Helmut Bauer | 19 September 2006 3 CEBS CEBS’ operational
Helmut Bauer | 19 September 2006 4 CEBS’ operational structure 2006 Groupe de Contact Chair Helmut Bauer BaFin Capital Requirements Kerstin af Jochnick Finansinspektion Financial Information Chair Arnoud Vossen De Nederlandsche Bank Secretariat Secretary General Andrea Enria Banca d’Italia Bureau Chair Danièle Nouy Commission Bancaire Vice Chair Helmut Bauer BaFin Andreas Ittner Oesterreichische Nationalbank Kerstin af Jochnick Finansinspektion Andrzej Reich Narodowy Bank Polski TFCM joint BSC/CEBS task force on crisis management TFNT on implementation of the Francq report mediation delegation etc.
Helmut Bauer | 19 September 2006 5 Internal vs. external agenda regulatory/supervisory convergence European Commission Industry regulatory advice enhanced co-operation external agenda internal agenda
Helmut Bauer | 19 September 2006 6 External agenda - Advice given 31 August 2006 INDUSTRY PRACTICES ON LARGE EXPOSURES 23 June 2006CURRENT RULES ON OWN FUNDS AND MARKET TRENDS IN NEW CAPITAL INSTRUMENTS 3 May 2006CURRENT SUPERVISORY PRACTICES ON LARGE EXPOSURES 30 September 2005CEBS ADVICE ON DEPOSIT GUARANTEE SCHEMES 1 July 2005CEBS ADVICE ON E-MONEY 31 May 2005CEBS ADVICE ON CROSS-BORDER MERGERS AND ACQUISITIONS 21 December 2004CEBS ADVICE ON PRUDENTIAL FILTERS FOR REGULATORY CAPITAL 28 October 2004CEBS' WORK ON NATIONAL DISCRETIONS
Helmut Bauer | 19 September 2006 7 External agenda - Pending calls ???CALL FOR TECHNICAL ADVICE ON LIQUIDITY RISK MANAGEMENT 22 August 2006CALL FOR TECHNICAL ADVICE ON COMMODITIES BUSINESS 3 August 2006CALL FOR TECHNICAL ADVICE ON DEFINITION OF OWN FUNDS 8 December 2005CALL FOR TECHNICAL ADVICE ON DEFINITION OF LARGE EXPOSURES RULES 1 July 2005CALL FOR TECHNICAL ADVICE ON DEFINITION OF OWN FUNDS
Helmut Bauer | 19 September 2006 8 LE December 2005: EC call for advice on LE A.Stocktake on the range of supervisory practices http://www.cebs.org/Advice/LE_report.pdf B. Industry consultation on market practices –banking and trading books –smaller and larger firms C. Analysis of the types of credit risk mitigation products that impact on the calculation of LE –quantitative and qualitative –banking and trading books –smaller and larger firms http://www.cebs.org/Advice/LE_industryreport.pdf two further areas: –analysis of the fundamental prudential principles –recognition of good credit risk management within LE rules pending
Helmut Bauer | 19 September 2006 9 LE Methodology: EGCR sub-group On-line questionnaire and responses http://www.cebs.org/Advice/LE_questionnaire.pdf http://www.cebs.org/Advice/LE_responses.htm Informal dialogue with experts designated by CEBS consultative panel Scope: (i) Approaches to measuring and managing singlename concentration risk (ii) Approaches to measuring and managing 'other' concentration risk (sectoral, geographic) (iii) Approaches to calculating large exposures, (iv) The assessment of connectedness of exposures, (v) The group-level issues, (vi) The use of credit risk mitigation techniques to reduce singlename concentration risk (vii) Internal governance and reporting practices, and (viii) The respondent's views of the current large exposures regulatory regime. Timeline: Art. 119 CRD requires EC to submit report to EP and Council by 31 December 2007
Helmut Bauer | 19 September 2006 10 LE industry responses Smaller respondents: Current regulatory regime is sufficient Banking groups and larger institutions: Risk weights for LE regime should be tied to risk weights for capital regime and should take into account the counterparty creditworthiness and transaction maturity Gap between internal measurement, management, and reporting and CRD/national regulatory limits and reporting requirements Investment management firms, energy trading firms, commodity trading firms, money market funds, factoring companies: Questioned appropriateness of applying the LE regime to their business What else: Inadequate treatment of derivatives, trading book activities, investment management and fund operations, other modern financial instruments, and obligors’ creditworthiness Unduly constraining and inflexible intra-group exposure limits conflicting with internal risk standards Lack of harmonisation across EU increasing administrative costs and complicating cross-border business.
Helmut Bauer | 19 September 2006 11 LE industry expectations a.Harmonisation of how each member state treats breaches of limits, b.Preference, at least on the part of large institutions, for integration of the LE scheme into the Pillar 2 framework for concentration risks, without the need for a detailed regulation because it would be fully integrated into the ICAAP process, c. Should the LE regime be maintained, it ought be more risk-sensitive and more closely aligned with institutions’ internal approaches.
