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ESBG Comments on CEBS Consultation Paper (CP 41)

Overview

The European Savings Banks Group (ESBG) has provided comments on the Committee of European Banking Supervisors (CEBS) consultation paper (CP 41) regarding proposed guidelines on the revised Article 3 of Directive 2006/48/EC. ESBG supports the initiative to ensure supervisory convergence and market transparency, while also highlighting specific concerns and suggestions related to the implementation of the revised Article 3.

Core Content

ESBG emphasizes the importance of clarity and practicality in the guidelines, especially for entities that may wish to affiliate with a central body in the future. The comments are structured around several key areas of the consultation paper.

Main Points

A) Concept of 'Permanently Affiliated to a Central Body'

• ESBG believes the definition of 'permanently affiliated' requires further clarification.
• It questions whether a contractual agreement can specify a minimum number of years during which an entity cannot leave the group and still be considered 'permanent'.
• ESBG is concerned about the implications of integrated liquidity management and centralised treasury functions, which could make it more difficult and costly for affiliated institutions to exit.
• It suggests that liquidity management should remain independent in normal circumstances, with emergency arrangements only being used when necessary.
• ESBG also notes that the purpose of a group is to conduct joint operations that support its business and legal frameworks, and recommends that this be included in the guidelines.

B) Guarantee

• ESBG is concerned about the clarity of the required level of commitment and guarantees.
• It questions whether guarantees must cover 100% of the capital and profits of each affiliate or can be limited to a certain percentage.
• It also raises the issue of whether a 100% commitment to the excess above solvency or liquidity ratios is an adequate threshold.

C) Compliance with Article 3 (1) and (2)

• ESBG agrees with CEBS that compliance with Article 3 (1) is a prerequisite for compliance with Article 3 (2).

D) Consolidated Financial Statements vs. Consolidated Prudential Reporting

• ESBG supports the prudential approach to monitoring solvency and liquidity using consolidated accounts.
• However, it questions whether consolidated account calculations alone are sufficient or if audit-trail accounting from top to bottom of the group structure is necessary.

E) Instructions Issued by the Central Body

• ESBG acknowledges the exhaustive nature of the list of instructions proposed by CEBS.
• It suggests a more concise list to avoid unnecessary complexity.
• It highlights the need for a central risk management body to assess whether entities meet substantial risk management requirements, even if they exceed minimum thresholds set by the central risk governing body.

F) Use of the EU Passport

• ESBG finds the current wording of paragraph 29 misleading and proposes an alternative that clarifies the EU passport usage for affiliated institutions.
• It argues that entities not exempted under Article 3 (2) and meeting prudential requirements on a solo basis should be able to use the EU passport without additional restrictions.

Key Information

• ESBG is a not-for-profit international association representing one of the largest retail banking networks in Europe.
• It has total assets of over €6.000 billion as of 1 January 2009.
• ESBG members are typically savings and retail banks operating in decentralised networks.
• The group is committed to responsible investment and corporate social responsibility.

Conclusion

ESBG's comments focus on the need for clarity, flexibility, and practicality in the guidelines for Article 3. It advocates for a balanced approach that supports both group operations and individual prudential requirements, ensuring that affiliated institutions can operate effectively while maintaining regulatory compliance.