EBA欧洲银行-CP36_FBF_coverletter_4页_1mb

French Banking Federation's Response to CEBS's Consultation Paper on Liquidity Cost Allocation (CP36)

Core Content

The French Banking Federation (FBF) has responded to the CEBS consultation paper (CP36) on liquidity cost allocation, offering both support and specific recommendations. The FBF represents over 430 commercial, cooperative, and mutual banks in France, including both French and foreign-based institutions. They acknowledge the importance of the consultation process in developing balanced regulations that address both supervisory objectives and operational challenges faced by banks.

The FBF generally agrees with the CEBS objectives of integrating funding costs and benefits into the decision-making processes of banks. They also support the phase-in process and the principle of proportionality proposed in CP36, which aims to meet the 30th March 2011 application date without placing undue burdens on banks.

However, the FBF raises concerns about the potential competitive disadvantage for European banks compared to non-European banks, especially if the application scope includes non-European subsidiaries. They suggest that the CP36 should clarify its application to avoid an uneven playing field.

Main Points and Key Recommendations

• Risk Tolerance:
  FBF supports the principle of defining risk tolerance but questions the consistency between Guideline 1 and the footnote in CP36. They recommend clarification on whether funding costs should be based on match term or contractual term, and suggest that the expected term (including prepayment and rollover) should be considered.

• Transaction vs. Pool of Transactions:
  FBF notes that CP36 should explicitly recognize that pool-based funding charge processes are acceptable, provided that the transactions within the pool are homogeneous in terms of contract types and maturities.

• Before-the-Fact vs After-the-Fact Funding Charge:
  FBF emphasizes that funding costs should be known at the inception of a transaction to be part of the decision-making process. They also suggest that any difference between expected and actual funding costs should be measured to prevent systematic bias in internal funding costs.

• Current vs. Lagged Funding Costs:
  FBF advocates for using a combination of observed and expected funding costs, rather than relying solely on instantaneous or lagged costs. This approach would allow banks to better manage market volatility and avoid creating distorted incentives.

• Observable Funding Costs:
  FBF recommends clarifying the definition of "market transaction prices" to ensure that funding costs derived from them are not overly subjective. This includes disentangling different price components such as funding costs, commercial margins, and transaction costs.

• Measuring ALM Treasury Funding Cost-Driven Results:
  FBF supports the measurement, monitoring, and reporting of ALM Treasury P&L related to funding costs, as it aligns with the "What is measured gets managed" principle. They suggest amending Guideline 2 to include this requirement.

• Other Issues:
  FBF proposes that internal funding costs should be broken down by currencies, given their currency dependence, and that both expected and actual early termination costs should be considered.

Conclusion

The FBF is committed to constructive engagement with CEBS and believes that the proposed guidelines should be designed to foster healthy competitive conditions in the banking sector. They emphasize the need for clarity, consistency, and flexibility in the implementation of liquidity cost allocation mechanisms to ensure they are both effective and fair.