasks assigned to it by the European Parliament and Council;

The EBA will implement corrective actions to address these points in the course of 2017.

25 http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//NONSGML+REPORT+A8-2017-0079+0+DOC+PDF+V0//EN

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Part III – Assessment of the effectiveness of the internal control systems

3.1 Risk Management

In order to ensure identification and evaluation of potential risks that could negatively influence the achievement of EBA’s objectives each year, the EBA conducts an assessment exercise to identify and follow up on risks, their exposure and mitigation measures. The results are being categorised accordingly to their significance.

The highest risks for the Agency were considered to be the ones relating to ITS data security and enforcing controls in areas of responsibilities.

Mitigating actions were developed for all identified risks.

3.1.1 Ethics guidelines and conflict of interest policy

The EBA has in place ethics guidelines that aim to ensure that its staff acts with independence, impartiality, objectivity, loyalty and in a transparent way. The guidelines give effect to the Staff Regulations applicable to staff working for the EU civil service and follow closely the European Commission’s guidelines, although taking into account specific situations that EBA staff can face in areas in which the EBA operates. For instance, the ethics guidelines impose strict rules on dealings in financial instruments, as well as setting out robust guidelines on gifts and hospitality.

In 2016, the EBA introduced a public meeting register. This register serves the purpose of enhancing the transparency of EBA’s activities by reporting the meetings that EBA staff have with external stakeholders. It is available on the EBA’s website and updated quarterly.

Furthermore, the EBA has in place a conflict of interest policy for staff, as well as a specific policy applicable to members of the Board of Supervisors and Management Board. Both policies require that their addressees submit an annual declaration of interests, where they need to declare any interest that creates a conflict with respect to all activities falling under the EBA’s scope of action and conducted during the preceding two years, in the case of members of the Board of Supervisors and Management Board, and five years in the case of EBA staff. To guarantee the transparency of the way the EBA operates, the declarations of interests of members of the Board of Supervisors and Management Board, as well as of the EBA’s Chairperson, Executive Director and Directors, are published on the EBA’s website. Moreover, both policies impose an obligation to declare a situation of conflict of interests not covered by the annual declarations, which in the

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case of members of the Board of Supervisors and Management Board also include those in the context of meetings.

3.1.2 Anti-fraud measures

The EBA is committed to taking strong measures to address and mitigate any fraud, corruption and other illegal activity affecting the financial interests of the European Union. To that end, the EBA has developed an Anti-Fraud Strategy for the period 2015–2017. The objectives of the strategy are:

1. prevent (additional controls and other measures to prevent fraud events); 2. detect and investigate (identification of potential fraud events and facilitate their

investigation by the European Anti-Fraud Office); 3. recover, mitigate and respond (recovery and mitigation of losses and taking appropriate

measures against fraudsters); 4. exploit (lessons learned process and communications).

The Executive Director has appointed an Anti-Fraud Team to coordinate the implementation of the strategy and related implementation plan. The team consists of the Ethics Officer and three other members from among the staff, including legal experts. In order to raise awareness and accountability amongst staff, the team has provided mandatory training sessions to all staff members. A risk assessment exercise involving all EBA’s Units and Departments has been performed to identify all fraud risks and estimate how frequent and how severe risk events in these areas could be. Finally, the effectiveness of existing controls has been assessed and additional mitigating measures have been introduced. Furthermore, the EBA has developed internal processes to improve fraud detection and a whistleblowing policy, which is planned to be adopted by the Management Board in the first months of 2017.

3.2 Compliance and effectiveness of Internal Control Standards (ICS)

The EBA has further developed and improved a series of internal measures to ensure that its activities are subject to control and to provide reasonable assurance to management of the achievement of the Authority’s objectives.

More specifically, internal controls are all the measures that the management takes to ensure that:

1. operational activities are effective and efficient; 2. legal and regulatory requirements are met; 3. financial and other management reporting is reliable; 4. assets and information are safeguarded.

To assist the Executive Director in implementing internal controls, the Agency has adopted a set of internal control standards (ICS). These standards are intended to guarantee a consistent level of internal control of all business activities throughout the Agency and to define the management rules that all services must follow in their management of resources.

