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报告摘要

LIBA & ISDA Joint Response to CEBS Consultation Paper (CP14) on Large Exposures

Core Content

This document outlines the joint response of the London Investment Banking Association (LIBA), the International Swaps and Derivatives Association (ISDA), and the British Bankers' Association (BBA) to the CEBS Consultation Paper (CP14) on the first part of the European Commission's call for advice on large exposures. The response is also joined by the European Securitisation Forum (ESF) for questions related to structured finance transactions.

The associations emphasize that their membership includes a diverse range of financial institutions, both within and outside the EU, operating in various segments of European and international capital markets. They note that their responses reflect the views of large, internationally active firms.

Main Viewpoints

1. Regulatory Context and Objectives

The current large exposures regime, dating back to the early 1990s, is seen as outdated and not aligned with the Basel 2 framework.
The EU Commission has acknowledged the need for better regulation and greater harmonization across member states.
The associations support the EU's initiative to reduce regulatory burden and align with industry best practices.

2. Key Messages

They question the presumption that a 25% limit is the most appropriate tool for managing single name concentration risk.
Firms generally manage concentration risk more stringently than the regulatory limit, and their systems are not directly aligned with the current regime.
The associations believe that a principles-based approach under Pillar 2 would be more effective and appropriate, allowing firms to use their own systems and internal assessments.
They are concerned that the market failure analysis in CP14 does not fully reflect the current state of risk management practices and the evidence that such risks are not the primary cause of firm failures.

3. Concerns with CP14

The associations find the market failure analysis insufficient and suggest that more work is needed to demonstrate better regulation.
They believe that the analysis fails to consider the implications of recent counterparty collapses and why they did not lead to firm failures.
They argue that the 25% limit is not a necessary regulatory tool and should be treated as a guideline rather than a hard limit.
They call for further consideration of alternative regulatory tools, such as independent third-party reviews, and for revisiting the timetable to ensure a thorough and high-quality outcome.

Key Information

4. Operational Objectives of the Large Exposures Regime

The consultation paper identifies three operational objectives: idiosyncratic risk, sectoral/geographic concentration risk, and unforeseen event risk.
The associations agree that these risks should be considered but argue that unforeseen event risk is not a separate risk category and is part of idiosyncratic risk.
They suggest that the focus should be on the principles of risk management rather than rigid regulatory limits.

5. Market Failure Analysis

The associations are unconvinced that there is a material market failure in respect of unforeseen event risk.
They believe that firms have well-considered policies and practices for managing concentration risk.
They argue that ratings and wholesale counterparties also serve as market discipline tools and that the current analysis does not adequately reflect this.
They question the validity of the argument that implicit state support undermines the effectiveness of ratings.

6. Comparisons with Other Jurisdictions

The associations note that the EU's large exposures regime is not systematically disadvantageous compared to other jurisdictions.
They point out that the US National Bank Act appears more restrictive but applies to single counterparties rather than groups.
They highlight the lack of consistency within the EU itself and the need for a more harmonized approach.

7. Credit Quality and Risk Mitigation

The associations support the inclusion of credit quality in the management of large exposures.
They believe that credit risk mitigation (CRM) and credit worthiness should be considered in a Pillar 2 framework.
They argue that a limits-based regime is not the most appropriate way to address credit quality and that such a regime could distort market behavior.

Additional Considerations

The associations suggest that the market failure analysis should be deepened by examining:
- Firms' practices in relation to significant counterparty failures.
- The policy options available.
- The analysis in light of further thinking from part two of the call for advice.
They also emphasize the importance of revisiting the timetable to ensure sufficient time for a comprehensive and effective regulatory outcome.

Conclusion

The associations believe that the current regulatory framework is not aligned with modern risk management practices and that a principles-based approach under Pillar 2 would be more appropriate. They are concerned that the 25% limit is not necessary and that the market failure analysis does not fully reflect the current industry practices. They encourage CEBS to consider alternative regulatory tools and to ensure that the final proposals are both effective and aligned with the better regulation agenda.

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