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ASF Response to CEBS Consultation Paper on Options and National Discretions

Core Content

The Association Française des Sociétés Financières (ASF) is a representative body of financial institutions in France, with nearly 380 members. These members include subsidiaries of major deposit banks and entities from other sectors such as insurers, financial organizations, manufacturers, and retailers. Together, they provide credit and financial services to the economy, with total funding exceeding €260 billion, representing about 20% of all credit to the economy in France. Their activities span four main areas: credit to private individuals, credit to companies and professionals (including leasing), other financial services (such as financial guarantees), and investment services, covering around 20 different financial products.

The ASF responds to the CEBS consultation paper on options and national discretions, particularly regarding the treatment of leasing exposures, default definitions, and risk-weighting provisions under the Directive 2006/48/EC.

Main Issues and Responses

1. Question 68 (Article 153, para 1) – Leasing Exposures

• CEBS Proposal: To maintain the national discretion until the end of the transition period, with binding mutual recognition for all institutions.
• ASF Response: Supports the introduction of binding mutual recognition and suggests adding a sentence to the article: "Before the end of the period, this discretion shall be reviewed."
• Reasoning: This option is consistent with previous European directives and reflects mature market practices. It is beneficial for countries where leasing is still developing.

2. Question 70 (Article 154, para 1) – Default Definition for Non-Commercial Exposures

• CEBS Proposal: To retain the current provision until the end of the transition period, then delete it.
• ASF Response: Advocates for keeping the option as a permanent one, as it is essential for accurately assessing the default status of debtors in real estate operations.
• Reasoning: In France and other countries, quarterly payments are common in real estate transactions. Two unpaid quarters (180 days) are necessary for a reliable default assessment. Deleting the option prematurely would render the default definition meaningless.

3. Question 71 (Article 154-2) – IRB Approach and Rating Systems Test

• CEBS Proposal: To keep the provision in its current form until the end of the transition period.
• ASF Response: Suggests that the expiration date should be postponed or removed to avoid competitive distortions during the early implementation of the new directive.
• Reasoning: A premature end could discourage institutions from adopting the IRB approach, especially after mergers or acquisitions.

4. Questions 113 and 151 – Default Definitions in IRB Approach

• Common Response: Both questions relate to the definition of default for retail and corporate exposures.
• ASF Position: Supports keeping the national discretion, possibly with a review clause, and suggests making these options permanent.
• Reasoning: The current provisions are necessary for accurate risk assessment, especially in real estate contexts where payment cycles are longer.

5. Other Questions

• Question 19 (Article 80 and Annex VI, part 1, point 24): Supports retaining the national discretion for risk-weighting exposures to credit institutions based on central government risk weights.
• Question 48 (Annex VIII, part 1, point 20): Supports the deletion of the discretionary part of the provision.
• Question 55 (Annex VIII, part 3, point 72): Supports keeping the option with a review clause, and considers the possibility of introducing a mutual recognition clause.
• Points 102 and 104 (Annex VIII, part 1, points 16 and 17): Supports retaining the national discretion but with binding mutual recognition.
• Point 110 (Annex VIII, part 3, point 73): Supports retaining the provision with a binding mutual recognition clause.

Key Information

• The ASF emphasizes the importance of maintaining national discretions that reflect local market conditions and practices.
• They advocate for the introduction of binding mutual recognition clauses to enhance harmonization across member states.
• The option to set 180 days as the number of days past due is crucial for accurate default assessment in real estate leasing and other related financial products.
• The ASF believes that premature deletion of such options could lead to competitive distortions and hinder the development of financial techniques in certain countries.

Conclusion

The ASF supports the CEBS proposals to retain certain national discretions, especially those related to real estate leasing and default definitions, while advocating for the inclusion of mutual recognition clauses to ensure a level playing field. They also emphasize the need for a review process before the end of the transition period to allow for necessary adjustments based on evolving market conditions.