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These standards are based on, and fully in line with, equivalent standards established by the European Commission.

Tangible improvement was made in 2016 in the following areas of Internal Control Standards:

1. Anti-Fraud Strategy and EBA Risk Assessment; 2. objectives and performance indicators; 3. activity-based planning and budgeting; 4. inventory of processes and procedures.

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Part IV – Management assurance

4.1 Review of the elements supporting assurance

The building blocks of assurance that are normally in place and were available to the Executive Director in 2016 are outlined below:

Audits: the Commission’s Internal Audit Services conducted an audit on Supervisory Convergence – Colleges & Training (report to be delivered in 2017) and the Court of Auditors conducts a regular audit on financials accounts.

Monitoring and reporting: This includes, for example, regular administrative and operational reports to the Management Board, internal monthly reporting as well as regular ex-post control exercises on selected sample of transactions.

Certification of the Agency’s year-end accounts by the Accounting Officer: The Accounting Officer’s certification of the provisional accounts by 31 March 2017 provided reasonable assurance to the Executive Director that the accounts present a true and fair view of the financial situation of the Agency.

Internal controls: Internal Control Coordinator ensures the effectiveness of the Agency’s internal control systems which was attested by the Internal Audit Services. In February 2016, the Internal Audit Services performed a full risk assessment of the Agency and a new Strategic Audit Plan has been approved covering the period of 2017–2019. All outstanding IAS recommendations were closed in 2016. In addition, the EBA conducts annual risk assessment exercises that include mitigation actions.

4.2 Reservations

Not applicable.

4.3 Overall conclusions on assurance

The Executive Director, in his capacity as Authorising Officer, has signed the Declaration of Assurance, which accompanies this Consolidated Annual Activity Report.

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Part V – Declaration of Assurance

I, the undersigned, Adam Farkas, Executive Director of the European Banking Authority, in my capacity as Authorising officer,

Declare that the information contained in this report gives a true and fair view.26

State that I have reasonable assurance that the resources assigned to the activities described in this report have been used for their intended purpose and in accordance with the principle of sound financial management, and that the control procedures put in place give the necessary guarantees concerning the legality and regularity of the underlying transactions.

This reasonable assurance is based on my own judgment and on the information at my disposal such as the results of the ex-ante verifications and ex-post controls performed during the year, or the reports of the Internal Audit Service and of the European Court of Auditors.

Confirm that I am not aware of anything not reported which could harm the interests of the European Banking Authority.

London, 15 June 2017

Adam Farkas,

Executive Director of the European Banking Authority

26 True and fair view in this context means a reliable, complete and correct picture of the state of affairs.

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Annex I – Core business statistics

Key Performance Indicators

Indicator Type Short description Outcome in 2016

Number of TS and Guidelines delivered and recommendations published

Output Quantity of TS and Guidelines delivered and recommendations published. 34

Number of reports and opinions delivered and warnings issued

Output Quantity of reports and opinions delivered and warnings issued. For warnings a target cannot be set.

51

Percentage of the work programme’s mandated tasks delivered on time

Output Timeliness of the mandated TS Guidelines and opinions delivered. N/A27

Composite indicator of supervisory and resolution convergence

Impact

The indicator will be computed as a weighted average of the outcome of direct thematic assessments peer reviews (e.g. heat map) and successful mediation cases (weights to be calibrated).

67.72%

Percentage of completed yearly assessments of colleges

Outcome/ result

The EBA provides regular feedback to the consolidating supervisors on the functioning of colleges. This indicator measures the completeness and the level of responsiveness of colleges with regard to the yearly assessment process.

100%

Feedback on training from seminar participants

Outcome/ result

Measures the satisfaction of the participants with regard to the quality of the trainings and the seminars organised by the EBA.

87.5%

Data processing Outcome/ result

Timely delivery of ‘new’ RI to the ESRB – ‘Timely’ means the first submission to the ESRB 10 days after the remittance date for CAs (up to 3 days delay on the submission = ‘Good’; between 3 to 10 days = ‘Medium’; more than Y days = ‘Bad’).

