EBA欧洲银行-EBA-Opinion-on-measures-in-accordance-with-Article-458-28EBA-Op-2018-0229_11页_236kb

Summary of EBA Opinion on Measures under Article 458 of Regulation (EU) No 575/2013

Core Content

The European Banking Authority (EBA) has issued an opinion on a measure proposed by the Haut Conseil de Stabilité Financière (HCSF), the French macro-prudential authority, under Article 458 of the Capital Requirements Regulation (CRR). The measure aims to tighten large-exposure limits for global and other systemically important institutions in France, specifically targeting large and highly indebted non-financial corporations (NFCs) and their connected groups.

Main Points of the Measure

• Scope: The measure applies to:

  • Large and highly indebted NFCs resident in France.
  • Groups of connected NFCs assessed as highly indebted and based in France.
  • Institutions identified by the French authorities as global or other systemically important institutions (currently six institutions).

• Criteria for Tightening Exposure Limits:

  • Exposures must be equal to or above EUR 300 million (excluding credit risk mitigation techniques and exemptions).
  • The NFC must meet two financial indicators:
    • Leverage ratio (total financial debt less outstanding liquid assets over total equity) > 100%.
    • Interest coverage ratio (EBIT over interest expenses) < 3.

• Stricter Limit: The limit is set at 5% of eligible capital for exposures to such NFCs.

• Implementation:

  • The measure will be fully applied from 1 July 2018.
  • It is intended to last for at least two years and may be renewed.
  • The HCSF, with support from Banque de France and ACPR, will monitor the measure and may revise the limit downward if necessary.

Key Information

• The HCSF argues that the proposed measure is proportionate, focusing on the most indebted NFCs and not affecting sound institutions, thus avoiding negative effects on the real economy.
• The measure is forward-looking, designed to prevent future vulnerabilities rather than address existing ones.
• It is considered a backstop to limit counterparty risk from highly indebted NFCs and to safeguard financial stability.
• The HCSF emphasizes that the measure does not require additional supervisory reporting data, as it aligns with the current large-exposure framework.

Main Views and Opinions

Economic Rationale

• The HCSF identifies rising indebtedness among large French NFCs as a potential threat to financial stability.
• The acceleration of the financial cycle in France, driven by low interest rates and increased corporate borrowing, has led to a significant rise in debt levels, especially for large corporations.
• Variable rate debt and high reliance on external financing make these corporations particularly vulnerable to interest rate hikes.
• The HCSF warns that increasing indebtedness could lead to systemic risk if not addressed, potentially triggering a credit crunch and affecting the real economy.

Rationale for Not Using Alternative Measures

• The HCSF evaluates other measures under the CRR and CRD, such as Pillar 2 requirements, risk weights, and liquidity measures, and concludes that they are not appropriate for addressing the specific risk related to large and highly indebted NFCs.
• Pillar 2 is seen as micro-prudential and less transparent, making it unsuitable for macro-prudential concerns.
• Risk weight adjustments and liquidity requirements are not relevant to the identified risk.
• CRD Articles 101–105 and 133–136 are considered to be too broad or not targeted enough for the specific issue at hand.

EBA's Assessment and Conclusions

• The EBA acknowledges the appropriateness of the objective to limit the indebtedness of large and highly indebted NFCs to promote financial stability.
• The EBA does not object to the proposed measure, but highlights several concerns:
  • The measure does not capture all institutions with exposures to the targeted NFCs.
  • It may be less effective in increasing the resilience of NFCs, as they might seek alternative funding sources.
  • The geographical and type-of-exposure restrictions are not clearly aligned with the broader Single Market objectives.
  • The reciprocity argument is unclear and may not justify limiting the measure to French institutions only.
  • The EBA encourages close interaction between macro and micro-prudential authorities to ensure effective monitoring.

Conclusion

The EBA supports the HCSF's intention to use Article 458 of the CRR to address the macro-prudential risk posed by the increasing indebtedness of large French NFCs. It acknowledges the preventive nature of the measure and its focus on specific risk segments, but emphasizes the need for clarity, comparability, and alignment with the Single Market. The EBA also recommends further guidance for institutions and authorities to ensure compliance and effectiveness.

This opinion was published on the EBA's website on 13 March 2018.