EBA欧洲银行-2012-11-21Letter-on-floors-EBA-Op-2012-04-_2页_102kb

EBA Summary on Transitional Floors in Capital Requirements

Core Content

The European Banking Authority (EBA) has raised concerns regarding the discrepancies in the application of transitional floors during the 2011 recapitalisation exercise. These inconsistencies across different jurisdictions have created a level playing field issue, which the EBA considers serious and urgent.

Main Issues Identified

• Discrepancies in Transitional Floor Calculation:

  • Different methodologies are used by various jurisdictions to calculate the transitional floor. Some base it on minimum own funds (capital requirements), while others use total own funds.
  • The latter approach (total own funds) is less likely to generate a restrictive effect on the regulatory ratio reported and disclosed by institutions.

• Impact Analysis:

  • The EBA conducted an analysis based on limited evidence and found that the differences in floor calculation could have significant implications.
  • If all banks applied the more conservative approach, an additional EUR 40 billion in capital would be required to maintain current capital ratios.
  • Conversely, if all banks used the alternative approach, up to EUR 5 billion of regulatory capital could be released.

• Level Playing Field Concerns:

  • The lack of harmonization in the calculation of the floor poses a risk to fair competition among financial institutions across the EU.
  • This issue needs to be resolved as soon as possible to ensure consistent regulatory treatment.

Key Recommendations

The EBA proposes the following measures to address the issue:

• Consistent Methodology:

  • A unified methodology for calculating the transitional floor should be based on the standardised approach currently in force, rather than older regulations.
  • The EBA suggests that the floor should be calculated using the standardised approach defined in the Capital Requirements Regulation (CRR), not the Basel 1 framework.

• Legislative Amendments:

  • The EBA recommends that amendments be introduced to the legislative text of the CRR to explicitly define and harmonise the transitional floor.
  • These changes should be made with due consideration of the tight deadline for finalising the CRR text.

Proposed Changes in Article 476

The EBA outlines the following changes to Article 476 of the CRR:

• Neutrality in Approach:

  • The text should remain neutral regarding the choice between the two approaches, allowing the EBA to propose a methodology based on a rigorous supervisory analysis.

• Standardised Approach for Calculation:

  • The floor should be calculated based on the standardised approach in the CRR, not on the Basel 1 framework.

• Regulatory Technical Standard:

  • The EBA should be mandated to draft a regulatory technical standard that specifies a single methodology for calculating the floor.

• Review Mechanism:

  • Two years after the entry into force of the CRR, the EBA should be asked to review the application of the floors and report to the Commission on the continued need for the floor, taking into account alternative supervisory and regulatory safeguards.

Conclusion

The EBA underscores the importance of a reliable and harmonised capital floor to ensure the stability and transparency of regulatory benchmarks, especially in light of concerns about the quality of bank assets. It calls for urgent legislative action to address these discrepancies and to align the calculation methodologies across the EU.