“Good” 0 days delay

Assessment of risks Output Number of risk reports dashboards and thematic studies. 9

Transparency and data dissemination Output

Bank by bank disclosure through ad hoc transparency exercises and regular publications.

Annual publication of transparency

data on the EU banking sector.

Budget execution (percentage committed of commitment appropriations)

Input Measures the level of commitments. 96.8%

27 Figure to be provided at the end of 2017.

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Indicator Type Short description Outcome in 2016

Number of critical and important audit recommendations received

Output Shows the number of critical and important recommendations received on external audits. 0

Establishment plan achieved (%)

Outcome/ result

Measures the fulfilment of the establishment plan. 99.5%

Achievements of the target stated in the service level agreements (SLAs) of the EBA applications

Output Measures the level of the achieved SLA targets stated in the SLA applications. 99.6%

Number of visits to the EBA website Impact

Volume of individual visits to the EBA website (i.e. traffic on the EBA website following major data releases mandated deliverables, etc.).

2 972 378 visits

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Annex II – Statistics on financial management

Revenue

As stipulated by the EBA founding regulations, the revenues of the Authority shall consist, in particular, of:

Obligatory contributions from national public authorities competent for the supervision of financial institutions;

A subsidy from the European Union;

Any fees paid to the Authority in the cases specified in the relevant instruments of the Union law.

The Financial Regulations also enable the Authority to collect revenue assigned to specific items of expenditure (in accordance with Article 23(1) of the FR).

Comparison of 2016 and 2015 revenues (executed budget)

REVENUES 2016 2015

1 REVENUE FROM FEES AND CHARGES

2. EU CONTRIBUTION 14 072 660 13 368 087

of which assigned revenues deriving from previous years' surpluses 113 701 1 443 487

3 THIRD-COUNTRIES CONTRIBUTION (incl. EFTA and candidate countries) 619 321 587 321

of which EFTA 619 321 587 321

of which Candidate Countries

4 OTHER CONTRIBUTIONS 21 800 098 19 497 496

of which delegation agreement, ad hoc grants

5 ADMINISTRATIVE OPERATIONS 131 260 113 972

6 REVENUES FROM SERVICES RENDERED AGAINST PAYMENT

7 CORRECTION OF BUDGETARY IMBALANCES

TOTAL REVENUES 36 623 339 33 566 876

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Expenditure

Budget execution on C1

The EBA had an overall budget execution rate in 2016 of 96.8% for commitments and 88.7% for payments. This continued high rate of execution results from continuously improving budget planning and monitoring.

Budget execution C1 in 2016 by title

Title Budget Committed % Paid % Carried forward %

A B C = B / A D E = D / A F G = F / C

I: Staff-related 25 015 156 24 007 806 96% 23 952 626 96% 55 181 0%

II: Administrative 5 849 346 5 795 673 99% 4 866 649 83% 929 025 16%

III: Operational 5 626 876 5 503 879 98% 3 538 020 63% 1 965 859 36%

TOTAL 36 491 378 35 307 359 97% 32 357 294 89% 2 950 064 8%

Budget execution C1 in 2016 by chapter

Title Budget Total commitments Total payments

A B C=B/A D E=D/A

11 Staff in active employment 23 507 000 22 991 611 98% 22 991 611 100% 12 Expenditure relating to staff management and recruitment 1 103 656 737 080 67% 722 241 98%

13 Mission expenses, travel and incidental expenses 71 000 68 264 96% 65 983 97%

14 Socio-medical infrastructure 70 000 51 654 74% 38 679 75% 16 Training 241 500 150 288 62% 125 202 83% 17 Representation expenses, receptions and events 22 000 8 910 41% 8 910 100%

20 Rental of building and associated costs 3 625 600 3 610 806 100% 3 469 507 96%

21 Information and communication technology 1 489 980 1 487 808 100% 981 167 66%

22 Movable property and associated costs 0 0 - 0 -

23 Current administrative expenditure 192 200 167 075 87% 70 682 42% 24 Postage and telecommunications 178 266 167 907 94% 146 116 87% 25 Information and publishing 363 300 362 078 100% 199 177 55% 26 Meeting expenses 0 0 - 0 - 31 General Operational Expenditure 2 518 556 2 413 106 96% 1 737 964 72% 32 IT Expenses for operational purposes 3 108 320 3 090 773 99% 1 800 056 58%

