EBA欧洲银行-OF_analysis15062007_50页_970kb

Summary of Quantitative Analysis of Eligible Own Funds in the EEA

Background

The European Commission initiated a review of the definition of own funds to inform future EU policy. This led to a call for advice from CEBS, which included a quantitative analysis of eligible own funds in credit institutions across the EEA. The analysis was based on data from 30 Member States as of 31 December 2006, with a focus on the structure and quality of own funds, including hybrid instruments.

Methodology

• A common taxonomy was developed using the COREP CA template, excluding new provisions of the Capital Requirements Directive (CRD) effective from 1 January 2007.
• The analysis distinguishes between IFRS and non-IFRS institutions.
• Data was collected at the consolidated, sub-consolidated, and solo levels, with double-counting avoided by aggregating only consolidated and solo data.
• The report uses both regulatory terminology and market terminology, aligning with Directive 2006/48/EC and Directive 2006/49/EC.
• Hybrid instruments are categorized as innovative, non-innovative, and non-cumulative perpetual preference shares.

Key Findings

• Total Eligible Own Funds: Estimated at approximately EUR 1,718 billion before prudential filters and EUR 1,706 billion after.
• Concentration of Own Funds: 5 countries (UK, DE, ES, FR, IT) account for 73% of eligible own funds.
• Structure of Own Funds:
  • Original Own Funds: Represent 64% of total eligible own funds.
  • Additional Own Funds: Account for 34%.
  • Ancillary Own Funds: Constitute a marginal 2%.
• Deductions from Own Funds: Amount to 7.4% of total eligible own funds, primarily from holdings in unconsolidated credit and financial institutions (48%) and participations in insurance undertakings (36%).
• Prudential Filters: Reduce total eligible own funds by 0.9% and original own funds by 5.2%. The most significant impact comes from shifting IFRS-related valuation differences from Tier 1 to Tier 2.

Structure of Eligible Own Funds

• Core Tier 1 accounts for 52.5% of total eligible own funds.
• Hybrids account for 11.5% of total eligible own funds.
• Deductions from Original Own Funds: Amount to 19% of original own funds, mainly intangible assets (93%).

Quality of Eligible Own Funds

• Core Tier 1 is the most stable component.
• Hybrids are included in Tier 1 in some countries, but their inclusion varies.
• Tier 2 consists of additional own funds, with Upper Tier 2 being less than 20% and Lower Tier 2 less than 34% of Tier 1.
• Country-Specific Deductions: Represent 16% of total deductions and are significant in only a few countries.

Prudential Filters

• CEBS Recommended Filters: Reduce original own funds by 6.5% for IFRS institutions.
• Other Adjustments: Increase original own funds by 1.3%.
• Compliance: CEBS guidelines are generally followed, with only three exceptions.
• Valuation Adjustments: The largest adjustment involves moving 62.5% of positive valuation differences related to available for sale equities from Tier 1 to Tier 2.

Elements Deductible from Own Funds

• Deductions from Tier 1: Include own shares, intangible assets, and material losses.
• Deductions from Total Own Funds: Include holdings in unconsolidated institutions and participations in insurance companies.
• Country-Specific Deductions: Are minimal in most countries, except for a few where they are more significant.

Composition of Original Own Funds

• Eligible Capital: Constitutes the main element of original own funds, with paid-up capital being the largest component.
• Eligible Reserves: Account for 82.2% of total eligible reserves, with interim profits and losses also contributing.
• Funds for General Banking Risks (FGBR): Reported in limited amounts, mainly by non-IFRS institutions.
• Hybrid Instruments: Reported in some countries under 'Other country specific original own funds', with variations in inclusion and limits.

Breakdown of Tier 1 Components

• Core Capital and Core Reserves are the main components of Tier 1.
• Non-Cumulative Perpetual Preference Shares: Represent a small portion in most countries, except the UK.
• Hybrid Instruments: Comprise a portion of original own funds, with the highest proportion in the Netherlands (28%) and the lowest in Germany (17%).

Conclusion

The quantitative analysis highlights the significant role of original own funds in the EEA banking sector, with hybrids playing a notable but variable role across countries. Prudential filters have a moderate impact, primarily affecting the valuation of certain assets. The structure of eligible own funds is largely consistent across IFRS and non-IFRS institutions, but differences exist in the composition and inclusion of hybrid instruments. Country-specific rules and deductions further influence the overall capital structure.