2014年-EBA欧洲银行管理局_20131217_Report_on_the_comparability_of_supervisory_rules_and_practices_44页_361kb

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

Core Content

This report by the European Banking Authority (EBA) examines the comparability of supervisory rules and practices across the EU regarding the Internal Ratings Based (IRB) Approach. It is part of a broader study mandated by Article 502 of the Capital Requirements Regulation (CRR), which requires the EBA to assess how supervisory rules affect the consistency and pro-cyclicality of capital requirements. The report highlights the differences in how Competent Authorities (CAs) interpret and apply the IRB framework, and identifies areas where harmonisation is needed.

Main Topics and Drivers

The report covers the following key drivers of supervisory rules and practices:

• Definition of default and past due
• Rating philosophy and general approach for risk parameter estimations
• Probability of default (PD) calibration
• Loss given default (LGD) calibration
• Credit conversion factor (CCF) calibration
• Maturity (M) calibration
• Roll-out plan
• Permanent partial use (PPU)
• Floors
• IRB shortfall/excess
• Regulatory mapping

Key Findings

1. Default and Past Due Definitions

• Over 60% of CAs have rules related to the definition of default and past due.
• Most of these rules are either public and binding or public and non-binding.
• There is significant variation in the treatment of default and past due, especially regarding:
  • Materiality thresholds
  • Calculation of days past due
  • Treatment of default for risk parameter quantification
• The CRD IV and CRR allow for flexibility, such as replacing 90-day thresholds with 180 days for certain exposures.
• Mitigants: The CRR provides a definition for the one-year default rate and RTS for materiality thresholds and a uniform default definition.

2. Rating Philosophy and Risk Parameter Estimations

• Fewer than 40% of CAs have specific rules on rating philosophy.
• Most rules are not binding or public, and are based on a principle-based approach.
• The rating philosophy affects the migration of ratings and PD calibration, which in turn influences the comparability of risk-weighted assets (RWAs).
• Mitigants: Draft RTS under CRR will clarify the assessment methodology for rating systems and PD estimation, promoting consistency.

3. Probability of Default (PD) Calibration

• There is high variance in how CAs approach PD calibration.
• Many CAs do not have specific rules, or they are not public.
• The main issues include:
  • Choice of estimation approach
  • Use of long-run data
  • Margin of conservatism
  • Calibration of master scales and performance
• Some CAs require PD to be independent of the economic cycle, using long data series or cycle adjustments.
• Mitigants: Draft RTS will help clarify PD methodologies and restrict data waivers, improving comparability.

4. Loss Given Default (LGD) Calibration

• A majority of CAs have rules for LGD calibration, with a mix of public and non-public rules.
• There is high variance in the treatment of explanatory variables, collateral, cure rates, and downturn LGD.
• The lack of harmonised guidelines leads to potential differences in LGD estimates.
• Mitigants: Draft RTS will address data waivers and the definition of economic downturns, promoting uniformity in LGD calculations.

5. Credit Conversion Factor (CCF) Calibration

• There is low variance in CCF rules across CAs.
• Most CAs do not have specific rules, but where they do, they are often non-binding.
• The main focus is on the treatment of negative CCF observations and downturn CCF.
• Mitigants: Draft RTS will address data waivers and the definition of economic downturns, aligning with LGD efforts.

6. Maturity (M) Calibration

• The vast majority of CAs have no specific rules for maturity calibration.
• This lack of guidance leads to low variance in practices.
• Mitigants: Draft RTS under CRR will help clarify the sequential roll-out of the IRB Approach, addressing maturity-related issues.

7. Roll-out Plan

• Most CAs have rules related to the roll-out plan for the IRB Approach.
• These rules vary in terms of:
  • Initial and final coverage
  • Sequence of coverage
  • Time horizon
  • Binding milestones
• The minimum initial coverage ranges from 30% to 85% of exposures, and the time horizon ranges from 3 to 7 years.
• Mitigants: The CRR mandates the EBA to develop RTS for the sequential roll-out of the IRB Approach, aiming for harmonisation.

8. Permanent Partial Use (PPU)

• The report does not provide detailed findings on PPU, but it is mentioned as one of the drivers of RWA differences.

9. Floors

• Floors are used to ensure a minimum level of capital requirements.
• The report notes that floors are a key aspect of regulatory mapping and may vary across CAs.

10. IRB Shortfall/Excess

• The EBA highlights that CAs may have different approaches to determining whether an institution is in shortfall or excess of the IRB requirements.

11. Regulatory Mapping

• Regulatory mapping is a key tool for aligning IRB results with the Standardised Approach (SA).
• The report suggests that further work is needed to harmonise this process.

Conclusion

The EBA identifies that while some supervisory rules are harmonised, many areas remain inconsistent. The main drivers of variation include PD and LGD calibration, roll-out plans, and regulatory mapping. The CRR provides a framework for harmonising these areas through regulatory technical standards (RTS), which are expected to be finalized by the end of 2014. Additional work is required to refine the diagnosis of materiality and to prioritize regulatory efforts, especially in areas like downturn LGD and PD calibration. The report concludes that the EBA's ongoing studies will contribute to the final summary report to be delivered to the European Commission by the end of 2013.