Grand Total 36 491 378 35 307 359 97% 32 357 294 92%

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Total commitments (C1): 2016-2014

Title 2016 2015 2014

I: Staff-related 24 007 806 22 681 862 19 318 780 II: Administrative 5 795 673 5 270 597 7 137 973 III: Operational 5 503 879 5 245 583 7 078 699 TOTAL 35 307 359 33 198 042 33 535 451

Initial and amending budgets

The initial 2016 budget was adopted by the Board of Supervisors on 18 December 2015.

Arising from the increase in the value of the euro against the pound sterling, the Board of Supervisors approved an amending budget in September 2016, which was then adopted in December 2016. The tables also show the total amounts transferred between budget lines.

Initial and amending budgets 2016 – Revenue

Budgetary revenue 2016 Initial

appropriations Amending

budget Transfers Final appropriations

A B C D = A + B + C

EU subsidy 14 678 400 - 606 441 - 14 071 959

National Competent Authority contributions 23 385 600 - 966 181 - 22 419 419

TOTAL 38 064 000 -1 572 622 - 36 491 378

Initial and amending budgets 2016 – Expenditure

Budgetary expenditure 2016 Initial

appropriations Amending

budget Transfers Final appropriations

A B C D = A + B + C

Title 1 Staff expenditure 26 849 000 -1 173 344 -660 500 25 015 156

11 Salaries & allowances 25 353 000 -1 155 000 -691 000 23 507 000

12 Expenditure relating to staff recruitment and management 1 122 000 -18 344

1 103 656

13 Mission expenses 40 000 - 31 000 71 000

14 Socio-medical infrastructure 70 000 -

70 000

15 Training 242 000 - -500 241 500

17 Receptions and events 22 000 -

22 000

Title 2 Administrative expenditure 5 923 000 -324 334 250 680 5 849 346

20 Rental of building and associated costs 4 080 000 -213 000 -241 400 3 625 600

21 Information and communication technology 1 135 000 -44 000 398 980 1 489 980

23 Current administrative expenditure 79 000 -34 000 147 200 192 200

24 Postage / Telecommunications 248 000 -19 334 -50 400 178 266

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Budgetary expenditure 2016 Initial

appropriations Amending

budget Transfers Final appropriations

A B C D = A + B + C

25 Information and publishing 381 000 -14 000 -3 700 363 300

26 Meeting expenses -

- -

Title 3 Operational expenditure 5 292 000 -74 944 409 820 5 626 876

31 General operational costs: seminars for NSA, meetings, missions, consultation services, publication

2 197 000 -74 944 396 500 2 518 556

32 Collection of information, developing and maintenance of a central European database

3 095 000 - 13 320 3 108 320

TOTAL 38 064 000 -1 572 622 - 36 491 378

Carry forward to 2017

The value of carry forward to the next year decreased from EUR 3 219 782 (10.7%) for 2015 to EUR 2 950 064 (8.4%) for 2016. The 2016 amount and % are the lowest values yet achieved by the EBA. The table below shows the change in carry forward percentages compared to the previous year.

Carry-forward % – comparison of 2016 to 2015

Title 2016 2015 Movement

A B C = A - B I: Staff-related 0% 1% (1%) II: Administrative 16% 28% (12%) III: Operational 36% 31% 5% TOTAL 8% 10% (2%)

As part of their review of the 2016 annual accounts, the Court of Auditors concluded that the 36% carry forward on Title III is high though justified.

Budgetary execution in 2016 on carry-forward from 2015

One hundred and twenty one (121) commitments were carried forward from 2015. More than a third of these (47) related to legal commitments denominated in pounds, where the drop in the value of the pound against the euro resulted in savings for the EBA. We estimate that the drop in the value of the pound was responsible for EUR 106 368 of the EUR 313 246 decommitted. This represents 3.3% of the 9.7% decommitted.

