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EAPB Position on the CEBS Consultation Paper on the New Solvency Ratio

Core Content

The European Association of Public Banks (EAPB) has submitted its position on the CEBS Consultation Paper on the New Solvency Ratio, focusing on the development of a common reporting framework. The EAPB represents 19 public banks, funding agencies, and associations across Europe, collectively managing EUR 3,000 billion in assets and employing over 170,000 people.

Main Views and Key Points

Support for Harmonisation

• The EAPB supports CEBS's initiative to create a level playing field in Europe and reduce reporting burdens on banks.
• They emphasize the importance of harmonization in both format and the volume of data required.

Criticism of Draft Templates

• The draft templates are considered excessively detailed and complex, making the overall framework unclear.
• The EAPB argues that the "highest common denominator" justification is insufficient for the volume of reporting required.
• They recommend a substantial reduction in data to be reported, particularly for cross-border institutions.

Simplification of Reporting Requirements

• Reporting should be limited to the information necessary for calculating capital requirements.
• Exposures should be broken down into risk classes, with a focus on risk-weighted assets and corresponding capital requirements.
• Information beyond this is deemed unnecessary and costly.

Rejection of OTH Templates

• The EAPB rejects all "other information" (OTH) templates, as they do not add meaningful value for supervisors.

Comments on Specific Templates

CA (Regulatory Capital)

• The requested information is too detailed and should be tightened.

CAIAS (IFRS Impact on Regulatory Capital)

• The use of prudential filters is appropriate, but the template is complex and unclear.
• A fundamental simplification and clear indication of filters are needed.

SA (Standard Approach)

• Reporting should be confined to columns 4, 9, 10, and 11.
• The securitisation templates are overly detailed and should be consolidated.
• Columns 6, 15, and 16 are unnecessary and should be deleted.
• The directive allows for deduction of securitised positions from Tier 1 and Tier 2 capital, not just core capital.

IRB (Internal Ratings-Based)

• Reporting should be limited to PD, LGD, EAD, and M risk parameters.
• The scaling factor should be reflected in column 10.
• Reporting EL and LGD in columns 13 and 8 is not useful.
• For IRB EQU 1 and IRB EQU 3, reporting should be confined to specific columns to avoid redundancy.
• For IRB SEC 1 and SEC 2, distinction between ranks is unnecessary for unrated positions.

SA CRM (Standard Approach Credit Risk Mitigation)

• The structure of CRM templates is complex and should be simplified.
• Only specific columns provide relevant information; others should be removed.

FIRB CRM (Foundation Internal Ratings-Based Credit Risk Mitigation)

• The template is too complex and should be limited to key columns.
• Distribution of LGD estimates in columns 33 and 34 is unnecessary.

AIRB CRM (Advanced Internal Ratings-Based Credit Risk Mitigation)

• Reporting should be confined to key columns similar to the FIRB CRM template.

CRM1-O (Credit Risk Mitigation Observations)

• These templates are rejected as they provide no meaningful insight into a bank's risk profile.

MKR-IM Daily (Market Risk – Interest Rate)

• The template does not offer additional value for supervisors.
• The EAPB suggests a focus on the five most important currencies and a collective item for others.

MRK SA TDI, MRK SA EQU, MRK SA FX, MRK SA COM (Market Risk – Other)

• Reporting should be simplified, focusing on core regions and currencies.

Conclusion

The EAPB advocates for a simplified, harmonized regulatory solvency reporting framework that reduces complexity and reporting burden while maintaining the necessary transparency for supervisors. They recommend focusing on essential data and aligning reporting requirements with the Basel framework.