EBA欧洲银行-EBA-Opinion-on-macroprudential-measures-28EBA-Op-2018-0129_9页_243kb

EBA Opinion on Measures under Article 458 of CRR (EBA/Op/2018/01)

Core Content

The European Banking Authority (EBA) provided an opinion on a macroprudential measure proposed by the National Bank of Belgium (NBB) under Article 458 of Regulation (EU) No 575/2013 (CRR). The measure aims to increase capital requirements for Belgian IRB (Internal Ratings Based) banks by applying a 5 percentage point (pp) risk weight add-on and a proportional 33% multiplier to their mortgage portfolios. This is intended to address risks in the residential real estate sector, particularly in light of the European Systemic Risk Board (ESRB) warning from November 2016.

Main Points

1. Background and Purpose of the Measure

• The NBB notified the EBA of its intention to replace an expired macroprudential measure introduced in May 2014.
• The measure is designed to increase capital requirements for mortgage exposures, reflecting the heightened risk in the Belgian real estate market.
• The NBB's simulations indicate that the current capital buffer may not be sufficient to absorb potential losses in severe stress scenarios.

2. Components of the Measure

• Flat Add-on: A 5 pp risk weight add-on to the microprudential risk weights for mortgage exposures.
• Proportional Multiplier: A 33% multiplier applied to the microprudential risk weights, targeting the risk profile of each bank's mortgage portfolio.

3. Impact on Capital Requirements

• The combined effect of the two components increases total risk-weighted assets (RWAs) for mortgage portfolios.
• This leads to an increase in the capital buffer needed to meet Pillar 1 capital requirements, which could affect the financial stability of IRB banks.
• The measure is intended to be temporary and may be adjusted or released if the risk profile changes.

4. Justification for Not Using Alternative Measures

• Article 124 of CRR: Not applicable, as it applies only to banks using the standardised approach.
• Article 164 of CRR: Would change internal models, which is not the intent of the proposed measure.
• Articles 101–105 and 133–136 of CRD: Not suitable due to governance constraints, limited scope, and potential for double-counting of risks.
• Pillar 2 Measures: Could be used but would not be as targeted or transparent as the proposed measure.

Key Information

5. EBA's Assessment and Observations

• The EBA acknowledges the ESRB warning and agrees that the proposed measure is necessary to address macroprudential risks.
• However, it raises concerns about the complexity and transparency of the measure, as the use of a multiplier on risk weights could obscure the true capital requirements for market participants.
• The EBA also notes that the calibration of the measure is based on internal stress tests rather than EU-wide scenarios, which may not fully reflect systemic risks.

6. Potential Distorting Effects

• The 33% multiplier could incentivise banks to take more risk, as it may reduce the incentive to maintain conservative risk parameters.
• Similarly, increasing the LGD floor under Article 164 could also lead to distorting effects, as it might penalise banks with more conservative lending standards.

7. Recommendations and Future Monitoring

• The EBA suggests that changes to IRB models could address the underlying issue of low risk weights in the long term.
• It recommends that the NBB continues to monitor the property market and reassess the rationale for the measure over time.
• The EBA also notes that the 2018 EU-wide stress test includes a more severe decline in Belgian house prices than previous tests, which could have implications for the calibration of the proposed measure.

Conclusion

The EBA does not object to the proposed macroprudential measure under Article 458 of the CRR. It acknowledges the NBB's rationale for the measure and its potential to improve the resilience of IRB banks in the face of macroprudential risks. However, it highlights the need for transparency, monitoring, and alignment with broader regulatory frameworks to ensure that the measure does not create unintended distortions or double-counting of risks.

The opinion was adopted by the Board of Supervisors on 21 February 2018 and published on the EBA's website.