EBA欧洲银行-BSG-response-to-Consultation-Paper-28EBA-CP-2015-212912-February-2016_5页_316kb

EBA Banking Stakeholder Group Consultation Summary on EBA/CP/2015/21

Core Content

The EBA Banking Stakeholder Group (BSG) has provided detailed comments on the Consultation Paper EBA/CP/2015/21, which proposes guidelines for the treatment of Credit Value Adjustment (CVA) risk under the Supervisory Review and Evaluation Process (SREP). The BSG generally supports the objective of harmonizing supervisory practices across Europe but raises several concerns regarding the proposed guidelines.

Main Views

1. Impact on the EU Economy

• The BSG warns that the proposed guidelines could eliminate or reduce exemptions for CVA risk capital charges for derivatives with non-financial counterparties, such as corporates, sovereigns, and pension funds.
• This could increase the cost of capital for banks, which would be passed on to non-financial entities, potentially harming the EU economy.
• Corporates may face a dilemma between bearing the cost, passing it to clients, or leaving risks unhedged, which could increase their vulnerability to market shocks.

2. Prescriptive and Inadequate Approach

• The guidelines are seen as overly prescriptive and detailed, giving them a quasi-Pillar 1 status, which may undermine the flexibility and purpose of Pillar 2.
• A "one-size-fits-all" approach may fail to capture specific institutional circumstances, making the SREP process less relevant and proportionate.

3. Misalignment with Basel 3

• The BSG questions the timing of the EBA initiative, as Basel 3 rules are currently under review and may change significantly.
• They argue that the SREP process should not impose new Pillar 2 charges before the Basel Committee revises its methodology.
• The proposed approach does not adequately address the limitations of the Basel 3 CVA risk calculation framework.

4. Intra-Group Transactions

• The BSG opposes the inclusion of intra-group derivatives transactions in the CVA risk calculation, as these are not subject to regulatory capital charges under Basel 3.
• They emphasize that intra-group transactions should remain exempt from CVA charges when institutions are supervised on a consolidated basis.

5. Calibration of Thresholds

• The BSG believes that the use of a single percentage threshold (e.g., x% or y%) is inappropriate, as it fails to account for the specificities of different institutions.
• They recommend that thresholds should be calibrated based on the accounting CVA risk, not the regulatory CVA formula.

6. Supervisory Benchmark

• The proposed supervisory benchmark is considered too arbitrary and lacks a solid basis for determining appropriate CVA risk coverage.
• The BSG suggests that the SREP process should focus on a more accurate and calibrated analysis of CVA risk, rather than relying on a simplified quantitative approach.

7. Monitoring and Data Reporting

• The BSG disagrees with the requirement for frequent monitoring of CVA risk and the associated data reporting.
• They argue that the Pillar 2 process, particularly the Internal Capital Assessment Approach (ICAAP), allows for more appropriate and flexible risk modeling.

Key Recommendations

• Maintain exemptions for non-financial counterparties in CVA risk capital charges.
• Avoid a one-size-fits-all approach in determining relevance and materiality of CVA risk.
• Wait for Basel 3 revisions before implementing new Pillar 2 charges for CVA risk.
• Exclude intra-group transactions from the CVA risk calculation.
• Use accounting CVA rather than regulatory CVA to assess risk relevance.
• Align SREP with ICAAP and allow institutions to use appropriate models for CVA risk measurement.

Conclusion

The BSG believes that the proposed guidelines may lead to unintended economic consequences and fail to achieve true harmonization. They advocate for a more flexible, economically grounded, and aligned approach with Basel 3 developments in order to ensure effective and proportionate risk management.