Presentation on theme: "GDV‘s Comments on the FCD EFCC Roundtable Session “Scope”"— Presentation transcript:
1GDV‘s Comments on the FCD EFCC Roundtable Session “Scope” Dr. Axel Wehling, Brussels
2FCD review: Heading to an economic view? level of alignmentfull economic view (capital requirements and own funds)20152012?2009economic view?Solvency IIBasel II (CRD)accounting view2005FCD2002Basel ISolvency I1970banking regulationfinancial conglomerate regulationinsurance regulation
3Current situation in identifying a financial conglomerate (Art Current situation in identifying a financial conglomerate (Art. 3 FCD) is not in line with an economic viewMain criteria in identifying a financial conglomerate:activities mainly in the financial sector (> 40 % of balance sheet total)significant activities in different financial sectors:(balance sheet of sector/total balance sheet + SCR of sector/total SCR)/2 > 10 % orbalance sheet total of smallest financial sector > 6 billion €supervisors may decide not to regard a group as financial conglomerate if only b) is fulfilled taking into account the relative size (< 5 %) and the market share in MS (< 5 %)The current identification of financial conglomerates is:not in line with an economic view (but based on arbitrary accounting figures) andnot sufficiently risk based putting the FCD objectives in question.
4GDV‘s position on the scope: define financial conglomerates by proportionality and allow opt-in for groups running no material risks and without impact on the stability of the financial market, supplementary financial conglomerate supervision is not necessarythe GDV advocates to apply the proportionality principle taking into account the nature, scale and complexity on the basis of a consolidated economic viewusing risk based measures (e. g. Solvency II capital requirements) would be more appropriate than purely accounting figures (if available, market consistent valuation is preferable instead of book values according to local GAAP)the flexible application of the proportionality principle should not hinder to be subject of a financial conglomerate supervisory regime voluntarily (opt-in clause) if the group falls below a certain threshold (say, 10 billion €).
5Review of the Scope of FCD - When is financial conglomerate supervision needed at top? if the nature, scale and complexity of risks (= proportionality) of financial institutions is not captured adequately bysolo supervisionsectoral group supervisiontherefore, financial conglomerate supervision should result from the application of the proportionality principle based on a consolidated view on the groupsince financial conglomerates do manage risks in an integrated manner, supervision should reflect this way of management congruently
7Review of the Scope of FCD – Which entities/participations should fall in the scope of a financial conglomerate?the overall risk position of a financial conglomerate is mostly a result of the risk exposure by its relevant entitiesas regard capital adequacy calculations including other irrelevant entities does not change the picture and would only result in additional burden for groupsa too wide interpretation of the term “participation” in financial conglomerate supervision is not appropriate and would not reflect the proportionality principlerelevant entities?
8Conclusions on the scope of financial conglomerate supervision applying the proportionality principle restricts the scope of entities being supervised additionally within a financial conglomeratea too wide interpretation of participations is not appropriate and results in distortionsthe costs of financial conglomerate supervision have to be minimised without loss of reliability and relevance