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Budget execution in 2016 on carry-forward from 2015 (C8)

Title Carry forward Paid % Cancellations

A B C = B / A D = B - A

I: Staff-related 116 921 99 080 85% (17 842) II: Administrative 1 487 794 1 229 476 83% (258 319) III: Operational 1 615 067 1 577 981 98% (37 086) TOTAL 3 219 782 2 906 536 90% (313 246)

Budget outturn

Budget outturn for 2016, 2015

2016 2015

REVENUE European Commission subsidy + 13 958 958 11 924 600 Surplus Year 2014 + 284 253 3 608 718 Contributions from National Competent Authorities + 21 634 257 17 392 368 Contributions from Observers 614 610 527 218 Bank interest 5 511 13 676 Other income + 125 749 100 296 TOTAL REVENUE (a) 36 623 339 33 566 876 EXPENDITURE Title I:Staff Payments - 23 952 625 22 571 851 Appropriations carried over - 55 181 116 921 Title II: Administrative Expenses Payments - 4 866 648 3 782 803 Appropriations carried over - 929 025 1 487 794 Title III: Operating Expenditure Payments - 3 538 020 3 630 516 Appropriations carried over - 1 965 859 1 615 067 TOTAL EXPENDITURE (b) 35 307 358 33 204 953 OUTTURN FOR THE FINANCIAL YEAR (a-b) 1 315 981 361 923 Cancellation of unused payment appropriations carried over from previous year + 313 245 164 243

Adjustment for carry-over from the previous year of appropriations available at 31.12 arising from assigned revenue + 5

Exchange differences for the year (gain +/loss -) +/- ( 27 739) ( 144 927) BUDGET RESULT FOR THE FINANCIAL YEAR 1 601 492 381 239

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Financial management

Financial statistics

Commitment transactions by fund source

C1 C8 Total

volume EUR volume EUR volume EUR

Carry-forward - - 121 3 219 782 121 3 219 782 New 428 18 462 746 - - 428 18 462 746 Top-up 128 19 982 798 - - 128 19 982 798 Decommitment 251 (3 138 185) 78 ( 313 246) 329 (3 451 432) TOTAL 807 35 307 359 199 2 906 536 1 006 38 213 895

Payment transactions by fund source

C1 C8 Total

volume EUR volume EUR volume EUR

Supplier invoices 983 10 655 543 181 2 867 408 1 164 13 522 951 Mass payment load 71 1 165 411 12 12 187 83 1 177 597 Other payments 317 20 536 340 44 26 942 361 20 563 282 TOTAL 1 371 32 357 294 237 2 906 536 1 608 35 263 830

Mass payment load (MPL) is batch processing functionality used for paying SNE and for reimbursement of staff mission expenses. Further detail on MPL is shown in a separate table below.

Other payments include the salary run, miscellaneous staff reimbursements, reimbursement of expenses to externals (BSG, BoS members, speakers) and a small number of payment regularisations.

Supplier invoice statistics

Payment deadlines

Number of payments

Payments within deadline %

Average payment times

Late payments %

days volume volume % days volume %

15 1 1 100% 15.00 - 0% 30 1 130 1 120 99% 19.86 10 1% 45 33 33 100% 30.24 - 0%

TOTAL 1 164 1 154 99% 20.15 10 1%

It is worth highlighting that just 10 supplier invoices were paid late in 2016, out of a total of more than 1 100.

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Supplier invoice suspensions

Number of payments

Suspended payments

Average suspension

volume volume % days

All payments 1 164 105 9% 30.2

Late payment interest

For the third year running, the EBA paid no late payment interest.

Mass payment load statistics 2016

Type Number of

batches Total individual

payments Average number of

payments per batch Total value

of payments

Average value of payments

per batch volume Volume Volume EUR EUR

Missions claims 59 817 13.85 278 288 4 717 SNE payments 12 129 10.75 899 309 74 942 TOTAL 71 946 13.32 1 177 597 16 586

The use of mass payment load (MPL) for SNE payments and reimbursement of staff mission expenses has significantly reduced the processing time for these payments: previously each of the 946 transactions making up these batches would have been processed with an individual payment order.

