The paper stressed out that the current capital buffer framework has scope for improvement as it focuses too much on capital levels and financial resiliency.
>>READ THE FULL POSITION PAPER
March 18, ESBG issued a new position paper with recommendations to the
European Commission on the review of the EU's macroprudential framework
for the banking sector.
The paper stressed out that the current
capital buffer framework has scope for improvement as it focuses too
much on capital levels and financial resiliency. In our view, the
capital buffer framework suffers from a lack of transparency, double
counting of risks in several buffers, and inconsistent application
across Member States.
With the finalisation of the Basel III, the
overall loss absorbing capacity of the European banking sector is
already sufficient to guarantee financial stability, and additional
increases are not warranted. Nevertheless, some adjustments to the
macroprudential framework should be explored with the aim of improving
buffers' usability, while maintaining and improving the credit
A key point is that double counting of risks
should be avoided. It would be important to ensure that the same risks
are not covered via different and overlapping measures. Furthermore, any
steps towards harmonisation across the EU/EEA should also leave enough
room for national specificities.
Regarding the buffers, we
strongly oppose to the application of a positive neutral rate to the
Countercyclical Capital Buffer (CCyB) in the current setting. If we want
to increase the flexibility and responsiveness of the framework to
exogenous shocks, it would be better to make the Capital Conservation
Buffer (CCoB) releasable. Those countries that are already applying a
positive neutral rate for the CCyB should be compensated with the
reduction of structural requirements; e.g. the Systemic Risk Buffer
(SyRB) or the CCoB.
There is also a case for the SyRB to be
removed or at least limited. It gives too much discretion to authorities
to address undetermined risks and it is not mentioned in the Basel
agreement. Furthermore, Pillar 2 should not be used to address a
Double counting of Article 458 CRR and the output
floor should be removed. The output floor is a backstop requirement that
limits the use of internal models, while the Article 458 addresses
systemic risks. The measures embedded in Article 124 and Article 164 CRR
should be removed for the same reason.
Finally, improvements to
the design and application of the buffers, on the scope of the framework
(e.g. extension to fintech/bigtech), and in terms of better guidance
and communication could be further envisaged.
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