EBA欧洲银行-2013-06-10-BSG-Opinion-to-EBA-CP-2013-02_7页_697kb

Banking Stakeholder Group Summary on EBA Draft RTS for Materiality Assessment

Core Content

The Banking Stakeholder Group (BSG) has provided detailed comments on the EBA draft Regulatory Technical Standards (RTS) regarding the conditions for assessing the materiality of extensions and changes to internal approaches used in calculating own funds requirements for credit, market, and operational risk. The BSG generally supports the harmonization and clarity of materiality assessment but identifies several areas where the draft RTS could be improved.

Main Views and Key Issues

General Comments

• Support for Harmonization: The BSG supports the effort to harmonize and clarify the materiality assessment framework.
• Competitive Neutrality: They emphasize the importance of a uniform approach across supervisors to ensure competitive neutrality.
• Clarity of Application: The BSG believes the RTS is not sufficiently clear on which models it applies and how consolidation for quantitative thresholds should be conducted.
• Rigidity of Approval Framework: The emphasis on quantitative identification and documentation for market risk is seen as overly rigid and burdensome, potentially hindering the timely adaptation of internal models.
• Proportionality Concerns: They argue that the documentation and approval requirements are disproportionate, especially for minor changes and for IMA (Internal Model Approach) models, which are qualitative in nature.
• Communication Framework: The current communication framework is considered inflexible compared to existing practices and lacks clarity on the roles of home and host regulators.
• Supervisor Responsiveness: The BSG highlights the need for supervisors to have clear deadlines for responding to model changes to avoid prolonged use of outdated or inappropriate models, which could lead to under-estimation of capital requirements.

Specific Questions

Q1: Clarity of Categorization Principles

• The BSG questions whether the RTS applies only to IRB, AMA, and IMA models, and whether other models like the Internal Method Model for Counterparty Credit Risk are included.

Q2: Clarity of IRB Threshold Calculation

• The BSG finds the consolidation method for the $15%$ IRB threshold unclear and requests further elaboration on the portfolio or consolidated level for calculation.

Q3: IRB Threshold Design

• While the group level threshold is appropriate, the sub-portfolio level threshold is seen as problematic due to potential borderline cases and the risk of over-estimating materiality.

Q4: Notification Period for IRB

• The BSG considers a three-month notification period for IRB changes as unnecessarily long and suggests a one-month period instead.

Q5–Q9: AMA Thresholds and Documentation

• The BSG supports the clarity of AMA provisions but raises concerns about the $10%$ threshold for IMA being too low given the volatility of results.
• They suggest that the threshold for IMA should be $10%$ instead of $5%$ to avoid treating non-material changes as material.
• The BSG opposes the one-month notification period and the 60-day observation period for IMA, arguing that they delay necessary model adjustments and increase costs.

Q10–Q14: IMA Documentation and Process

• The BSG believes that the documentation requirements for IMA are excessive and unclear.
• They suggest that only ex-post notification should be required for immaterial changes.
• The requirement to compare 12 numbers for weekly models is seen as impractical and time-consuming.

Q15–Q18: Cost Implications

• The BSG does not support the view that documentation and quantitative impact analysis costs are non-material.
• Main Cost Drivers: Increased IT and human resource costs.
• % Increase in Costs: Not specified, but considered significant due to the extensive IT upgrades and ongoing staff involvement.
• Monetary Impact: Indicative monetary amounts are not provided, but the BSG highlights the operational and capital risk implications of these costs.

Key Recommendations

• Clarify Model Scope: Specify which models are included in the RTS and how consolidation is to be done.
• Simplify Documentation Requirements: Reduce the burden of documentation for immaterial changes.
• Adjust Thresholds: Consider raising the IMA threshold from $5%$ to $10%$ to reflect volatility.
• Shorten Notification Periods: Suggest one-month notification periods for IRB and IMA, and eliminate the 60-day observation period.
• Improve Communication Framework: Make the communication process more flexible and reduce the number of approval cases.
• Clarify Supervisor Responsibilities: Define clear deadlines for supervisor responses and outline the roles of home and host regulators.

Conclusion

The BSG advocates for a more flexible, proportionate, and practical approach to materiality assessment, emphasizing the need for clarity and reducing the administrative burden on financial institutions. They believe that the current draft RTS, while well-intentioned, imposes unnecessary costs and delays that could hinder the effectiveness of internal risk models and the responsiveness of banks to changing risk environments.