EBA欧洲银行-20131217-Report-on-the-comparability-of-supervisory-rules-and-practices_44页_364kb

Summary Report on the Comparability of Supervisory Rules and Practices for IRB Approach

Core Content

This report, issued by the European Banking Authority (EBA) in December 2013, evaluates the comparability of supervisory rules and practices for the Internal Ratings Based (IRB) Approach across the Competent Authorities (CAs) in the EU. It is part of a broader EBA study mandated under Article 502 of the Capital Requirements Regulation (CRR), which requires the EBA to assess the convergence of capital requirements and their pro-cyclicality impact.

The report focuses on how supervisory rules and practices influence the comparability of risk-weighted assets (RWAs), and identifies areas where divergence exists and where harmonisation efforts are underway.

Main Topics Analyzed

The EBA examined the following key drivers of RWA differences:

1. Definition of default and past due
2. Rating philosophy and general approach for risk parameter estimations
3. Probability of default (PD) calibration
4. Loss given default (LGD) calibration
5. Credit conversion factor (CCF) calibration
6. Maturity (M) calibration
7. Roll-out plan
8. Permanent partial use (PPU)
9. Floors
10. IRB shortfall/excess
11. Regulatory mapping

Each driver was assessed for the variability in supervisory practices, materiality of differences, and potential for harmonisation.

Key Findings

1. Definition of Default and Past Due

• Over 60% of CAs have adopted rules on this topic, but the forms vary.
• 12 CAs have public and binding rules, while 1 CA has public and non-binding.
• A medium variance of practices is observed, with 40% of rules merely replicating the CRD framework.
• The CRD IV and CRR allow flexibility in default definitions, such as extending the 90-day threshold to 180 days for certain exposures.
• Mitigation: The CRR provides a definition of the one-year default rate and will introduce RTS on materiality thresholds and uniform default definitions.

2. Rating Philosophy and Risk Parameter Estimations

• Fewer than 40% of CAs have rules on rating philosophy.
• Most rules are principle-based and not binding.
• Institutions are generally required to understand their rating systems and ensure they work as intended.
• Mitigation: The EBA will develop RTS under Article 144(2) and 180(3)(b) of the CRR to standardise the assessment of rating systems and PD methodologies.

3. Probability of Default (PD) Calibration

• There is high variance in supervisory practices regarding PD calibration.
• Most CAs do not have public rules and apply case-by-case assessments.
• Common elements include long-run data, conservatism, and cyclicality adjustments.
• Mitigation: The EBA will develop RTS on data waivers and downturn PD under Article 180(3)(a) and (3)(b) of the CRR.

4. Loss Given Default (LGD) Calibration

• A majority of CAs have rules on LGD, but they are widely dispersed.
• One third of CAs have no national rules.
• Rules often cover data sources, modeling practices, and downturn LGD.
• Mitigation: The EBA will develop RTS on data waivers and downturn LGD under Article 181(3)(a) and (3)(b) of the CRR.

5. Credit Conversion Factor (CCF) Calibration

• There is low variance in CCF rules, with few CAs having defined rules.
• The main variation lies in the treatment of negative CCF observations.
• Mitigation: The EBA will develop RTS on data waivers and downturn CCF under Article 182(4)(a) and (4)(b) of the CRR.

6. Maturity (M) Calibration

• The vast majority of CAs have no specific rules on M calibration.
• Low variance is observed due to lack of reported rules.
• Mitigation: The EBA will develop RTS to harmonise the roll-out sequence and time horizon under Article 148(6) of the CRR.

7. Roll-out Plan

• 14 CAs have public and binding rules, while 6 CAs have non-public rules.
• High variance in the initial coverage and time horizon of roll-out plans.
• The minimum initial coverage ranges from 30% to 85% of exposures.
• The maximum time horizon ranges from 3 to 7 years.
• Mitigation: The EBA will develop RTS to standardise roll-out conditions and compliance points.

8. Other Drivers

• Floors, IRB shortfall/excess, and regulatory mapping are also examined.
• The EBA acknowledges that CRR and CRD IV will address many differences, but some additional rules may still be needed.

Regulatory Mapping and Harmonisation

• The CRD IV and CRR provide minimum requirements and RTS, which are expected to reduce supervisory divergence.
• The EBA is tasked with developing guidelines and RTS to standardise practices and reduce pro-cyclicality.
• The final summary report will integrate findings from all studies, including those on SMEs, residential mortgages, and pro-cyclicality.

Priority and Additional Tools

• Roll-out plans were the first priority in harmonisation efforts.
• Additional work is needed on:
  • PD computation (data and conservatism)
  • Downturn LGD (methodology, data, and conservatism)
• Policy recommendations are being explored in dedicated reports.

Conclusion

The EBA identifies that while some supervisory rules are converging, significant divergence remains in key areas such as PD, LGD, and CCF calibration. The CRR and CRD IV provide a framework for harmonisation, but additional guidelines and RTS may be necessary to improve comparability and mitigate pro-cyclicality. The final summary report will serve as a comprehensive review of these findings and recommendations for the European Commission.