Procurement statistics

New framework contracts concluded in 2016: EBA open procedures

Subject Contractor(s) Date signed Ceiling Currency

Business analysts 1 Michael Page 2 LOC consulting 18/05/2016 1 000 000 EUR

Catering Services and Supplies Genuine Dining 05/07/2016 700 000 GBP Proofreading and editing services Prepress Projects Ltd 05/12/2016 250 000 EUR

Travel Services Corporate Travel Management 30/08/2016 2 800 000 EUR Website services European Dynamics 03/11/2016 720 000 EUR

In 2016 the EBA was participating in 38 framework contracts lead by other EU institutions. The EBA also makes extensive use of service level agreements (SLA) and memoranda of understanding (MoU) with DG HR, DG BUDG, PMO, CdT and the Publications Office.

Legal/contractual basis for 2016 commitments (C1)

Legal/contractual basis Commitments Payments

Staff regulations 22 483 085 64% 22 481 845 69% EBA FWC 4 800 183 14% 3 135 709 10% Lease agreement 3 297 298 9% 3 255 947 10%

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Legal/contractual basis Commitments Payments

EC FWC 1 557 809 4% 1 020 181 3% EC MoU/SLA 1 061 606 3% 649 051 2% EBA decision 1 077 160 3% 1 047 533 3% Direct contract 608 234 2% 478 770 1% Direct purchase order 363 524 1% 279 725 1% Headquarters agreement 58 459 0% 8 533 0% TOTAL 35 307 359 100% 32 357 294 100%

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Annex III – Organisational chart (as of 31 December 2016)

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Annex IV – Establishment plan

EBA’s Establishment Plan 2017

Category and grade

Establishment plan in EU Budget 2017 Modifications in 2017 in application of flexibility rule28

Officials TA Officials TA AD 16 1 AD 15 1 AD 14 2 AD 13 2 AD 12 7 -1 AD 11 12 -1 AD 10 11 -1 AD 9 15 AD 8 20 +1 AD 7 21 +6 AD 6 16 +5 AD 5 15 -7

Total AD 123 125 AST 11 0 AST 10 0 AST 9 0 AST 8 0 AST 7 0 AST 6 1 AST 5 4 -1 AST 4 3 -1 AST 3 2 AST 2 1 AST 1

Total AST 11 9 AST/SC 6 0 AST/SC5 0 AST/SC4 0 AST/SC3 0 AST/SC2 0 AST/SC1 0

Total AST/SC 0 TOTAL 134 134

28 In line with Article 32 (1) of the framework Financial Regulation, the Management Board may modify, under certain conditions, the establishment plan by in principle up to 10% of posts authorised, unless the financial rules of the body concerned allows for a different % rate.

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Information on the entry level for each type of post: Indicative table

Key functions Type of contract

Function group, grade

of recruitment

Indication whether the function is dedicated to administrative

support or operations

Head of Department, Deputy Director etc. TA AD 12

(please identify which level in the structure it corresponds to, taking the Director as level 1)

L-1

Head of Unit, Head of Business Area TA AD 10

(please identify which level in the structure it corresponds to, taking the Director as level 1)

L-2

Head of Sector n/a n/a

(please identify which level in the structure it corresponds to taking the Director as level 1)

Senior Officer, Senior Specialist, etc. TA AD 8-9

Officer, Specialist TA/CA AST 4/AD 6-7-8

Junior Officer TA AD 5

Senior Assistant CA FG III

Junior Assistant n/a

Head of Administration TA AD 12

Head of Human Resources n/a

Head of Finance TA AD 10

Head of IT TA AD 10

Secretary CA FG III

Mail Clerk n/a

Webmaster – Editor CA FG IV

Data Protection Officer TA AD 10

Accounting Officer TA AD 10

Internal Auditor n/a

Secretary to the Director CA FG IV

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Statistics from Job Screening/Benchmarking Exercise

