EBA欧洲银行-BSG-response-to-Discussion-Paper-28EBA-DP-2015-01295-May-2015_13页_409kb

EBA Banking Stakeholder Group Consultation Summary on EBA/DP/2015/01

Core Content

The EBA Banking Stakeholder Group (BSG) has provided detailed feedback on the Discussion Paper EBA/DP/2015/01, which outlines the future direction of the Internal Ratings-Based (IRB) approach. The BSG emphasizes the importance of harmonization across institutions and alignment with global standards, particularly the Basel Committee's work.

Main Views

General Comments

• Harmonization Necessity: The BSG acknowledges the need for further harmonization of the IRB approach across institutions and thanks the EBA for their efforts in this direction.
• Alignment with IFRS 9 and Basel: The BSG stresses the importance of minimizing divergence between the Basel framework and the European implementation in the Capital Requirements Regulation (CRR). They are not in favor of merging prudential IRB parameters with accounting credit provisioning models.
• Feasibility of Timeframe: The proposed timeframe for implementation is deemed unfeasible due to the simultaneous implementation of IFRS 9, the lengthy and uncertain regulatory approval process, and the short duration for model redevelopment.
• Disclosures and Reporting: The BSG questions the need for additional disclosures and suggests that the reporting framework should be maximally harmonized. They advocate for consistency in definitions, scope, and reporting dates.
• Model Adjustments: The BSG doubts the necessity of certain specific proposals, such as number-weighted LGD/CCF, and believes that the proposed changes could lead to an excessive number of adjustments to rating systems.

Key Concerns

• Regulatory Approval Process: The uncertainty and length of the approval process are major concerns.
• Implementation Periods: The short timeframes for phases 3 and 4 are seen as unrealistic, especially considering the need for comprehensive model redevelopment.
• Materiality Threshold: The BSG believes that the proposed materiality threshold may not be sufficient for accurate risk estimation and highlights the need for further clarification.
• Low Default Portfolios: A clear and unambiguous definition of low default portfolios is needed. The BSG supports a "sophisticated standardized" approach that balances risk sensitivity and practicality.
• Harmonization of Exposure Classes: The BSG strongly supports the harmonization of exposure classes for both IRB and Standardized approaches to reduce reporting burdens and improve comparability.

Key Information

Proposed Changes

• Definition of Default: The BSG agrees with the proposed grouping, starting with the definition of default, and believes it should align with global standards.
• LGD and Conversion Factor Estimation: The BSG questions the added value of number-weighted LGD/CCF and suggests that the proposed changes should be aligned with BCBS developments.
• PD Estimation: The BSG highlights the need for clarity on the economic cycle and back-testing procedures.
• Treatment of Defaulted Assets: The BSG supports the proposed changes but suggests further guidance on cut-off time, calibration levels, and minimum cure periods.
• Credit Risk Mitigation (CRM): The BSG considers CRM a low priority area.
• PPU and Roll-Out: The BSG agrees that the IRB approach should be applied to all exposures, with a strict and realistic roll-out plan. They also suggest maintaining flexibility for changes in portfolio characteristics.
• Data Waiver: The BSG agrees in principle to remove the data waiver possibility but believes a limited use under specific conditions should be retained, especially for high default portfolios.

Recommendations

• Global Alignment: The BSG prefers global alignment of IRB requirements and believes changes should be initiated by the Basel Committee.
• Regulatory Coordination: They emphasize the need for coordination between the EBA and competent authorities to streamline the regulatory approval process.
• Harmonization of Reporting: The BSG advocates for maximum harmonization of reporting requirements, using consistent definitions and scopes.

Conclusion

The BSG's feedback highlights the need for careful consideration of the proposed changes to the IRB approach, particularly in terms of implementation feasibility, regulatory alignment, and harmonization across institutions and globally. They advocate for a balanced and realistic approach that minimizes the burden on institutions while ensuring consistency and transparency in risk measurement and capital requirements.