EBA欧洲银行-CP16_EACB_18页_171kb

EACB Summary of Consultation Paper (CP 16) on Large Exposures

Core Content

The European Association of Co-operative Banks (EACB) submitted a detailed response to the Consultation Paper (CP 16) on the Second Part of CEBS advice to the European Commission on large exposures. The EACB represents 28 co-operative banks across Europe, with a significant presence in the financial system, serving 140 million customers and holding a market share of about 20%. Their response focuses on the need for a proportionate and differentiated approach to large exposures regulation, emphasizing simplicity, efficiency, and alignment with existing frameworks.

Main Views and Key Points

I. General Remarks

• Proportionality: EACB emphasizes that large exposures regulation should consider the diversity in bank size and complexity, advocating for a two-tier approach:

  • A rule-based approach for smaller banks.
  • A principle-based approach for larger, more sophisticated banks using the Advanced-IRB method.

• Simplicity and Harmonization: EACB supports a simplified regime that aligns with the CRD solvency standards and calls for a harmonized approach without national discretion.

• Separation of Liquidity and Large Exposure: EACB argues that the liquidity effects of large exposures should be addressed under the liquidity framework, not the large exposures regime.

• Internal Reporting Systems: EACB warns against combining accounting and risk reporting lines for Advanced-IRB banks, as it could lead to errors and inefficiencies. They propose:

  • Full use of Basel II/CRD data (EAD, LGD, CRM, PD).
  • A haircut system based on the estimated time-lag for selling collateral.

II. Responses to High-Level Questions

Q2: Control and Interconnectedness

• EACB agrees with the interpretation of "control" but finds the concept of "interconnectedness" too broad.
• They suggest a reciprocal connectedness approach, where both parties must be financially interdependent.
• They caution that the current interpretation could restrict SMEs' borrowing capacity, especially those critical to large corporations.

Q5: Conversion Factors

• EACB supports using 0% conversion factor for unconditionally cancelable facilities.
• They advocate for lower conversion factors for:
  • Short-term business (up to one year).
  • Non-credit substitute products like bid bonds and performance bonds.
• They argue that a uniform 100% conversion factor would be too onerous and inaccurate.

Q9: Mitigation Techniques

• EACB believes the large exposures regime should recognize physical collaterals more extensively than the minimum capital requirements.
• They propose:
  • No large exposure exceeding 40% of own funds without physical collateral.
  • Recognition of sovereign and core market guarantees as credit risk mitigants.
  • Stress-testing for indirect exposures from financial collaterals and guarantees.

Q15: Banking and Trading Book Rules

• EACB favors separate rules for banking and trading books due to their differing risk profiles.
• They support maintaining the current system of two different sets of rules to reflect these differences.

Q21: Scope of Application

• EACB agrees that the proposed scope of application is appropriate.

Q22: Intra-Group Exposures

• EACB supports exemption for intra-group exposures within the same Member State, and for group entities across EU/EEA countries that meet CRD conditions.
• They also suggest maintaining the exemption for group entities in non-EEA jurisdictions, especially for liquidity management purposes.

Q26: Sovereign and International Organization Exposures

• EACB supports the removal of national discretion and the automatic exemption for exposures to sovereigns and international organizations, aligning with the 0% weighting for solvency.

Q31: Interbank Exposures

• EACB supports a 0% conversion factor for interbank exposures with maturity less than one year, as they do not pose counterparty risk.
• They suggest a privileged treatment for longer-term interbank exposures.

Q34: Non-Trading Book Breaches

• EACB supports the deduction of only the excess over the large exposure limit from own funds.
• They oppose the deduction of the entire exposure, as it could lead to a dramatic drop in capital ratios and regulatory consequences.

Q37: Reporting Elements

• EACB agrees with the proposal to report net exposure values.
• They oppose including breaches of the backstop limit in Pillar 3 disclosure requirements.

Q38: Credit Management

• EACB supports recognizing good credit management as an incentive, even though the large exposure regime may be more conservative.

III. Responses to Technical Questions

Q1: Impact Assessment

• EACB appreciates the impact assessment and supports Option 6, which proposes an EU-wide amended limit-based backstop regime.

Q3: On-Balance Sheet Exposure Calculation

• EACB supports net exposure values for standardized and foundation IRB banks.
• They suggest gross exposure values for the evidence system to determine total indebtedness.

Q4: 100% Conversion Factor for Off-Balance Sheet Items

• EACB believes a 100% conversion factor is too conservative and would overstate risk for low/medium risk items.

Q6: Legal Right to Cancel Undrawn Facilities

• EACB believes the legal right to cancel is generally exercised and that non-cancellation would be a management failure, not a risk issue.

Q7: Principles for Advanced IRB Institutions

• EACB provides no comments on this question.

Q8: Structured Products and Credit Risk

• EACB supports a principles-based approach for identifying inherent credit risk in structured products.
• They appreciate the guidance provided in Annex 3 for further discussion.

Q10: Recognition of CRM Techniques

• EACB supports additional alternatives for recognizing collaterals, especially those that can be commercialized, and suggests portfolio-level considerations.

Q11: Costs and Benefits

• EACB provides no comments on this question.

Q12: Simple Method and Substitution Approach

• EACB supports the substitution approach for institutions using the simple method, aligning with minimum capital rules.

Q13: Physical Collateral Eligibility

• EACB supports the eligibility of residential and commercial real estate and covered bonds.
• They also suggest additional conditions for recognizing physical collateral in large exposures.

Q14: Indirect Exposures

• EACB supports taking indirect exposures into account when assessing unforeseen event risk.
• They suggest principles-based guidance for identifying and managing indirect credit risk.