Job Type (sub) category 2015 2016

Administrative Support and Coordination 12.5% 11.25% Administrative Support 8.8% 7.75% Coordination 3.7% 3.5% Operational 80.1% 81.75% Top Level Operational Coordination 2.1% 2% Programme Management & Implementation 48.9% 51% Evaluation & Impact Assessment 2.1% 2% General Operational 26.9% 26.8% Neutral 7.4% 7% Finance/Control 7.4% 7% Linguistics n/a n/a

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Annex V – Human and financial resources by activity

FTE EUR

EBA (Chair, Executive Director, PAs) Department of Regulation (Management and Support) 01: Capital 1.14 226 443 02: Internal Governance Remuneration and Anti-Money Laundering 4.56 936 421 03: Liquidity Risk 2.28 449 502 04: Leverage Ratio 1.14 236 593 05: Credit Risk and Credit Risk Modelling 8.38 1 675 690 06: Market Risk 2.68 487 877 07: Market Infrastructure and Investment services 3.82 630 739 08: Securitisation and Covered Bonds 4.96 907 129 09: Analysis and Operational Risks 12.95 2 301 506 10: Structural Reforms Scope Shadow Banking and Large exposures 2.28 449 640 11: Accounting Audit and Scope of Consolidation 2.28 483 933 12: Q&As and other activities 5.70 1 004 053 Resolution Unit (Management and Support) 13: Resolution planning 4.02 771 677 14: Resolution colleges 5.25 917 369 15: Convergence in applying resolution measures 2.79 498 587 16: DGSD and non-bank resolution initiatives 1.56 350 663 Department of Oversight (Management and Support) 17: Functioning on Supervisory colleges 3.80 770 356 18: Supervisory policy and methodology 2.07 370 601 19: Supervisory convergence 3.22 650 906 20: Recovery planning and early intervention 3.47 819 929 21: Training of supervisors 1.41 274 005 22: Third countries equivalence assessment 0.25 275 659 23: Regular assessment for Identifying and addressing risks and vulnerabilities 8.34 1 631 028 24: Thematic assessment and analysis 1.41 259 923 25: Consistency of RWAs 6.03 1 105 953 26: Risk infrastructure and tools 6.03 1 051 145 27: Transparency 2.56 713 706 Consumer Protection Financial Innovation and Payments Unit (Management and Support) 28: Protecting Consumers 3.51 669 967 29: Monitoring Innovation 1.76 518 682 30: Payments 2.93 594 220

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FTE EUR

Support Activities 31: Policy Analysis & Coordination Processes 12.34 1 845 009 32: Accounting Finance and Procurement Processes 12.47 1 956 896 33: HR Processes 6.80 940 556 34: Communication Processes 3.40 699 573 35: Legal Processes 13.47 2 206 561 36: IT Processes 11.34 4 756 047 37: Internal Control Standards (ICS) Processes 2.27 332 693 38: Corporate Services Processes 3.40 536 118 TOTAL 178.00 35 307 359 Comments Full-time equivalents (FTE) include Temporary agents, Contract agents and Seconded National Experts only. Compared to the table published in the annual work programme, management staff have been reallocated across the relevant activities. The EUR amount equals the amount committed in 2016, including carry-forward to 2017.

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Annex VI – Annual Accounts

The EBA’s financial performance in 2016

The annual accounts of the EBA have been established in accordance with the EBA’s financial regulation adopted by the EBA’s Board of Supervisors, as well as with the framework financial regulation.29 The accounting rules, methods and guidelines are those adopted and provided by the accounting officer of the European Commission.

The annual accounts comprise the financial statements and the reports on the implementation of the budget. The reports on the implementation of the budget are shown in Annex II – Statistics on financial management. The financial statements comprise the balance sheet, the statement of financial performance, the cash-flow statement and the statement of changes in net assets.

Balance sheet

The balance sheet provides the financial position of the EBA as at 31 December 2016 and 31 December 2015.

