EBA欧洲银行-EBA-Report-on-the-peer-review-of-the-GLs-on-credit-concentration-risk_42页_847kb

Summary of the EBA Peer Review on GL 31 - Credit Concentration Risk Management

Core Content

This report presents the findings of the European Banking Authority (EBA) peer review on the implementation of the EBA Guidelines on the management of concentration risk under the supervisory review process (GL 31), with a specific focus on credit concentration risk. The peer review involved 30 EEA countries, with the exception of Iceland’s Financial Supervisory Authority (FME), which did not contribute. The review aimed to identify good practices, challenges, and areas for improvement in the application of GL 31 across national competent authorities (NCAs).

Main Findings

Implementation of GL 31

• Overall Application: The majority of NCAs (93%) largely or fully applied GL 31 regarding credit concentration risk.

  • Fully Applied: 37.6% (35 NCAs)
  • Largely Applied: 47.3% (44 NCAs)
  • Partially Applied: 9.7% (9 NCAs)
  • Not Applied: 2.2% (2 NCAs)
  • Non-Contributing: 3.3% (3 NCAs)

• Guidelines and Paragraphs: Paragraph 60 and Guideline 7 were applied more widely than Guideline 8.

  • Paragraph 60: 90.3% of NCAs fully or largely applied it.
  • Guideline 7: 87.1% of NCAs fully or largely applied it.
  • Guideline 8: 77.4% of NCAs fully or largely applied it.

Supervisory Practices

• Integration with Existing Frameworks: Most NCAs have integrated GL 31 into their existing domestic supervisory regulations, particularly their ICAAP and SREP guidelines.
• Continuous Monitoring: The assessment of credit concentration risk is continuous and not limited to annual SREP capital calculations. It is an integral part of NCAs' risk assessment systems and on-site examinations.
• Definition of Credit Concentration: Almost all NCAs assess whether credit institutions define credit concentration, but some do not verify whether this definition includes forward-looking credit risk mitigation techniques or indirect exposures (e.g., to a single collateral issuer).
• Model and Tool Evaluation: Most NCAs assess whether credit institutions use methodologies and tools to identify credit risk exposure. However, only half of them evaluate the models' underlying assumptions and how credit institutions use model outputs in policy formulation.
• Systemic Risk Consideration: A few NCAs were identified as having weaknesses in assessing the robustness of credit institutions' infrastructure for aggregating and consolidating credit exposures.

Good Practices Identified

• Comprehensive Coverage: Many NCAs integrate GL 31 into their annual SREP and use both on-site and off-site supervision to monitor credit concentration risk.
• Resource Allocation: Centralised and dispersed resource models have benefits, and dedicated staff for individual institutions improves supervision quality.
• Use of Credit Registers: Domestic central credit registers provide valuable data for assessing credit concentration, provided the data is granular.
• Automated Risk Analysis: Large credit institutions that use automated systems to monitor and report credit concentration risk enhance the EBA's ability to assess risks.
• Scenario Analysis and Stress Testing: Some NCAs require credit institutions to conduct scenario analysis and stress tests to identify hidden concentrations.
• Model Validation: Certain NCAs verify credit institutions' models by comparing them with historical data and other institutions’ parameters, and by using simulation methods.
• Benchmarking: Regular peer comparisons between credit institutions help NCAs benchmark credit concentration risk across sectors, industries, and countries.
• Forward-Looking Supervision: Some NCAs require credit institutions to submit funding and capital plans twice a year, enabling a longer-term risk assessment.
• Dedicated Teams: The establishment of dedicated teams for model validation and risk management is a best practice observed.
• HHI Usage: For less complex institutions, the Herfindahl-Hirschmann Index (HHI) is used as an indicator of credit concentration risk.

Key Recommendations

• Resource Measurement: NCAs should consider how they measure supervisory resources to ensure adequacy in future reviews.
• Guideline Development: The EBA should incorporate the elements and practices identified in this review into the development of the single supervisory handbook and related CRD guidelines.

Conclusion

The peer review highlights that NCAs across the EEA have largely implemented GL 31 regarding credit concentration risk, with some notable gaps in the assessment of indirect exposures and model conservatism. The report identifies several good practices that could be adopted more widely to enhance the effectiveness of credit concentration risk management.