EBA欧洲银行-EBA-BS-2012-219opinion-on-HLG-Liikanen-report-2-_6页_188kb

Summary of the EBA Opinion on the High-level Expert Group's Recommendations for EU Banking Sector Reform

Introduction and Legal Basis

The European Banking Authority (EBA) has issued an opinion on the recommendations of the High-level Expert Group on reforming the structure of the EU banking sector, which was established by the European Commission in February 2012. The Group aimed to assess whether structural reforms could complement ongoing regulatory reforms to enhance financial stability, efficiency, and consumer protection.

The EBA's competence to deliver this opinion is based on Article 34(1) of Regulation No 1093/2010, and the Board of Supervisors has adopted the opinion in accordance with Article 14(5) of the EBA's Rules of Procedure.

Core Content and Main Recommendations

The Group's final report recommends actions in five key areas:

1. Mandatory separation of proprietary trading and other high-risk trading activities when these are material within a group.
2. Possible additional separation of activities conditional on the recovery and resolution plan.
3. Amendments to bail-in instruments as a resolution tool.
4. Review of capital requirements on trading assets and real estate-related loans.
5. Strengthening banks' governance and controls.

General Comments

1. Consistency Across the Single Market

• The EBA supports the Report's contribution to strengthening the EU's regulatory framework.
• It emphasizes the need for consistency across the Single Market to avoid regulatory arbitrage and ensure a level playing field.
• Structural measures should not lead to segmentation of the market or support ring-fencing of national establishments.

2. Balancing Universal Banking and Resilience

• The EBA advocates for maintaining the core features of universal banking while improving sector resilience.
• It suggests that a separate legal entity approach within a group is preferable to complete separation.
• A thorough impact assessment is necessary to evaluate the benefits and costs of such measures, especially regarding capital costs and market consequences.

3. Legal Consistency and Supervisory Flexibility

• Structural measures must be consistent with bank recovery and resolution legislation.
• The draft BRR Directive already encourages simpler business models, so additional measures should focus on incremental benefits.
• The EBA highlights the importance of legal constraints for supervisory authorities to enforce separation effectively.

4. Supervisory Coverage

• Structural measures should not replace adequate supervision.
• All banking activities, including those on wholesale markets, must be intensively supervised due to systemic risk potential.
• The EBA warns against reducing supervisory coverage even if certain activities do not directly affect retail banking.

5. Review Clauses and Macro-Prudential Monitoring

• Structural measures should be reviewed regularly due to the risk of being eroded by financial innovations.
• Macro-prudential authorities should monitor risk migration to non-regulated intermediaries.
• The EBA cautions against unintentionally fostering shadow banking through structural changes.

6. Bail-in Instruments

• The EBA supports the use of bail-in instruments within the BRR Directive to improve loss-absorbency.
• It calls for clear definitions of bail-in instruments' position in the hierarchy of commitments.
• The EBA proposes a two-tier bail-in regime: a targeted approach for specific debt instruments and a comprehensive approach for others, if necessary.

7. Loss-Absorbing Liabilities

• The EBA believes that minimum loss-absorbing liabilities should be defined based on a thorough impact assessment.
• These liabilities should be calibrated and combined with a comprehensive statutory approach to bail-in.

Specific Comments

1. Mandatory Separation

• The EBA supports the two-stage approach for determining mandatory separation.
• It suggests excluding available for sale components from the first threshold to avoid conflicts with the Liquidity Coverage Ratio.
• Technical standards should be developed at the EU level to ensure consistent application.

2. Exceptions to Separation

• The EBA supports the exceptions for hedging services and securities underwriting.
• It is ready to assist in defining these services to ensure consistent application across the EU.

3. Risk Transfer Between Entities

• The Report recommends market-based terms for transferring risks between deposit banks and trading entities.
• The EBA highlights the need for updated large exposures regulations to implement these rules effectively.

4. Financial Support Within Groups

• Clear and transparent principles for intra-group financial support are required.
• The EBA is ready to provide expertise in setting up such standards and to monitor their application.

5. Intra-Group Financing Restrictions

• The EBA supports consistent application of intra-group financing restrictions in recovery and resolution plans.
• It recommends binding technical standards and rigorous ex post reviews to ensure uniformity.

6. Counterparty Risk in Capital Requirements

• The EBA emphasizes the need to include counterparty risk, particularly in derivatives transactions, in capital requirements for trading assets.
• It supports the Basel Committee's review of capital requirements and the global approach to address this issue.

7. Loan-to-Value and Loan-to-Income Ratios

• The EBA strongly supports the consistent application of these ratios across all EU member states.
• It recommends ex post monitoring by micro- and macro-prudential authorities to ensure uniformity.

Conclusion

The EBA's opinion underscores the importance of consistency, supervision, and legal clarity in implementing structural reforms. It supports the Group's recommendations but stresses the need for impact assessments, technical harmonization, and rigorous oversight to ensure that these measures contribute effectively to financial stability and consumer protection without creating unintended consequences.