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CEBS Consultation Paper Summary: Options and National Discretions

Overview

This document outlines the Association of Danish mortgage banks' (ADMB) feedback on the CEBS consultation paper regarding options and national discretions in the context of the European Commission's regulatory framework under Directive 2006/48/EC. The ADMB has provided detailed comments on specific points of the consultation paper, particularly focusing on the standardised approach outlined in Annex VI Part 1.

Core Content

The consultation paper proposes changes to certain national discretions, including the removal of specific provisions or their retention with mutual recognition. The ADMB has reviewed the paper and provided additional comments, emphasizing the importance of maintaining certain national discretions as they are currently structured.

Main Views and Key Comments

31. Standardised Approach, Annex VI Part 1 Point 64 (Directive 2006/48/EC)

• CEBS Proposal: To remove or retain the national discretion with mutual recognition.
• ADMB Opinion: The discretion should be kept in its present form.
• Rationale:
  • The exposure already reflects a reduced risk due to a minimum 20% value adjustment.
  • Danish mortgage collateral is part of a developed market.
  • Credit institutions comply with the directive's requirements for monitoring and valuing collateral.
  • This compliance allows for a relatively accurate calculation of proceeds from a forced sale.
• Concern: The proposed CEBS compromise draft may lead to an inappropriate tightening of the rules.

34. Standardised Approach, Annex VI Part 1 Point 68 (e) (Directive 2006/48/EC)

• ADMB Support: The ADMB fully supports the CEBS proposal to retain the national discretion as it is currently structured.
• Context: The provision allows for mortgaging of commercial properties up to a Loan-to-Value (LTV) ratio of 70%.
• Reasoning: This practice is already in place within Danish mortgage credit legislation and is utilized by Danish mortgage banks.

Additional Support

The ADMB also supports the proposed treatment of the following points in the consultation paper:

• Points 102-105
• Points 110-111
• Points 136-138
• Points 141-143

These points are considered to be in line with the current practices and regulatory requirements in Denmark.

Conclusion

The Association of Danish mortgage banks believes that maintaining certain national discretions is essential for accurately reflecting the risk profile of mortgage exposures and ensuring effective collateral management. They caution against any changes that may lead to an unnecessary tightening of the regulatory framework, which could negatively impact the Danish mortgage market and its participants.