2014年-EBA欧洲银行管理局_20121002_BSG_Liquidity_Paper_incl_amendment_80页_2mb

Summary of "New Bank Liquidity Rules: Dangers Ahead"

Core Content

This document, a position paper by the EBA's Banking Stakeholder Group, highlights the potential unintended consequences of the new liquidity rules introduced by the Capital Requirements Directive (CRD4) and Regulation (CRR). The focus is on the Liquidity Coverage Ratio (LCR) and the Net Stable Funding Ratio (NSFR), which are key components of the Basel 3 framework. The report argues that these rules, if not properly calibrated, may lead to significant economic distortions and reduced financial stability.

Main Acronyms and Abbreviations

• BCBS: Basel Committee on Banking Supervision
• BSG: Banking Stakeholder Group
• CET1: Common Equity Tier 1
• CRD4: 4th Capital Requirements Directive
• CRR: Capital Requirements Regulation
• DGS: Deposit Guarantee Scheme
• EBA: European Banking Authority
• ECAI: External Credit Assessment Institutions
• HQLA: High-Quality Liquid Assets
• IIF: Institute of International Finance
• IRB: Internal Ratings-Based
• LCR: Liquidity Coverage Ratio
• NSFR: Net Stable Funding Ratio
• SME: Small-Medium Enterprise

Key Issues and Main Points

1. Overview of Liquidity Rules and Their Role

• The new liquidity rules, introduced by the Basel Committee and European regulators, are part of a broader regulatory reform effort following the 2009 De-Larosière Report and the Basel 3 framework.
• These rules aim to enhance the stability of the financial system by requiring banks to hold sufficient high-quality liquid assets (HQLA) and to fund long-term assets with stable sources.
• The Capital Requirements Regulation (CRR) establishes a comprehensive regulatory framework, leaving many details to be calibrated by the EBA.

2. The LCR: Expected Impact and Scope for Calibration

• The Liquidity Coverage Ratio (LCR) requires banks to hold liquid assets equal to or greater than their net cash outflows under a 30-day stressed scenario.
• The LCR shortfall for EU banks is estimated to be over €1.15 trillion, up from €1 trillion in 2009.
• This shortfall may lead to crowding out of productive investments, as banks may channel funds into LCR-eligible assets rather than into loans and other "illiquid" assets.
• The report suggests that the definition of eligible liquid assets is critical, as it may exclude certain financial instruments that support SMEs and consumers, such as corporate bonds, covered bonds, and asset-backed securities.

3. The NSFR: Impact on Long-Term Funding

• The Net Stable Funding Ratio (NSFR) requires banks to fund long-term assets with stable funding sources, which could reduce their role in maturity transformation.
• The NSFR shortfall is estimated at €1.93 trillion, with an average ratio of 90% for surveyed banks.
• This could lead to higher interest rates and weaker supply of long-term finance for non-financial companies and households.

4. Risks of Overly Prescriptive Rules

• The LCR and NSFR are designed to buy time for supervisors to rescue failing institutions, not to ensure that banks can survive on their own.
• A narrow definition of eligible liquid assets could create systemic risks and distort market behavior, as banks may prioritize certain assets over others.
• Central bank eligibility is crucial in a crisis, and the rules must be flexible to adapt to changing market conditions.

5. The Need for Calibration and Stakeholder Involvement

• The report emphasizes the need for rigorous calibration of both the numerator (eligible assets) and the denominator (net cash outflows).
• Calibration is necessary to reduce the foreseeable burden on banks and the European economy.
• Stakeholder involvement is essential to ensure that rules are practical, market-sensitive, and not overly restrictive.

6. Impact on the Real Economy and SMEs

• The new rules could reduce the availability of credit for SMEs, which are vital to the European economy.
• SMEs rely heavily on bank financing, which may become more expensive and less accessible due to the rules.
• Alternative financing sources are limited, and tailor-made solutions are needed to support SMEs.

7. Accounting and Business Model Changes

• The new liquidity rules may alter accounting choices of banks, affecting their incentives and relationships with stakeholders.
• Banks are likely to deleveraging and shifting business models to meet regulatory requirements, which may lead to reduced lending and higher costs.

8. Conclusion

• The report urges regulators and policy makers to calibrate the rules carefully to avoid unintended consequences.
• It calls for collaboration with industry stakeholders, users of financial services, and academics to ensure the rules are effective and not too burdensome.
• The goal of the liquidity rules should be to support economic growth and stability, not to impose a "straightjacket" on the banking sector.

Summary of Key Findings

• LCR shortfall is over €1.15 trillion, leading to crowding out of productive investments.
• NSFR shortfall is over €1.93 trillion, potentially reducing long-term finance availability.
• Overly prescriptive rules may distort market behavior and reduce liquidity in certain asset classes.
• SMEs are particularly vulnerable to the new rules due to their reliance on bank financing.
• Calibration is essential to ensure the effectiveness and feasibility of the rules.
• Stakeholder involvement is necessary to avoid unintended consequences and support economic growth.