EBA欧洲银行-EBA-Op-2017-06-on-the-partial-waiver-of-the-Polish-FSA_6页_433kb

EBA Opinion on Partial Waiver of Article 129(1)(c) of the CRR

Core Content

The European Banking Authority (EBA) issued an opinion on 11 April 2017 regarding the partial waiver of Article 129(1)(c) of the Capital Requirements Regulation (CRR). This opinion was requested by the Polish Financial Supervisory Authority (KNF) on 07 October 2016, which sought to allow covered bond programmes in Poland to use CQS 2 institutions as collateral, up to 10% of the nominal amount of outstanding covered bonds, instead of the stricter CQS 1 requirement.

Legal Basis

• The EBA's competence to deliver an opinion is based on Article 29(1)(a) of Regulation (EU) No 1093/2010.
• Article 129(1)(c) of the CRR limits the collateralisation of covered bonds to exposures to institutions classified as CQS 1, with a maximum of 15% of the nominal amount of outstanding covered bonds.
• The third subparagraph of Article 129(1) allows for a partial waiver, enabling the use of CQS 2 institutions up to 10%, provided that significant concentration problems are documented.

Main Points and Key Information

1. Significant Potential Concentration Problem in Poland

• The EBA concluded that there is a significant concentration risk in Poland due to the limited number of CQS 1 institutions.
• Only six institutions in Poland qualify for CQS 1 based on external credit ratings, all of which are foreign branches operating in Poland.
• Among these, only one institution (Skandinaviska Enskilda Banken AB SA) is available as a counterparty in derivative transactions.
• This limited availability creates a risk of over-concentration in the covered bond market.

2. Exposures Considered

• The EBA identified several types of exposures that may arise in covered bond programmes, including:
  • Exposures from bank account facilities
  • Exposures from derivative contracts
  • Exposures from instruments issued by institutions as collateral
  • Exposures from liquidity facilities

3. Derivative Exposures and Collateralisation

• The EBA emphasized that derivative exposures should be considered for compliance with Article 129(1)(c) unless:
  • The national framework excludes derivative values from the minimum nominal coverage requirement
  • Derivatives are used as additional collateral beyond the minimum required
• In cases where derivatives are pari passu with covered bond liabilities, the minimum nominal coverage requirement from Article 52(4) of Directive 2009/65/EC must also apply.

4. Impact of the Waiver

• Without the partial waiver, covered bond programmes would be forced to rely on a single CQS 1 institution to meet the collateralisation requirements.
• This would expose programmes to further currency mismatches and increase the risk of breaching large exposure limits under the CRR.
• The EBA believes that this concentration would pose prudential and competitive concerns in the Polish financial market.

5. Waiver Implementation and Monitoring

• The Polish Financial Supervisory Authority (KNF) will issue an administrative decision granting the partial waiver and make it public.
• The KNF commits to reviewing the continued relevance of the waiver annually, using documented evidence of the concentration problem.
• If the concentration problem is no longer significant, the waiver will be repealed.
• A grandfathering period will apply to exposures to CQS 2 institutions that become ineligible after the revocation of the waiver.

Conclusion

The EBA supports the partial waiver of Article 129(1)(c) of the CRR in Poland, as it addresses the significant concentration risk in the covered bond market. The waiver allows for the use of CQS 2 institutions up to 10% of the total nominal amount of outstanding covered bonds, thereby reducing the risk of over-concentration and aligning with the current market practices.

Annex Summary

The annex lists the institutions operating in Poland with ECAI credit assessments equivalent to CQS 1 or CQS 2 as of 30 June 2016. It includes both domestic and foreign institutions, with their respective credit ratings from Moody’s, S&P, and Fitch.