Balance sheet (amounts in EUR)

31.12.2016 31.12.2015

ASSETS NON-CURRENT ASSETS Intangible fixed assets Computer software 2 396 134 2 438 494 Tangible fixed assets Computer hardware 179 602 226 347 Furniture 473 199 493 067 Other fixture and fittings 8 571 612 8 364 719 Total 11 620 547 11 522 627 CURRENT ASSETS Current receivables 586 608 1 441 358 Sundry receivables 9 881 2 992 Prepaid expenses 1 220 853 663 765 Cash and cash equivalents 4 500 288 2 393 929 Total 6 317 630 4 502 044 TOTAL ASSETS 17 938 177 16 024 671 LIABILITIES NON-CURRENT LIABILITIES Provision for risks and charges 2 797 506 1 579 348

29 Commission Delegated Regulation (EU) No 1271/2013 of 30 September 2013 on the framework financial regulation for the bodies referred to in Article 208 of Regulation (EU, Euratom) No 966/2012 of the European Parliament and of the Council.

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31.12.2016 31.12.2015

Deferred revenue 5 986 434 6 613 345 Total 8 783 940 8 192 693 CURRENT LIABILITIES Current payables 2 410 813 1 760 277 Sundry payables 128 435 – EU entities 1 601 492 381 239 Deferred revenue 648 074 669 238 Total 4 788 814 2 810 754 TOTAL LIABILITIES 13 572 754 11 003 447 NET ASSETS Accumulated surplus/(deficit) 5 021 224 6 177 752 Economic outturn for the year - profit/(loss) (655 801) (1 156 528) TOTAL NET ASSETS 4 365 423 5 021 224

Statements of financial performance

The financial statements below show all income and charges for the financial year based on accrual accounting rules complying with the European Commission’s accounting rules.

Statements of financial performance (in EUR)

2016 2015

OPERATING REVENUE Contribution from the Member States 21 634 257 17 392 368 Contribution from EFTA countries 614 610 493 804 EU Subsidy 12 641 720 15 152 079 Foreign currency conversion gains 959 100 685 939 Other administrative revenue 4 740 180 075 TOTAL OPERATING REVENUE 35 854 427 33 904 265 OPERATING EXPENSES Staff expenses 21 821 230 20 275 949 Building and related expenses 2 849 257 3 360 161 Other expenses 8 650 415 8 692 396 Depreciation and amortization 2 250 643 1 953 528 Foreign currency conversion losses 986 839 830 866 TOTAL OPERATING EXPENSES 36 558 384 35 112 900 SURPLUS / (DEFICIT) FROM OPERATING ACTIVITIES (703 957) (1 208 635) NON OPERATING REVENUES / (EXPENSES) Financial revenue 5 666 14 103 Financial expenses 42 490 38 004 SURPLUS / (DEFICIT) FROM NON OPERATING ACTIVITIES 48 156 52 107 SURPLUS / (DEFICIT) FROM ORDINARY ACTIVITIES (655 801) (1 156 528) SURPLUS / (DEFICIT) FROM EXTRAORDINARY ITEMS - - ECONOMIC RESULT FOR THE YEAR (655 801) (1 156 528)

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Cash flow statements

2016 2015

CASH FLOW FROM ORDINARY ACTIVITIES Surplus /(deficit) from ordinary activities (655 801) (1 156 528) Operating activities Depreciation and amortisation 2 250 643 1 962 565 Increase/(decrease) in provisions for risks and liabilities 1 218 158 - (Increase)/decrease in short term receivables 290 772 (786 218) Increase/ (decrease) in accounts payable 778 970 (1 368 184) Increase/ (decrease) in liabilities related to consolidated EU Entities 1 220 252 96 986 Increase/(decrease) in deferred income (648 074) (529 990) Net cash flow from operating activities 4 454 920 (1 781 369) CASH FLOW FROM INVESTING ACTIVITIES (Increase)/decrease in tangible and intangible fixed assets (2 348 561) (875 861) Net cash flow from investing activities (2 348 561) (875 861) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2 106 359 (2 657 230) CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD 2 393 929 5 051 159 CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD 4 500 288 2 393 929

Statement of changes in net assets

Accumulated Surplus

Net surplus/(deficit) for the period Total Net Assets

Balance as of 31 December 2015 5 021 224 5 021 224 Economic result of the year (655 801) (655 801) Balance as of 31 December 2016 5 021 224 (655 801) 4 365 423

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