Helmut Bauer | 19 September 2006 12 Own funds June 2005/August 2006: EC call for advice on own funds A. Survey of implementation of current rules on own funds across Member States http://www.cebs.org/OF_part1_rules.pdf B. Analysis of the capital instruments recently created by the industry http://www.cebs.org/OF_part1.pdf C.Development of guiding principles behind own funds pending D. Quantitative analysis of the types of capital held by credit institutions within Member States pending
Helmut Bauer | 19 September 2006 13 Own funds Methodology: EGCR set up sub-group (upgraded to joint CEBS/CEIOPS task force) Questionnaire on rules to CEBS members (A.) on „innovative“ instruments to market participants (B.) http://www.cebs.org/Advice/OF_q.pdf Scope: A. Member States national own funds regimes B. innovative instruments (i) What innovative instruments have reached reasonable market standing? Why? What characteristics do they have in common? (ii) What are the main market conventions/factors that govern the issues of innovative instruments? (iii) New trends? What would prevent/favour the development of innovative instruments? (iv) Characteristics of innovative instruments in the future? (v) Key industry expectations/concerns regarding supervisors’ approach to innovative instruments? (vi) Views of market participants regarding what main differences in supervisory approaches have the most important impact on the structure and quality of own funds? Timeline: Art. 62 CRD requires EC to submit proposal for amendments to EP and Council by 1 January 2009 - deadlines set by EC to CEBS: for A. and B. August 2006, for D. October 2006 to March 2007
Helmut Bauer | 19 September 2006 14 Own Funds - rules Working in parallel with the Basel Committee is crucial IAS/IFRS and CEBS prudential filters introduce necessary adjustments to regulatory own funds Original own funds: following the BCBS Sydney press release of 1998 some member states have included new capital instruments (‘hybrids’) into original own funds - CRD has not been updated – divergences remain majority of members apply 15% limit to hybrids with incentives to redeem differences are wider regarding the limit on total of hybrid instruments (taking into account also hybrids with incentives to redeem), which can reach 50% Additional own funds: conditions of eligibility laid down in the CRD have in general been consistently implemented Undated vs. dated vs. minimum maturity until first call Prior supervisory approval before eligible/before call can be exercised Step up subject to formal vs. Informal levels Supplementary additional own funds: amortisation of subordinated loans
Helmut Bauer | 19 September 2006 15 Internal vs. external agenda regulatory/supervisory convergence European Commission Industry regulatory advice enhanced co-operation external agenda internal agenda
Helmut Bauer | 19 September 2006 16 Internal agenda - 2006 work programme „2006 will be a year of continuation, in the sense that CEBS’ focus will remain firmly on the CRD, but will also mark a shift of orientation and emphasis, from design to delivery of a more convergent supervisory framework.“
Helmut Bauer | 19 September 2006 17 Work programme 2006 Finalise guidelines/standards in early 2006 - focus on Implementation and monitoring of convergence progress and “Maintenance” through adjustments and updates in the light of practical experience High priority on fostering convergence of supervisory practices and a common European supervisory culture Training and staff exchange Setting up of operational networks for the supervision of EU crossborder banking groups – college/cooperation processes
Helmut Bauer | 19 September 2006 18 Guidelines 4 April 2006CEBS GUIDELINES ON VALIDATION 25 January 2006CEBS GUIDELINES ON SUPERVISORY COOPERATION FOR CROSS-BORDER BANKING AND INVESTMENT FIRM GROUPS 25 January 2006CEBS GUIDELINES ON SUPERVISORY REVIEW PROCESS 20 January 2006CEBS GUIDELINES ON THE RECOGNITION OF EXTERNAL CREDIT ASSESSMENT INSTITUTIONS 13 January 2006CEBS GUIDELINES ON COMMON REPORTING 16 December 2005CEBS GUIDELINES ON FINANCIAL REPORTING 1 November 2005CEBS GUIDELINES ON SUPERVISORY DISCLOSURE 21 December 2004CEBS GUIDELINES ON PRUDENTIAL FILTERS FOR REGULATORY CAPITAL
Helmut Bauer | 19 September 2006 19 Pending CPs 9 June 2006CONSULTATION PAPER (CP12) on Stress testing under the Supervisory Review Process 6 April 2006CONSULTATION PAPER (CP2 revised) on Standards on Outsourcing 23 March 2006CONSULTATION PAPER (CP11) on Technical Aspects of the Management of Interest Rate Risk arising from non Trading Activities and Concentration Risk under the Supervisory Review Process
Helmut Bauer | 19 September 2006 20 Maintenance Work programme 2006: CEBS „attention will … increasingly turn to carrying out dynamic “maintenance” of the standards and guidelines through adjustments and updates in the light of practical experience.“ EGCR networks on validation issues („NOVI“) to tackle issues arisinf wrt IRBA and AMA validation.
Helmut Bauer | 19 September 2006 21 Operational networks Work programme 2006: „The setting up of operational networks is particularly important with regard to the supervision of EU crossborder banking groups. The consolidating home and the host supervisors will have to cooperate and coordinate supervisory activities at the operational level.“ Implementing: Articles 129, 131, 132 CRD and CEBS‘ Home/Host guidelines.
Helmut Bauer | 19 September 2006 22 Operational networks GdC subgroup on operational networking (SON) to support the design, the setting up and the operation of college/cooperation processes between consolidating home and host supervisors to identify the real life issue and assist the finding pragmatic solutions to enhance day-to-day consistent supervision and cooperation between consolidating and host supervisors of cross-border banking groups –Ensuring consistency of approaches within and across operational networks –Conducting bottom-up surveys of market and supervisory practices to operate as an interface between CEBS and industry 1st phase: Focus on 10 large EU banking groups
Contacts: CEBS http://www.c-ebs.org Helmut Bauer firstname.lastname@example.org http://www.c-ebs.org email@example.com