EBA欧洲银行-CP31_ZKA_5页_93kb

CEBS Consultation Paper Summary: "Guidelines on Aspects of the Management of Concentration Risk under the Supervisory Review Process" (CP 31)

Core Content

The CEBS Consultation Paper CP 31 focuses on the management of concentration risk within the supervisory review process. It aims to provide guidance on how financial institutions should identify, assess, and manage concentration risk, both within individual risk types (intra-risk) and across different risk types (inter-risk). The paper outlines a comprehensive framework that includes general considerations, principles, and specific areas of risk management.

Main Points and Observations

1. General Observations

• Intra-risk vs. Inter-risk: The distinction between intra-risk (within a single risk type) and inter-risk (across different risk types) is based on real developments in the financial sector. Intra-risk models are well-established, while inter-risk analysis is still in its early stages.
• Stress Testing: For many institutions, concentration risk across risk types is primarily analyzed in the context of stress testing or scenario analyses.
• Integrated Approach: The requirement for a fully integrated approach to measure and control concentration risks is seen as leading to high costs without clear benefits.
• Model Risk: Inter-risk integration approaches may carry model risk, as they are not yet standardized.
• Proportionality Principle: CEBS should emphasize the importance of local market knowledge and specialized expertise for smaller institutions, rather than implying that regional and specialized credit institutions inherently face concentration risk.
• Implementation Deadline: The deadline of 31 December 2010 should be interpreted as the time for transposition into national legislation, not the implementation date in banks.
• Ambiguity in Implementation Study: The proposed implementation study in point 13 is unclear and requires a brief description of the intended activities.

2. General Considerations and Principles for Concentration Risk Management

• Risk Pricing: Point 27 requires institutions to correctly price risks, but it conflates risk pricing with concentration risk management. The latter should not be tied to pricing mechanisms.
• Limitation of Exposures: Point 35 is interpreted as a requirement to limit all exposures, which is not appropriate. Instead, suitable control mechanisms should be in place.
• Reporting Framework: Point 43 suggests a separate reporting framework for concentration risk, but it should be integrated into regular risk reporting.
• Capital Allocation: Point 47 implies that concentration risk can be measured and allocated capital separately, which is not accurate. Concentration risk is often already captured at the portfolio level.
• Double Capital Cover: A flat-rate capital cover for concentration risks may lead to double counting under ICAAP.
• Common Underlying Factors: Point 50 addresses concentration risks arising from common underlying factors, which have been previously discussed in CEBS CP 26. The paper suggests that such reviews should be based on materiality thresholds and that transitional periods are necessary for transactions up to 2010.
• VaR Models: CEBS should clarify that VaR models can still be used for assessing concentration risk, especially in conjunction with Guideline 7.

3. Management and Supervision of Concentration Risk within Individual Risk Areas

• Operational Risk: Point 78 suggests considering near misses and operational risk gains, but these are not relevant for capital requirements modeling and should not be included in the concentration risk context.
• Liquidity Risk: Point 85 and following paragraphs discuss the identification of liquidity risk concentrations. The paper refers to the Basel Committee and European Commission guidelines for establishing a uniform liquidity regime.
• Funding Sources: Guideline 14 (point 92) requires credit institutions to identify and monitor concentration risk in their funding sources. The paper questions the inclusion of covered bonds in the list of funding sources, citing the stability of the German Pfandbrief market and its legal and structural characteristics.

Key Recommendations

• Clarify the distinction between intra-risk and inter-risk and the practical application of inter-risk analysis.
• Avoid imposing unnecessary limitations on exposures and focus on control mechanisms.
• Ensure that the implementation study is clearly defined.
• Integrate concentration risk into existing risk reporting frameworks rather than requiring separate reporting.
• Delete covered bonds from the list of funding sources due to their stability and legal structure.
• Clarify that VaR models can continue to be used for concentration risk assessment.