EBA欧洲银行-Sovereign-capital-shortfall_Methodology-FINAL_6页_395kb

Capital Buffers for Addressing Market Concerns Over Sovereign Exposures

Core Content

This document outlines the methodology and requirements for banks in the European Union to build capital buffers in response to market concerns over sovereign risk, as part of the EBA's capital exercise agreed by the Council on 26 October 2011. The goal is to ensure that banks maintain a minimum Core Tier 1 (CT1) capital ratio of 9% by the end of June 2012, after adjusting for prudential filters and valuing sovereign debt at current market prices.

Main Objectives

• To create an exceptional and temporary capital buffer to address current market concerns over sovereign risk.
• To ensure banks can withstand shocks while maintaining adequate capital.
• The buffer is not intended to cover actual losses but to signal market confidence in banks' resilience.

Key Dates and Process

• End of June 2012: Banks must reach a 9% CT1 ratio.
• End of September 2011: Reference date for computing capital buffers.
• Preliminary estimates based on June 2011 data were provided by banks, but final figures will be based on September 2011 data.
• Final buffer will be published in November 2011.
• Comparison between bank estimates and EBA benchmarks will occur at the sovereign level.
• Final capital shortfall must be addressed by June 2012.

Scope of Application

• 70 banks are involved in the capital exercise, including all banks that participated in the 2011 EU-wide stress test, excluding small non cross-border banks.
• The capital package for Greece is not subject to new benchmarks, as it is already covered by pre-agreed EU/IMF arrangements.

Core Tier 1 Definition

• The definition of Core Tier 1 is consistent with the 2011 EU-wide stress test.
• It includes common equity and hybrid instruments provided by governments.
• It excludes participations in financial institutions and existing preference shares.
• The EBA has mapped the capital elements to the COREP reporting framework to ensure harmonisation.
• Commercial instruments included must be simple, directly issued by the bank, and capable of loss absorption in going concern situations.

Eligible Capital Instruments

• Core Tier 1 instruments are the primary means to meet the capital buffer requirements.
• Newly issued private contingent convertibles may be eligible under strict and harmonised criteria.
• Existing convertibles are not eligible unless they are converted into Core Tier 1 by the end of October 2012.

Risk-Weighted Assets (RWA) and Prudential Filters

• Banks are required to adhere to CRD 3 for RWA calculation, including Basel 2.5 rules.
• Prudential filters on sovereign exposures in the Available-for-Sale (AFS) portfolio are removed, requiring a buffer of CT1 capital.
• For Held-to-Maturity (HTM) and Loans and Receivables (L&R) portfolios, a conservative valuation is applied using September 2011 market prices and bond yields.
• Unrealised losses for equities are deducted after tax, while unrealised gains are partially included before tax.
• Loans cannot benefit from hypothetical gains, and value adjustments can be offset between positive and negative adjustments.

Tax Treatment

• HTM holdings are computed gross of taxes.
• AFS holdings are computed net of tax, following CEBS guidance.

Computation of Target Capital Buffers

The target capital buffers are calculated as follows:

1. Buffer AFS: The buffer is the difference between the original own funds and the adjusted value of AFS sovereign exposures after removing prudential filters.
2. Buffer HTM: The buffer is the difference between the book value and the conservatively revalued amount of HTM and L&R sovereign exposures.
3. Offsetting: Positive (potential losses) and negative (potential gains) adjustments can be offset.
4. Capping: The total buffer (BufferSOV) is capped at zero, ensuring no negative buffer.
5. Capital Shortfall: Calculated as the difference between the 9% CT1 target and the actual CT1 capital, plus the BufferSOV.

$$
\text {S h o r t f a l l} _ {\text {S e p t 2 0 1 1}} = (0. 0 9 \times \text {R W A} _ {\text {S e p t 2 0 1 1}} - \text {C T 1} _ {\text {S e p t 2 0 1 1}}) + (\text {B u f f e r S O V} _ {\text {S e p t 2 0 1 1}})
$$

$$
\text {S h o r t f a l l} _ {\text {J u n 2 0 1 2}} = 0 = (0. 0 9 \times \text {R W A} _ {\text {J u n 2 0 1 2}} - \text {C T} _ {\text {J u n 2 0 1 2}}) + (\text {B u f f e r S O V} _ {\text {S e p t 2 0 1 1}})
$$

Actions to Address Shortfalls

• Banks must submit capital plans to national supervisors by 25 December 2011.
• Plans must include new capital raising, asset disposals, and other measures to meet the 9% CT1 target and sovereign buffer.
• National Supervisory Authorities (NSAs) will consult with supervisory colleges and consider the impact of deleveraging and the need to maintain lending to the real economy, including SMEs.
• The EBA will provide guidelines, templates, and process maps to support this process.

List of Participating Banks