EBA欧洲银行-Guidelines-on-Large-exposures_connected-clients-and-schemes_29页_376kb

Summary of Guidelines on the Implementation of the Revised Large Exposures Regime

Core Content

These guidelines, issued by the Committee of European Banking Supervisors (CEBS), provide clarity on the implementation of the revised large exposures regime included in the amended Capital Requirements Directive (CRD). The amendments must be transposed into national laws by 31 October 2010 and will be applied from 31 December 2010. The guidelines focus on two main areas:

1. Definition of "connected clients", particularly the concepts of control and economic interconnection.
2. Treatment of exposures to schemes with underlying assets, including the use of the look-through approach and alternative methods.

CEBS also developed separate guidance on reporting requirements, which will be integrated into the COREP framework.

Main Views

1. Connected Clients

• Definition: A group of connected clients includes entities that are either under control or economically interconnected. Control is defined as the ability to direct the activities of another entity or to influence its decisions significantly.
• Control:
  • Control is presumed if a client holds more than 50% of the voting power or capital of another entity.
  • Control can also exist if a client holds less than 50%, but has the power to direct activities, decide on key transactions, appoint/remove majority of directors, or coordinate management with other entities.
• Economic Interconnection:
  • Even without control, institutions must assess whether clients are economically dependent on each other.
  • Economic dependence arises when the financial problems of one client could lead to repayment difficulties for another.
  • It may be mutual or one-way.
• Exemptions:
  • Entities controlled by central or regional/local governments (with 0% risk weight) are not required to be grouped as connected clients.
  • Exemptions do not extend to further sub-structures of these entities.

2. Treatment of Schemes with Underlying Assets

• Look-Through Approach: This is the most risk-sensitive method for assessing exposures to schemes. It involves considering the underlying assets of the scheme in the exposure calculation.
• Alternative Approaches:
  • Partial-look-through and structure-based approach are proposed for cases where full look-through is not feasible.
  • These methods allow for flexibility while still addressing concentration risks.
• Branched Products: CEBS has considered the application of these approaches to branched products and provided examples to illustrate their use.

Key Information

• Implementation Deadline: Guidelines must be applied by 31 December 2010, alongside the revised large exposures regime.
• Flexibility for Institutions: Institutions are allowed a proportionate approach, with an intensive process required for exposures exceeding 2% of own funds.
• Supervisory Role: Competent authorities have the final say in determining whether clients should be grouped as connected clients.
• Risk Considerations:
  • Geographic and sectoral concentration risks are outside the scope of the large exposures regime and are addressed separately.
  • Economic interconnection is a form of idiosyncratic risk, which is distinct from sectoral and geographic risks.
• Examples of Economic Interconnection:
  • Full or partial guarantees between clients.
  • A property owner and a tenant with significant rent payments.
  • A client reliant on a single customer or counterparty.
  • Clients with a similar customer base or funding source.
  • Clients where one is a collateral provider or guarantor for the other.
• Funding Relationships:
  • If clients share a common source of funding, they may be considered interconnected.
  • Institutions must assess whether the funding source is irreplaceable and whether the risk of contagion or synchronous risk exists.
  • Institutions should consider unknown underlying exposures as a single risk group.

Structure and Application

• The guidelines are divided into two parts:
  • Part I focuses on connected clients and includes detailed interpretations of control and economic interconnection.
  • Part II addresses the treatment of exposures to schemes and includes principles and examples for applying different approaches.
• CEBS has considered the impact of the guidelines on institutions and concluded that the benefits of clear rules for risk management and financial stability outweigh the costs.
• An implementation study is proposed one year after the recommended date to ensure harmonization across Member States.

Conclusion

The guidelines aim to enhance risk management by ensuring that institutions identify and group connected clients effectively, and apply appropriate methods to assess exposures to schemes. They provide flexibility while promoting consistency in the application of the large exposures regime across the European Union.