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CEBS Questionnaire on Large Exposures: Summary

Core Content

The document is a response from the German banking industry to the Committee of European Banking Supervisors (CEBS) questionnaire on market practices related to large exposures. It outlines the industry's position on the current regulatory framework, the need for a more flexible and risk-sensitive approach, and the importance of dialogue between supervisors and the banking sector.

Main Views and Key Points

1. Support for Regulatory Improvement

• The German banking industry supports the involvement of the banking sector in improving European supervisory law.
• They believe that the current large exposures regulatory regime is effective in capturing and limiting risks in the short term.

2. Criticism of the Questionnaire Process

• The industry feels that the questionnaire format is insufficient for a meaningful exchange of views.
• They emphasize the need for a real dialogue, including expert meetings, bilateral talks, and verbal exchanges, rather than just written responses.
• The consultation period was extended, but due to the heavy workload from Basel II implementation, a detailed response to all questions is not possible within the timeframe.

3. Focus on Questions 16 and 17

• The industry has concentrated on answering questions 16 and 17, which pertain to the regulatory environment for large exposures.
• They plan to provide a detailed response to the other questions in the near future.

4. Call for Risk-Sensitive Rules

• The industry advocates for more risk-sensitive rules and a level playing field in areas not yet covered by the current regime.
• They highlight the importance of legal certainty in large exposures regulation, so that banks can operate without constant uncertainty about compliance.

5. Need for Adaptation to Modern Financial Instruments

• The current framework does not adequately reflect modern financial instruments such as derivatives.
• The industry calls for adaptation of prudential treatment to align with internal risk management practices.
• They stress the need for uniform rules to ensure consistency and certainty across the EU.

6. Intra-Group Exposures

• The industry believes that the 20% limit on exposures to affiliated companies (not consolidated) is disproportionate compared to the 25% limit for non-associated companies.
• They suggest that central risk management at the group level should eliminate the need for such limits.

7. Harmonisation of Overshooting Rules

• There is a need for clarification on temporary overshooting of large exposure limits.
• The industry highlights differences in national supervisory practices, particularly within the EU, and calls for harmonisation to ensure a level playing field.

8. International Harmonisation

• The industry supports international harmonisation of large exposures rules, particularly involving the Basel Committee on Banking Supervision.
• They argue that unanimous decision-making by all executive directors in Germany is too strict and should be reconsidered.

9. Legal Basis and Interpretation

• The industry emphasizes that CEBS should examine not only the legal basis for monitoring large exposures, but also how national supervisors interpret and apply the rules.
• They believe that existing differences in interpretation, such as tolerance for overshooting, must be addressed to ensure consistency across the EU.

Conclusion

The German banking industry appreciates the opportunity to respond to the CEBS questionnaire but urges for a more interactive and comprehensive dialogue. They advocate for risk-sensitive and harmonised rules, legal certainty, and alignment with modern risk management practices, while emphasizing the need to avoid unnecessary regulatory burdens. The industry also calls for international cooperation in developing a uniform regulatory framework for large exposures.