EBA欧洲银行-CP16_EBF_17页_180kb

EBF Response to CEBS CP 16: Summary

Core Content

The European Banking Federation (EBF) provides detailed feedback on the second part of CEBS' technical advice to the European Commission regarding the review of large exposures rules. The EBF emphasizes the importance of aligning the large exposures regime with the principles of the Basel II framework, ensuring consistency, efficiency, and neutrality in risk management practices.

Main Views and Key Points

1. Purpose and Scope of Large Exposures Rules

• The review of large exposures rules should be limited to establishing a backstop regime, not to resolve issues of ailing institutions.
• The rules should not interfere with other regulatory areas such as liquidity risk, insolvency laws, or crisis management.
• National discretions should be eliminated from the large exposures framework to reduce regulatory burden on cross-border banks.

2. Definition of Large Exposures (Connected Clients)

• The EBF supports CEBS' objective of clarifying the definition of "connected clients" but argues that the proposed interpretation of "interconnectedness" is impractical.
• A broad interpretation of interconnectedness could lead to the formation of large groups of connected clients, which may not reflect real risk.
• The EBF recommends removing the "interconnectedness" criterion from Article 4(45) of the CRD.
• The IKB case highlights the need for a more holistic approach, with Pillar 2 being the appropriate framework for addressing sectoral and regional risks.

3. Exposure Value Calculation

• The EBF notes that the CP16 does not clarify the formula for calculating exposure values against own funds.
• For advanced institutions, PD should not be used for large exposures, as exposure values reflect the risk of a position, not its default probability.
• The EBF suggests aligning the inclusion of gains in value (GV) in exposure values with their treatment in regulatory own funds to avoid perverse effects.
• The use of Expected Positive Exposure (EPE) for large exposures is preferred over Potential Future Exposure (PFE), as both are based on the same simulation.

4. Credit Risk Mitigation (CRM) and Indirect Exposures

• The EBF disagrees with treating CRM techniques differently from the minimum capital requirements framework.
• They support the idea of applying the same protection treatment in both frameworks.
• The proposed treatment of physical collateral is considered too conservative and not aligned with CRD rules.
• The EBF argues that recognizing the double default effect for large exposures would improve risk assessment and reduce costs.

5. Intra-Group Exposures

• The EBF opposes the introduction of intra-group large exposures limits, as they would create additional costs and hinder liquidity management.
• Intra-group exposures should not be subject to limits, as they are already considered under consolidated supervision.
• The EBF recommends deleting Article 111(2) of the CRD due to its overly strict 20% limit on group entities.
• Exemptions for intra-group exposures should be granted under the same conditions as those in Article 69 and 80 of the CRD, but the criteria need clarification.

Key Recommendations

• Eliminate national discretions from the large exposures framework to ensure harmonization and reduce regulatory burden.
• Align large exposures with Basel II principles, using the same systems and methodologies for consistency and comparability.
• Remove the "interconnectedness" criterion from Article 4(45) of the CRD to avoid misclassification of risk.
• Apply EPE instead of PFE for large exposures to ensure consistency in risk measurement.
• Treat CRM instruments consistently across both large exposures and minimum capital requirements.
• Exempt intra-group exposures from large exposure limits, provided that the parent company guarantees support to its subsidiaries.
• Delete Article 111(2) of the CRD due to its restrictive and unnecessary nature.

Conclusion

The EBF believes that the large exposures regime should be simplified, harmonized, and aligned with the broader risk management framework under Pillar 2. They advocate for a neutral, flexible, and prudentially sound approach that supports efficient operations and effective risk management without imposing undue costs or regulatory burdens on banks.