EBA欧洲银行-Call-for-advice-to-the-EBA-for-the-purposes-of-revising-the-own-fund-requirements-for-credit2C20operational-market-26-credit-valuation-adjustment-risk-040518_18页_423kb

Summary of the EBA's Call for Advice on Revising Own Fund Requirements for Risk Types

Core Content

The European Commission has issued a call for advice to the European Banking Authority (EBA) to assess the impact of Basel III framework revisions, particularly those published in December 2017, on the EU banking sector and the broader economy. These revisions aim to enhance the prudential standards for credit, operational, market, and credit valuation adjustment (CVA) risk. The EBA is requested to evaluate both the capital and operational implications of these changes, with a focus on their effects on institutions' risk-weighted assets (RWAs), capital ratios, and the associated administrative and operational costs.

The implementation of these reforms is expected to occur by 1 January 2022, with some transitional arrangements for the output floor extending to 2027. The EBA's analysis should consider the differences in impact based on the size, location, and business model of institutions, as well as the potential shifts in banking activities and exposures.

Main Points

1. Standardised Approach for Credit Risk (SA-CR)

• Overview: The EBA should evaluate the current use of SA-CR in the EU and the associated own funds requirements, including the share of credit risk in total exposures and the role of external credit ratings.
• Impact Analysis: Assess the impact of the revised SA-CR, including the external credit risk assessment (ECRA) vs standardised credit risk assessment (SCRA) approach, the revised risk weights for SMEs and special lending categories, and the treatment of subordinated debt and equity.
• Operational Costs: Evaluate one-off and recurring costs of implementing the revised SA-CR, with a focus on the proportionality principle and simplifications for small institutions.

2. Internal Ratings-Based Approaches (IRBAs) for Credit Risk

• Overview: The EBA should provide an overview of institutions’ use of the Foundation and Advanced IRB approaches and their current own funds requirements.
• Impact Analysis: Estimate the capital impact of amendments to IRBAs, including the deletion of the 1.06 scaling factor, the introduction of input floors for PD and LGD, and the revised regulatory values for LGDs and CCFs.
• Operational Costs: Analyse the implementation and operational costs for the revised IRBAs, distinguishing between one-off and recurring costs.

3. Securities Financing Transactions (SFTs)

• Overview: The EBA should assess the current SFT positions, including collateral types and whether they are centrally cleared.
• Impact Analysis: Evaluate the capital impact of the revised SFT exposure calculation framework, including the recalibration of haircuts, removal of own estimates, and introduction of minimum haircut floors.
• Operational Costs: Provide a broad assessment of the implementation, operational, and administrative costs of the revised SFT framework, particularly the minimum haircut floor.

4. Credit Valuation Adjustment (CVA) Risk Framework

• Overview: The EBA should review institutions’ current CVA risk positions and own funds requirements under the CRR.
• Impact Analysis: Estimate the capital impact of the revised CVA framework, especially for counterparties exempted under the CRR. Consider the effect of moving from the current framework to the new one.
• Proportionality: Analyse how the proportionality principle can be applied to the CVA risk framework, including the appropriateness of the simplified treatment for institutions with low CVA risk.
• Operational Costs: Assess the implementation and operational costs for the revised CVA framework, including the use of credit derivative indices as eligible hedges.

Key Information

• The revisions to the Basel III framework include changes to the SA-CR, IRBAs, CVA risk, and SFTs.
• The EBA is required to provide a comprehensive assessment of both capital and operational impacts.
• The analysis must be clustered by institution size, location, and business model.
• The EBA should evaluate the potential for shifts in banking activities or exposures due to the new rules.
• The simplified treatment for CVA risk should be assessed for prudence and adequacy, considering the current exemptions and their implications.
• The EBA should also consider the possibility of introducing alternative thresholds or criteria for the simplified treatment if the current ones are deemed insufficient.

Conclusion

The EBA's report will be instrumental in guiding the EU's implementation of the Basel III framework revisions. It will provide critical insights into the capital and operational implications, helping to ensure a balanced and proportionate approach that supports financial stability while considering the needs of different types of institutions across the EU.