EBA欧洲银行-BSG-reponse-to-Consultation-paper-28EBA-CP-2014-3829-4-February-2015_8页_242kb

EBA Banking Stakeholder Group Consultation on Valuation RTS Summary

Core Content

The EBA Banking Stakeholder Group (BSG) has provided detailed feedback on the Consultation Paper EBA/CP/2014/38, which outlines Draft Regulatory Technical Standards (RTS) on valuation under Directive 2014/59/EU (BRRD). The BSG's comments focus on the clarity, consistency, and independence of valuation methodologies used by valuers in the context of resolution actions.

Main Views

General Comments

• The BSG acknowledges the importance of the RTS Drafts in supporting resolution authorities in making informed decisions.
• They emphasize the need for consistency in valuation methodologies across the European Union.
• Valuers should be free to choose methodologies, but must justify their approach, assumptions, and the economic and financial variables used.
• The use of "generally accepted valuation methodologies" is encouraged to ensure uniformity and transparency.
• The independence of valuers is critical, especially in the context of resolution, to prevent bias or undue influence.

Key Recommendations

• Clarify definitions of valuation approaches, especially highlighting that some methodologies are complementary (e.g., hold value and franchise value can be used together) or result from different courses of action (e.g., fair value vs. forced exit value).
• Justify deviations from management assumptions in valuation reports, particularly in expected cash flows and discount rates.
• Highlight valuation uncertainty in specific areas such as models used for fair value, goodwill/intangibles, and collateral valuation.
• Avoid default prudential buffers unless necessary, as they may lead to double conservatism and unintended legal consequences.
• Valuation of post-conversion equity is essential for determining write-down or conversion terms, and the valuer should be allowed to propose adjustments to conversion rates if needed.
• Limit the use of post-resolution information to cases of material changes, to prevent valuation loops and prolonged uncertainty.
• Specify discount rates based on the valuation scope (whole entity vs. specific parts), and consider homogeneity across EU member states.
• Enhance transparency in valuation reports by including comparisons between resolution and insolvency scenarios, along with analysis and justification of treatment differences.
• Valuation dates should be based on the resolution date, even if it is in the future, to ensure relevance for decision-making.
• Explicit independence statements should be included in valuation reports to ensure objectivity and avoid conflicts of interest.

Key Information

• Valuation 1: Used to determine if an entity is failing or likely to fail.
• Valuation 2: Used to inform resolution actions, including write-downs or conversion.
• Valuation 3: Used to assess whether shareholders/creditors would have received better treatment under normal insolvency.
• Valuation 2 and 3 are closely related, and the BSG suggests that elements of Valuation 3 should be included in Valuation 2 for consistency and comparability.
• Collateral valuation should include a best estimate and a value range to reflect uncertainty.
• The BRRD provides various resolution tools (e.g., sale of business, bridge institution), which require specific asset valuations.
• Discount rates should be justified and linked to the valuation context, such as the weighted cost of capital for the whole entity or comparable instruments for specific parts.

Conclusion

The BSG supports the general objectives of the RTS Drafts but calls for improvements in clarity, consistency, and transparency. They stress the importance of valuer independence, methodological justification, and limiting the use of post-resolution data to ensure fair and effective resolution processes across the EU.