EBA欧洲银行-EBA-Report-on-the-regulatory-review-of-the-IRB-Approach_27页_618kb

EBA's Regulatory Review of the IRB Approach Summary

Core Content

The European Banking Authority (EBA) conducted a consultation on the 'Future of the IRB Approach' to evaluate the regulatory review of the Internal Ratings-Based (IRB) approach within the European Union. The main objectives were to ensure a harmonised application of the IRB requirements, improve the comparability of capital requirements, and align with international developments such as those from the Basel Committee on Banking Supervision (BCBS). The EBA received 28 responses, including 22 public and 6 confidential, which were used to inform its review and future regulatory actions.

Main Purpose and Objectives

• To ensure that the scope of the regulatory review is adequate and can be implemented efficiently.
• To maintain the risk-sensitive nature of the IRB approach while reducing variability.
• To enhance supervisory consistency and transparency across institutions and jurisdictions.
• To align with the Basel framework and address discrepancies in risk estimates and capital requirements.

Key Areas of Consultation

2.1 Prioritisation and Timelines

• The EBA proposed a four-phase regulatory review, with the last phase to be finalised by the end of 2017.
• The implementation of changes in institutions' models and processes is expected to be completed by the end of 2020.
• Respondents generally supported the prioritisation but expressed concerns about the ambitious timeline.
• Some requested more time for implementation, particularly due to the complexity of the changes and the need for data adjustments.
• The EBA should consider extending the implementation timeframe and address transitional issues, such as data proxies or waivers.

2.2 Technical Adjustments

2.2.1 Definition of Default

• Clarification of the definition of default is crucial for harmonising risk estimates.
• Respondents highlighted the need for further clarification on:
  • Days past due
  • Technical defaults
  • Indications of unlikelihood to pay
  • Distressed restructuring
  • Multiple defaults
  • Recovery (monitoring) periods
• Adjustments to historical data may be necessary, but many institutions lack the expertise and time to do so.

2.2.2 Risk Estimates

• The EBA aims to clarify the main definitions and aspects related to Probability of Default (PD) and Loss Given Default (LGD) estimation.
• Concerns were raised about the margin of conservatism, downturn adjustments, and the treatment of low default portfolios.
• The calculation of default rates and LGD, including indirect costs and credit risk mitigation techniques, requires further clarity.
• The EBA should also address the definitions of 'long run average' and 'economic cycle'.

2.2.3 Treatment of Defaulted Assets

• Institutions have developed varying practices for the treatment of defaulted assets.
• Clarifications are needed on:
  • Forbearance cases in LGD calculation
  • Discount rates
  • Calibration levels
  • Expected loss (ELBE) and its relationship with accounting provisions
• Most respondents supported the proposed changes to improve consistency in the treatment of defaulted assets.

2.2.4 Scope of Application of the IRB Approach

• Flexibility in the roll-out of the IRB approach is needed, especially for low default portfolios and portfolios with structural changes.
• The initial five-year roll-out period was considered too short for complex organisations.
• The EBA should allow more time for institutions to prepare and implement the changes.

2.2.5 Internal Risk Management Processes

• The EBA's regulatory technical standards (RTS) include requirements for internal risk management processes.
• Key areas of focus:
  • Corporate governance
  • Use of risk estimation in internal risk management
  • Decision-making processes
  • Stress testing
• Some respondents raised concerns about the proportionality of the requirements for smaller institutions and the independence of the validation function.

2.2.6 Credit Risk Mitigation (CRM)

• The EBA's CRM mandates focus on specific aspects such as conditional guarantees and liquid assets.
• CRM-related changes are planned for the final phase of the review.
• Respondents indicated that CRM should have lower priority but highlighted the importance of expanding the scope and granularity of eligible mitigation techniques.
• They suggested that CRM work should be carried out in parallel with LGD estimation to avoid multiple IT system redevelopments.

2.2.7 Other Areas of Discrepancy

• Discrepancies were identified in double validations and supervisory approaches between home and host authorities.
• The EBA should increase cooperation between competent authorities to align requirements and assessment methodologies.
• Discrepancies between EU and non-EU authorities, such as different materiality thresholds, also need to be addressed.

EBA's Considerations and Intentions

• The EBA will continue to focus on improving supervisory consistency and transparency.
• The review will be conducted in a coordinated manner with international developments, especially from the Basel framework.
• The EBA maintains its support for the continued use of the IRB approach, but acknowledges the need for a more harmonised and risk-sensitive framework.
• The EBA will develop technical standards and guidelines based on the consultation responses, particularly in areas where clarification is needed.
• The EBA opinion, which outlines the implementation plan, states that the implementation should be complete by end-2020.

Final Remarks

• The EBA's report and opinion should be read together to fully understand the regulatory review and implementation plan.
• The EBA aims to ensure that the IRB approach remains a core part of the EU's regulatory framework while addressing the operational challenges and discrepancies raised by the industry.