EBF also stated that the placement of grandfathering clauses and the recognition of a sufficiently long transition period will be key to succeed in the adoption of the overhaul of the prudential regulatory framework.
The European Banking Federation (EBF) welcomes the willingness of the Basel Committee to set a framework of rules geared to improve the resilience of the banking sector.
Nevertheless, as regards the ongoing discussions reconsidering the overall level of capital and liquidity in the financial sector, the EBF acknowledges the need for improved supervision which, together with better regulation, constitutes the bedrock of stability in the financial system.
The enhancement of the capital requirements should only be implemented once recovery is assured and be proportionate to the risks involved. The latter is a point of major concern among our member associations. We are committed to help policy-makers in the identification and correct evaluation of risks that might have been underestimated, but there are grounds for thinking that the new set of proposals points to an overall overstatement of the capital requirements far beyond the risks involved.
Despite the industry has dedicated huge resources to the analysis of the new proposals during the last months, the newness and complexity of the measures makes us think that further assessment is needed. We understand that the BCBS has left a number of key points undefined in waiting for the subsequent calibration process. In the same vein, we request the BCBS to conduct a second consultation when the results of the calibration are known and to invite the industry to revisit this first analysis. Further to the quantitative impact study, more clarity would contribute enormously to the management of the expectations of market participants, rating agencies and the industry.
It is also important to note that, in addition to the particular analysis of each individual measure, it will be of the utmost relevance to pay heed to the following dimensions:
o The interplays between different measures and the expected results of their combined effects. The EBF response includes a specific section about this issue.
o The overall impact of the proposed regulatory overhaul on the real economy. In this regard, the EBF is developing its own assessment in collaboration with the Institute of International Finance.
EBF strongly believes that substantial revisions will need to be performed to the proposals before they are able to achieve their objectives. EBF would also like clarification and transparency on what capital increase that the BCBS aims for on an overall level and how it has arrived at this ambition.
The placement of grandfathering clauses and the recognition of a sufficiently long transition period will be key to succeed in the adoption of this overhaul of the prudential regulatory framework.
© EBF
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