EBA欧洲银行-Congl_EBF_2页_92kb

EBF Response to IWCFC Recommendations on Own Funds Calculation for Financial Conglomerates

Core Content

The European Banking Federation (EBF) responds to the recommendations by the Insurance and Banking Working Group on Financial Conglomerates (IWCFC) regarding the impact of sectoral rules on the calculation of own funds for financial conglomerates. The EBF emphasizes the importance of harmonization and consistency across banking and insurance sectors to ensure a fair regulatory environment and support integrated management of financial conglomerates.

Main Views and Key Information

1. Hybrid Capital Instruments

• Harmonization of Eligible Capital: The EBF supports the IWCFC's view that the principles and requirements for eligible capital should be the same for banks and insurance companies, unless specific sectoral differences are justified.
• Alignment with Solvency II: They advocate for harmonization to occur at the latest with the implementation of Solvency II, rather than creating a new framework.
• Three-Tier Structure: The EBF strongly endorses the Commission's approach of using a three-tier structure for Solvency II, as opposed to developing a new method.
• Criticism of CEBS Proposal: The EBF argues that the current CEBS draft proposal for a common EU definition of Tier 1 hybrids is not in line with the Better Regulation principles and lacks consideration for economic costs.

2. Unrealised Gains and Revaluation Reserves

• No Change in Rules: The EBF agrees with the IWCFC's conclusion that there is no need to change the current rules on unrealised gains and revaluation reserves.
• Call for Consistency: They recommend that Member States strive for greater consistency in the national transposition of sectoral rules and the application of prudential filters.
• Level Playing Field: Consistency across Member States and between sectors is essential to ensure a level playing field and identify potential regulatory shortcomings at the conglomerate level.

3. Thresholds for Deduction of Participations

• Low Regulatory Arbitrage Risk: The EBF considers the potential for regulatory arbitrage to be low and does not support amendments to sectoral rules or the introduction of a specific conglomerate rule.
• Supervisory Discretion: They prefer that supervisory bodies use case-by-case discretion to address arbitrage issues, if necessary.
• Need for Cross-Sectoral Alignment: The EBF proposes that rules on the mandatory deduction of participations should be aligned across sectors to maintain a level playing field.
• Clarification of Participation Definition: They request a review of Article 4(10) of the Capital Requirements Directive (CRD) to clarify that "participation" means ownership of 20% or more of voting rights or capital.
• Durable Link Definition: If the term "durable link" is retained, the EBF suggests that the criteria should focus on whether the participation allows significant influence on the held entity, and that the regulatory definition should align with the accounting definition.

4. Consolidation Methods

• Default Method: The EBF supports the IWCFC's recommendation to use consolidated accounting as the default method for calculating own funds of financial conglomerates.
• Retention of Other Methods: They believe that removing the book value/requirement deduction method too soon would be inappropriate and advocate for the retention of the deduction and aggregation method, as well as the possibility of using a combination of these methods.
• Concern Over Timing: The EBF expresses concern about the timing of the proposed removal of Method 3, suggesting that a gradual transition would be more prudent.

Conclusion

The EBF's response underscores the importance of regulatory consistency and harmonization across banking and insurance sectors. They advocate for a balanced approach that respects sectoral specificities but avoids regulatory arbitrage and ensures a level playing field. The EBF supports the use of consolidated accounting as the default method but urges caution in removing alternative methods. They also call for a clear and objective definition of participation to enhance transparency and comparability across financial conglomerates.