EBA欧洲银行-EBA-results-from-the-2014-Low-Default-portfolio-28LDP2920exercise_59页_2mb

EBA Report: Results from the 2014 Low Default Portfolio (LDP) Exercise

Core Content

The EBA report presents the findings of the first supervisory benchmarking study on low-default portfolios (LDPs) across 41 EU institutions as of 30 June 2014. The study is conducted under Article 78 of the Capital Requirements Directive (CRD) and aims to evaluate the internal models used by institutions for calculating risk-weighted assets (RWA) in LDPs, which include sovereigns, institutions, and large corporates.

The main objectives of the report are:

• To assess RWA variability and its drivers
• To test the supervisory benchmarking framework
• To summarise the quality of internal approaches and potential improvements
• To provide evidence for future regulatory activities

Main Findings

Global Charge (GC) Variability

• Three-quarters of the GC differences across institutions can be explained by:
  • The proportion of defaulted exposures in the portfolio
  • The mix of large corporate, sovereign, and institution exposures
• For large corporate portfolios, defaulted exposures explain about 40% of GC differences, while the remaining 60% may be due to bank-specific factors like risk management practices and IRB risk parameters.

RW Deviations

• For large corporate portfolios, there is a high variation in risk weights (RW) due to differences in default definitions and treatment of defaulted assets.
• The LGD effect had a more significant impact on RW deviations than the PD effect, with 9 institutions showing a notable LGD deviation and 6 showing a PD deviation.
• Compensation effects between PD and LGD were observed in some cases.

Regulatory Approaches

• The study compared the IRB approach (Advanced and Foundation) with the Standardised Approach (SA).
• The dispersion of GC was similar for sovereign and institutions portfolios under both approaches, but larger for large corporate portfolios.
• Differences in data quality for SA figures may explain the greater dispersion in large corporate portfolios.

Impact of Benchmark Parameters

• If institutions with IRB parameters below benchmark use peer-based parameters, the average RW would increase by approximately 7.5% for the large corporate portfolio and 6.6% for the total portfolio.
• These impacts are influenced by collateralization status and deal structure, and should not be interpreted as underestimation due to inadequate modelling.

Data Quality and Constraints

• The data collection was based on draft technical standards (ITS), which will be finalized in 2016.
• Key constraints include:
  • Lack of granularity in reporting regulatory approaches
  • Incomplete or poor quality data submissions, particularly regarding collateral and LGD
  • Limited availability of Legal Entity Identifier (LEI) for some institutions

Key Analysis and Methodology

Top-down Analysis

• A top-down analysis was conducted using COREP data and LDP-specific data.
• The analysis focused on two categories:
  • Share of defaulted exposures
  • Relative exposure class shares (portfolio mix)

Common Obligor Analysis

• The study used a common set of obligors to compare IRB parameters and resulting RWs.
• It found that maturity has a limited effect on RW differences for large corporate portfolios, but a significant impact on institutions and sovereign portfolios.
• The use of real LGD parameters led to lower RWs in 6 out of 9 institutions compared to benchmark LGD parameters.

Hypothetical LGD Analysis

• A hypothetical senior unsecured LGD was used to isolate the impact of collateral and deal structures.
• Enhanced collateral data in future studies will allow more comprehensive analysis.

Competent Authorities' Assessments

• CAs shared their assessments with the EBA, confirming the existence of issues with internal models.
• Some differences were deemed justifiable, while others were not identified by the EBA's benchmarking.
• CAs also highlighted variations in supervisory practices, such as add-ons and floors, which may contribute to RWA variability.

Conclusion and Future Work

• This LDP exercise serves as a pilot for future annual benchmarking exercises under the ITS.
• The study highlights the need for further data collection and improvements in data quality.
• Areas for future investigation include:
  • Comparisons between IRB and standardised approaches
  • Impact of collateral on internal LGD estimates
• A workshop with participating institutions is planned to improve future exercises.

Key Information

• Number of institutions: 41 (from 14 EU countries)
• Data submission date: 30 June 2014
• Portfolios studied: Large corporate, sovereign, and institutions
• Regulatory approaches: AIRB (Advanced IRB), FIRB (Foundation IRB), and SA (Standardised Approach)
• Main drivers of RWA variability: Default rate, portfolio mix, PD, LGD, and maturity
• Benchmarking tool: The EBA calculated and shared benchmarks to support CAs' assessments
• Policy implications: The findings are aligned with previous EBA studies and will inform future policy discussions on IRB improvements

Future LDP Studies

• The EBA has published a discussion paper on the future of the IRB approach, summarising policy implications and possible regulatory measures.
• Future studies will benefit from improved data quality and more comprehensive data collection under the ITS.