Eurofinas' observations on the Commission's Proposal for a CRD IV

09 December 2011

Eurofinas would like to draw attention to some selected issues, which it believes are essential to uphold the important specificities of European consumer credit providers when adopting the new regulatory prudential framework.

New European prudential requirements and their national interpretation are of key importance for Eurofinas’ constituency. As previously mentioned, Basel III requirements were not primarily designed for small and specialised financial institutions. As a consequence, the current provisions of the proposed European framework fail to take into account the specificities of consumer credit providers’ business models. The expected increase in the cost of capital and liquidity and changes to these organisations’ structure and refinancing models will have a direct impact on the provision of finance to households. As such it will also have a direct impact on the economic growth of European markets which, in general, heavily rely on private consumption.

Erofinas remarks are linked to:

Scope

• Clarify in the Proposals’ recitals that, in line with the scope of Basel III requirements, the proposed general prudential requirements are not designed for and should not apply to organisations other than credit institutions or investment firms as defined in the Directive.
• Clarify in the Proposals’ recitals that, the applicability of the proposed general prudential requirements is without prejudice to the access of credit and financial institutions to the European Central Bank’s funding schemes.

Own funds

• Limit the possibility for national regulators to impose further capital requirements.
• Allow all capital requirements and surcharges for subsidiaries to be included in the calculation of minority interests.
• Clarify the treatment of Deferred Tax Assets (DTA). DTAs should be netted with deferred tax liabilities.

Leverage ratio

• Keep the proposed leverage ratio only as a Pillar II measure.

Liquidity

• Clarify and strengthen the derogation from individual liquidity requirements to allow exclusive application of requirements at consolidated level.
• Define marginal lending facilities to the European Central Bank as non-risky liquid assets.
• Include all financing commitments given to institutions in the calculation of the relevant ratio.
• Increase the recognition of short term commitments (i.e. of less than a year) in the ratio.

Full document

© Eurofinas