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EBF Summary of Comments on CEBS' Consultation on Options and National Discretions in the CRD

Core Content and Main Points

The European Banking Federation (EBF) has provided detailed feedback on the CEBS consultation regarding national options and discretions in the Capital Requirements Directive (CRD). The EBF has long expressed concerns over the negative impacts of these discretions, including level playing field distortions, administrative burdens, and challenges to the harmonization of supervisory practices across the EU.

The EBF emphasizes the importance of a clear and final resolution to these issues, as they hinder the development of a genuinely harmonized Common Reporting framework. While the EBF acknowledges CEBS' efforts to provide a more consistent approach, it believes that the current proposals are only a partial improvement and fall short of addressing the broader regulatory challenges.

Key Concerns of the EBF

• Divergence and Market Distortions: National discretions create inconsistencies and competitive imbalances across EU jurisdictions.
• Administrative Burden: Maintaining different rules in different jurisdictions increases the complexity and cost of compliance for financial institutions.
• Impact Assessment: The EBF is critical of CEBS' use of impact assessments, which it believes often disguise prudential concerns rather than analyze actual industry costs and benefits.
• Pillar 2 and Pillar 3: The EBF highlights the indirect costs of national discretions on these pillars, particularly in terms of transparency and consistency.
• Need for Binding Rules: The EBF advocates for binding mutual recognition processes, not just non-binding ones, to ensure consistency in supervision.
• Supervisory Discretion: The EBF is concerned that CEBS' proposal to use supervisory discretion in some cases may reduce transparency and undermine the goal of a unified regulatory framework.

EBF's Agreement with CEBS

The EBF agrees with CEBS' proposals for 91 out of 152 provisions. These agreements are mainly on:

• Provisions to be kept in current form: 7 provisions (e.g., 55, 69, 70, 80, 150, 151, 152).
• Provisions to be turned into general rules: 53 provisions (e.g., 2, 8, 9, 10, 11, 12, 14, 15, 16, 19, 20, 21, 28, 29, 30, 31, 34, 37, 38, 39, 40, 41, 46, 47, 48, 55, 58, 59, 66, 67, 71, 72, 77, 78, 79, 82, 93, 96, 97, 113, 114, 124, 125, 126, 129, 137, 139, 146, 147).
• Provisions to be deleted: 32 provisions (e.g., 16, 22, 30, 32, 33, 35, 36, 41, 42, 43, 44, 45, 48, 49, 57, 85, 88, 99, 109, 112, 116).

Comments on CEBS' Methodology

• The EBF questions CEBS' approach to impact assessments, arguing that they often fail to consider the actual costs on the industry and are too general.
• The EBF believes that CEBS should consider the scope of representation in its analysis, as some responses come from more representative entities than others.
• CEBS' use of the term "local market conditions" as a justification for maintaining discretions is criticized, as it conflicts with the EU's goal of a single market.
• The EBF suggests that CEBS should link the current consultation with the ongoing Lamfalussy process, which aims to increase supervisory convergence.

Comments on the Glossary

• The EBF disagrees with CEBS' argument that certain provisions should only be changed during a future overhaul, as this avoids necessary regulatory debates.
• The EBF also questions the legitimacy of "local market conditions" as a basis for maintaining discretions, arguing that binding mutual recognition should be used where such conditions exist.
• The EBF believes that the application of provisions should be consistent across the EU and that supervisory discretions should be minimized to ensure transparency.

Comments on the Summary of Findings

• The EBF is not convinced by CEBS' claim that supervisory discretions reduce the costs of national discretions.
• It calls for a more systematic and comprehensive impact assessment that considers both direct and indirect costs and benefits.
• The EBF is critical of CEBS' argument that higher conservatism equates to greater risk sensitivity, which is inconsistent with the spirit of Basel II.

Comments on Specific Provisions

Conclusion

The EBF urges CEBS to move towards a more comprehensive and binding approach to harmonizing the CRD, ensuring that supervisory practices are consistent across the EU. It emphasizes the need for a clear timetable for implementation and calls for a more systematic and industry-focused impact assessment. The EBF is particularly concerned with the implications of national discretions on Pillar 2 and Pillar 3, and believes that these should be eliminated or converted into general rules to support a truly harmonized regulatory framework.