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EBA Banking Stakeholder Group Summary on Draft Regulatory Technical Standards on Independent Valuers

Core Content

The EBA Banking Stakeholder Group (BSG) has provided detailed comments on the Consultation Paper EBA/CP/2014/18, which outlines draft Regulatory Technical Standards (RTS) for the appointment of independent valuers under Articles 36.14 and 74 of the BRR Directive 2014/59/EU. The BSG supports the principles-based approach taken in the draft RTS, which aims to ensure the independence of valuers in resolution processes.

Main Views

General Comments

• The BSG appreciates the general conditions set in Article 1 of the draft RTS, which require valuers to have sufficient expertise and resources, legal and structural separation, and no material conflicts or common interests with the institution being valued.
• They believe that the approach to identifying conflicts of interest is appropriate but suggest that the independence test should also include the group and related parties of the institution, such as senior management or directors.
• The BSG emphasizes that the scope of "affiliated undertaking" and "group of companies" in Article 3.2 should be aligned with definitions from the Accounting Directive 2013/34/EU or equivalent bank industry standards.
• Some valuation firms in Europe have closed relationships with banks that are not based on control, such as significant influence or joint control, which may affect independence.

Replies to Questions

• Q1: The BSG agrees with the approach to identify conflicts of interest, but recommends extending the independence test to include the group and related entities.
• Q2: The BSG supports a three-year cooling-off period for valuers, but believes that this period should also apply to auditors. They suggest that auditors who have audited the institution in the previous year should not be appointed as valuers, and that a cooling-off period of three years should apply to auditors as well.
• Q3: The BSG does not support the appointment of a temporary administrator as an independent valuer, due to the potential for conflict of interest and impaired objectivity.
• Q4: The BSG has not identified any other cases where independence should be ruled out.
• Q5: The BSG believes the cost-benefit assessment included in the impact analysis is appropriate.

Key Information

Article 36.14 and 74 of BRR Directive

• These articles form the basis for the appointment of independent valuers in resolution scenarios.
• The RTS aims to develop requirements for these appointments to ensure independence.

Independence Criteria

• Valuers must not have material conflicts of interest or common interests with the institution, its shareholders, or its creditors.
• Independence must also be assessed with respect to the group and related entities.

Cooling-off Period

• A three-year cooling-off period is proposed for valuers.
• The BSG suggests this period should also apply to auditors, with a total prohibition for auditors who have audited the institution in the previous year.

Administrator as Valuer

• The BSG opposes the appointment of administrators, whether temporary or permanent, as independent valuers.
• They argue that the administrator's role may lead to conflicts of interest and compromise objectivity.

Appointment of Multiple Valuers

• The BSG recommends that for large institutions, competent authorities should be allowed to appoint two or more valuers, provided they share responsibility for the valuation report.

Other Relevant Points

• The BSG notes that the scope of the RTS should be expanded to include Article 74 in addition to Article 36.14.
• They also highlight the need for consistency in the definitions of related entities and groups across the document.

David T Llewellyn
Chairperson, EBA Banking Stakeholder Group