2013年-EBA欧洲银行管理局_LE_industryreport_58页_641kb

Summary of CEBS Report on Large Exposures in the European Banking Sector

Core Content

This report by the Committee of European Banking Supervisors (CEBS) addresses the European Commission's Call for Advice on large exposures (LE) under the Capital Requirements Directive (CRD). The review aims to assess the current regulatory framework and consider improvements based on industry practices and supervisory approaches. CEBS collected data from over 100 credit institutions and investment firms across 19 EU Member States, including small, medium, and large institutions, as well as those operating internationally.

Main Points

1. Background and Purpose

• In December 2005, the Commission requested CEBS to provide technical advice on LE rules, with a deadline extended to 31 August 2006 due to industry concerns.
• The report covers three main areas: supervisory practices, industry consultation on market practices, and analysis of credit risk mitigation (CRM) techniques.

2. Methodology

• CEBS conducted an online survey of market participants, which was also supported by national supervisors.
• The survey was designed to be comprehensive, covering single-name, sectoral, and geographic concentration risk, as well as CRM techniques.
• The results were anonymized to maintain confidentiality.

3. Scope of the Survey

• The survey included responses from a wide range of institutions, such as universal banks, specialized lenders, investment firms, and cooperative banks.
• It aimed to understand the relationship between regulatory requirements and internal practices.

Key Findings

Part 1: Single-name Concentration Risk

• Single-name concentration risk is defined as the risk of significant losses due to the default of a single borrower or related entities.
• Measurement approaches:
  • Limits-based: Most institutions use exposure limits, often as a fraction of total capital or assets.
  • Economic capital: Some larger institutions use internal economic capital models or VaR to estimate unexpected losses.
• Management approaches:
  • Limits: Many set internal limits, with larger institutions using more conservative and risk-sensitive thresholds.
  • Stress testing: Conducted by some institutions, especially larger ones, to identify and manage a range of risks.
  • Connected counterparties: Considered in risk management, with internal limits applied to single names, groups, or related parties.

Part 2: Sectoral and Geographic Concentration Risk

• 'Other' concentration risk refers to exposures sharing common risk factors (sector or geography).
• Measurement:
  • Sophisticated institutions use internal economic capital models.
  • Smaller institutions rely on simpler tools like sector distribution charts and judgment-based assessments.
• Management:
  • Larger institutions use more advanced methods, while smaller ones often lack formal procedures for sectoral or geographic risk.

Part 3: Exposure Calculations

• Exposures are generally defined in line with CRD provisions, including on- and off-balance sheet items.
• Calculation methods:
  • Smaller institutions use simple regulatory-based approaches.
  • Larger institutions apply more sophisticated models like VaR, Monte Carlo simulations, and peak potential future exposure calculations.
• There is a wide variety of methods across the EU, reflecting differences in transaction types and institutional size.

Part 4: Connected Counterparties

• Connectedness is often determined by ownership, management control, or financial dependencies.
• Institutions use a case-by-case approach, relying on expert judgment and various indicators to assess connectedness.

Part 5: Group-level Issues

• Most institutions manage concentration risk at both group and individual entity levels.
• Large institutions:
  • Often set group-level limits and allocate them to business lines.
  • Manage intra-group exposures as part of resource allocation, not necessarily under credit risk management.
• Small institutions:
  • May lack formal group-level approaches and treat intra-group exposures outside the credit risk function.

Part 6: Credit Risk Mitigation

• Many institutions use CRM techniques such as:
  • Collateral and haircuts
  • Top-slicing, netting, and unfunded credit protection
• Indirect exposures:
  • Only larger institutions typically measure and monitor indirect concentration risk.
  • There is a perceived gap between industry-developed CRM techniques and those recognized in regulatory frameworks.

Part 7: Governance and Reporting

• Internal limits:
  • Most institutions use limits, with smaller ones often aligning with regulatory thresholds.
  • Larger institutions have more flexible and risk-sensitive limits.
• Reporting:
  • Counterparty exposures are reported regularly to management.
  • Breaches of internal limits are reported immediately to designated committees.
  • Formal policies are more common in large and medium-sized institutions.

Part 8: Regulatory Environment

• Regulatory views:
  • Smaller institutions generally find the current LE regime sufficient.
  • Larger institutions suggest that the regime should be more risk-sensitive and aligned with internal practices.
  • There is a call for harmonization of LE rules across EU Member States.
  • Some respondents questioned the applicability of the LE regime to certain types of institutions (e.g., investment management firms, commodity traders).

Key Recommendations and Expectations

• Harmonization: Market participants expect a more consistent application of LE rules across EU countries.
• Integration with Pillar 2: Larger institutions prefer integration of LE into the Pillar 2 framework, particularly through ICAAP.
• Risk sensitivity: The LE regime should reflect internal risk management practices and consider counterparty creditworthiness and transaction maturity.
• Flexibility: There is a need for more flexible limits that align with group-level risk management.

Conclusion

The report provides a factual snapshot of current industry practices regarding large exposures in Europe. It highlights the commonalities and differences in approaches across institutions, emphasizing the need for a more flexible and risk-sensitive regulatory framework that aligns with internal risk management methodologies. CEBS aims to provide further analysis on prudential principles and the recognition of good credit risk management in the future.