EBA欧洲银行-2008-06-30-Risk-Capital-2008_18页_313kb

Risk Capital 2008 Paris Summary

Core Content

The Risk Capital 2008 Paris document outlines the Committee of European Banking Supervisors (CEBS) response to the financial market turmoil of 2008. It highlights the need for improved transparency, risk management, and liquidity practices in the European banking sector. The report also addresses the valuation of complex and illiquid financial instruments, emphasizing the importance of consistent regulation, supervisory cooperation, and enhanced disclosure standards.

Main Tasks and Objectives of CEBS

CEBS is tasked with promoting efficient and effective supervision and ensuring the safety and soundness of the EU financial system. This is achieved through:

• Good supervisory practices
• Efficient and cost-effective supervision of cross-border groups
• Effective regulation
• Level playing field and proportionality

CEBS also provides advice to the EU Commission, promotes consistent implementation of EU legislation, enhances supervisory cooperation, and alerts on financial stability.

Response to the Market Turmoil

Key Initiatives

• Financial Stability Forum (FSF): Focused on capital requirements, liquidity, and oversight of risk management.
• ECOFIN Roadmap: Aims to improve financial stability and regulatory coordination.
• Institute for International Finance (IIF): Engaged in discussions on risk disclosure, valuation standards, and structured products.

EU Commission and CEBS Actions

• Review of Capital Requirements Directive (CRD): To ensure adequate capital and liquidity.
• Guidance on Liquidity Risk Management: Emphasizes improved transparency and supervision of cross-border groups.
• Report on Transparency of Structured Products: Highlights the need for robust risk disclosure, standards for off-balance sheet vehicles, and transparency in structured products.
• Dialogue with Accounting Standard Setters: To improve guidance for valuing illiquid assets.

CEBS Report on Transparency

Scope of Assessment

• 22 significant banks were analyzed, 19 of which were EU-based.
• Sources included: published reports, presentations, slides, and trading reports.

Methodological Approach

• Based on Pillar 3 and IFRS 7 principles.
• Logical structure includes:
  • Risk information and risk management
  • Business model and involvement
  • Impact of the crisis and exposures
  • Accounting policies and valuation issues
  • Other disclosure and presentation aspects

Main Findings

• Limited disclosures on business models and liquidity risk management.
• Diverse approaches to exposures and crisis impact.
• Generic disclosures on valuation and accounting.
• Varied presentation of disclosure information.

Report on Valuation of Complex and Illiquid Financial Instruments

Focus Areas

• Valuation of complex or illiquid instruments without active markets.
• Transparency in valuation practices and related uncertainties.
• Auditing of fair value estimates.

Main Recommendations

To Institutions:

• Enhance governance around modeling techniques.
• Consider all relevant risk factors in fair value determination.
• Improve risk management to assess and manage exposures effectively.

To Standard Setters:

• Provide further guidance on fair value determination for illiquid instruments.

Transparency and Auditing Aspects

• Accounting standard setters should review disclosure requirements to enhance information on fair values and valuation techniques.
• Auditing standard setters should review guidance to improve the audit of fair value estimates.

Consultation Paper on Liquidity Risk Management

Overview

• A consultation paper was published on the CEBS website.
• Consultation period: until 1 August 2008.
• Public hearing: held in London on 4 July 2008.

Recommendations

• 18 recommendations to institutions for adequate liquidity risk management in both normal and stressed conditions.
• 12 recommendations to supervisors to apply a proportionate approach in supervising liquidity risk.

Main Requirements for Institutions

• Robust internal governance.
• Adequate tools to identify, measure, monitor, and manage liquidity.
• Stress tests and contingency funding plans.
• Communication strategy to ensure transparency.

Conclusions

The CEBS response to the financial crisis includes:

• Refinement of existing regulation.
• Enhanced work on supervisory colleges.
• Improved transparency in financial disclosures.
• Improvement of internal governance in banks.
• Enhanced risk management practices to address both normal and stressed conditions.

Contacts

• CEBS: http://www.c-ecs.org
• Kerstin af Jochenick: Chair of CES
  • Email: Kerstin.Jochnick@c-ecs.org
  • Affiliation: CEBS
  • Role: Committee of European Banking Supervisors