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EBA Board of Supervisors Teleconference Summary (22 November 2011)

Core Content

The EBA Board of Supervisors held a teleconference on 22 November 2011 to discuss several key topics related to capital requirements, policy measures, and the implementation of the capital buffer. The meeting aimed to align the Board on the next steps for the comprehensive package of recommendations and procedures to be presented to ECOFIN.

Main Topics and Views

1. Voting Procedure and Recommendation Framework

• The Chair outlined the main topics for discussion, including the voting procedure and the final structure of the Recommendation.
• It was confirmed that the Recommendation would be subject to Qualified Majority Voting (QMV) as per Article 16 of the EBA Regulation.
• The Board agreed to review the Recommendation and allow amendments, which would also be subject to QMV.
• The voting procedure for the three ESAs (EBA, CEBS, and ESRB) will be discussed at the next JC meeting.

2. Feedback on EFC/ECOFIN

• The Chair provided an overview of the discussions at EFC and ECOFIN, highlighting the importance of viewing the banking component as part of a broader policy package.
• The Board acknowledged the need for coordination and alignment with these bodies.

3. Methodology for Computing the Floors

• The issue of transitional floors was raised, with some NSAs expressing concerns about a lack of level playing field due to varying applications across countries.
• Two methodologies were proposed for calculating the floors:
  • Assessing floors against total own funds.
  • Using an RWA (Risk-Weighted Assets) approach, which would have a greater impact on the EBA exercise.
• No clear majority was found for either option, but the more restrictive option proposed by EBA Staff received more support.
• It was decided to leave both options available for selection, with full disclosure of the choices made in the final results.

4. Term Sheet Contingency on Capital Instruments

• This was discussed at the previous Meeting of the Board (MB).
• The document will be circulated again with members' comments incorporated.
• The Chair suggested that members provide written comments, and a revised version will be sent out on 24 November.

5. Buy-Backs

• The issue of buy-backs was also discussed at the MB.
• CEBS' Guidelines stated that in exceptional circumstances, NSAs could allow certain buy-backs, and such circumstances currently exist.
• Members expressed general agreement on the issue, and the document will be reviewed accordingly.
• A vote on the issue is planned.

6. Moratorium on Calls on Innovative Capital Instruments

• The idea of a moratorium on the exercise of calls on innovative capital instruments was raised at the previous MB.
• Most members were not convinced and argued that the moratorium should be applied on a case-by-case basis.
• There was no strong support for the proposal, and the Chair acknowledged this.

7. Structure of the Recommendation

• The Chair proposed that the Recommendation be based on Articles 16(1), 21(2)(b), and 31.
• Annexes will include the methodology and an explanatory memorandum.
• The Board will have the opportunity to table amendments to the Recommendation, followed by a vote on the overall package.

8. Legal Basis for Implementation

• The Chair noted that some NSAs may lack the legal basis for implementing the Recommendation.
• If a legal vacuum exists, one option is to fill it with a piece of legislation.
• However, it was emphasized that technical discussions should not be reopened once legislation is introduced.
• Members indicated that national legislation already under consideration would address any legal obstacles, and no new EU legislation was deemed necessary.

Key Information

• The capital buffer and its implementation are central to the discussions.
• The final timing of the decision and publication of the Recommendation will be reconsidered based on ECOFIN feedback and Commission advice.
• The EBA Staff will contact members who did not express a preference on the floors and will circulate a revised term sheet incorporating feedback.

Conclusion

The Chair concluded that good progress had been made, and the EBA would present a comprehensive package to ECOFIN. The next steps include finalizing the documents, incorporating member feedback, and preparing for the final vote. The Board remains committed to ensuring consistency, transparency, and legal feasibility in the implementation of the capital buffer measures.