EBA欧洲银行-FBF_CP10r_8页_1mb

FBF Summary on CEBS CP10 Revised: Guidelines on AMA and IRB Implementation, Validation, and Assessment

Core Content

The French Banking Federation (FBF) has provided detailed comments on the revised Consultation Paper CP10 issued by the Committee of European Banking Supervisors (CEBS), focusing on the implementation, validation, and assessment of Advanced Measurement Approaches (AMA) and Internal Ratings Based (IRB) approaches. The FBF acknowledges the effort to clarify previous ambiguities but highlights several unresolved issues and areas of concern.

Main Points and Recommendations

1. Translation and Documentation Burden

• The current CP10 document includes excessively detailed documentation requirements for internal practices, which may not add value.
• FBF recommends that only two languages be requested for the most basic documents, with operational language used for technical processes.
• They suggest that summaries and abstracts should be made available in a more accessible format to reduce the burden on banks.

2. Securitisation

• The reference to "direct control over the physical collateral" in Annex III should be replaced with "substantial degree of control" to align with the CRD.
• The significant risk transfer indicator should be set using a quantitative threshold based on losses retained by the originator, and this should be consistent across Europe.
• FBF recommends a thorough discussion with the industry before finalizing the threshold.

3. Purchased Receivables

• The concept of dilution risk remains unclear, particularly in relation to the seller's default.
• FBF emphasizes that dilution losses only occur if the seller defaults, and that recourse exists otherwise.
• They suggest that seller's default risk should be more clearly defined and integrated into the risk assessment framework.

4. Downturn LGD

• FBF disagrees with the concept of downturn LGD, arguing that it leads to excessively conservative estimates.
• They point out that downturn LGD is not used for EL calculations and that the capital charge is based on an add-on reflecting unexpected losses.
• The calculation of RWAs using this add-on is unclear and may conflict with statistical methods used for non-defaulted exposures.
• FBF urges CEBS to clarify the framework for LGD and RWA calculations on defaulted assets.

5. Credit Facilities (CF)

• For retail exposures, own estimates of CF are required.
• For corporate, sovereign, and institutional exposures, the use of own estimates should be permitted by competent authorities.
• FBF supports the use of supervisory CF for guarantees and standby letters of credit, but recommends the same treatment for short-term letters arising from goods movement.
• They suggest that Annex V should be removed due to its overly prescriptive nature.

6. Operational Risk

• The document is too detailed and prescriptive, particularly in the AMA quantitative sections.
• FBF recommends removing examples from §437, as they may be misinterpreted as requirements.
• They suggest replacing "loss events database" with "operational risk data" to avoid implying direct input into capital calculations.
• The distinction between multiple-effect and multiple-business line losses should be clarified or removed.
• The concept of super-additivity in correlation should be avoided, as it could incentivize banks to revert to the standard approach.
• They recommend replacing the last sentence in §462a with a more cautious statement about dependencies of tail events.
• FBF supports clarifying the term "repeatability" and removing the concept of granularity from the document.

7. Internal Audit and ORM

• FBF is concerned that §473 may question the independence of Internal Audit and the Operational Risk Management (ORM) function.
• They suggest that the ORM function should be partially responsible for tasks listed in §474 and cooperate with senior management.
• They recommend a phasing-in period for the implementation of the tasks outlined, as it is unrealistic to expect full compliance within the remaining time horizon.

Key Information

• The FBF highlights the practicality and cost-effectiveness of the AMA approach, urging CEBS to consider the feasibility of implementation.
• They emphasize the need for clarity, consistency, and flexibility in the guidelines, particularly for technical processes and risk modeling.
• The revised CP10 is seen as a step in the right direction, but further clarification and industry consultation are necessary to ensure its effectiveness and applicability.

Conclusion

The FBF believes that while the revised CP10 addresses many of the initial concerns, it still contains ambiguities and overly prescriptive elements that could hinder its implementation. They call for greater flexibility, clarity on key concepts, and alignment with industry practices to ensure that the guidelines are both practical and consistent across Europe.