22.9.2009   

EN

Official Journal of the European Union

C 228/62

1.1

The Committee approves of the Commission’s initiative, which is in line with its ongoing work on modernising measures to improve and update the legislative framework of the Basel Agreement. It also agrees in general with the implementing provisions proposed, with the exception of certain individual aspects that do not alter the general framework.

1.2

Hybrid capital instruments, that contain features of both equity and debt, are currently subject to national rules that ought to be harmonised in order to achieve a reasonably level playing field at international level. The Commission does not give a precise definition for these instruments, as they take various forms and can evolve, but sets out the basic principles for them to be eligible. Their original maturity must be longer than 30 years, they must be fully paid up and they must be designed to absorb all losses. Furthermore, they must not grow excessively in relation to equity. National authorities are given the power to intervene to put a brake on abnormal growth.

1.3

On the subject of connected clients, the notion of risk arising from the difficulties of a company upon which another is financially dependent has been introduced and reporting requirements have been simplified, harmonised and restructured. In the area of significant risks, the main innovation is the introduction of a single limit of 25 %, also including inter-bank deposits. The EESC believes that this last rule, probably inspired by the catastrophic scenario of recent times, should be revised, given the important regulatory function of the liquidity of these deposits and their relatively minor risk levels, in normal periods, compared with other types of exposure.

1.4

The proposal introduces a rule whereby issuers, intermediaries and managers who directly negotiated, structured and documented the original agreement giving rise to obligations must undertake to maintain a minimum material economic interest of 5 %. This rule was seemingly inspired by the bad experience with American CDOs (collateralised-debt obligations), although their origins and characteristics differ from normal securitisations. The EESC wonders what the impact of this new measure might be on market liquidity.

1.5

Member States are given the possibility of excluding intra-group exposures from the calculation of exposure when the counterparties are established in the same Member State. The Committee is well aware of the legal reasons against extending the rule to counterparties resident in other Member States, but would argue that in normal conditions, the failure to include foreign counterparties could affect the overall evaluation of the exposure of the company in question. A reasonable solution might be to extend the exemption to the entire group on the basis of a case by case assessment, suspending that possibility in the event of signs of critical problems.

1.6

With reference to the rule in the previous point, and also more generally, the Committee would reiterate its opposition to the principle of giving Member States the choice of whether or not to adopt certain provisions. This is contrary to the principle of harmonisation and the need for a level playing field when it comes to competition.

1.7

The EESC thinks that special attention should be given to the risk posed by potential exposure from the use of as yet unused credit lines on credit cards. This exposure could rapidly become significant in times of restrictions on consumer and mortgage credit.

1.8

The draft directive introduces a series of new rules on supervisory mechanisms, designed to increase the efficiency of controls. First, consideration is given to ‘systemically relevant branches’, which are to be placed under supervision in the host country when the situation is recognised as being critical, subject to the agreement of the countries concerned. The EESC agrees, but would stress that measures are needed to deal with sudden, unforeseen events.

1.9

Lastly, the EESC is pleased to note the establishment of the colleges of supervisors established by the consolidating supervisor and including authorities of the countries where the companies of a certain group are based. This initiative will improve the efficiency of supervision over groups and speed up the adoption of appropriate measures when necessary.

2.1

The financial markets crisis has prompted the Commission to speed up its work on strengthening and where necessary modifying provisions for the capital requirements framework for financial institutions, which was adopted under the Basel II agreement with Directives 2006/48/EC and 2006/49/EC. It should be noted that discussions on the new measures were already underway when the crisis emerged; structural market reform should be implemented after the publication of a white paper planned for June 2009. The present proposal includes a series of rules that:

2.2

The proposal was preceded by an on-line stakeholder consultation. The text drawn up took into account the recommendations made without, of course, departing from the basic principles which had underpinned the consultation:

2.3

The EESC welcomes the basic tenor of the Commission’s proposals and endorses their main thrust. Recent events and, in particular, various incidents and misdeeds have seriously damaged public confidence in the financial system as a whole and appropriate measures are called for. The prudential rules must not however be so severe as to penalise the operators and their clients needlessly. As the crisis has demonstrated, prudential rules securing the stability and solidity of the markets also play an extremely important social role.

4.1

The current large exposure regime dates back to 1992 and no changes have been made since. Recent events have highlighted the need for new rules. The Commission proposal gives greater consideration to the risk inherent in certain exposures while, at the same time, endeavouring to reduce the costs of data collection, increase transparency and create a more level playing field.

4.2

The concept of connected clients has changed. Hitherto the focus has been on the danger that an entity might experience difficulties because of the financial problems of another entity; events have shown that two or more undertakings can be placed at risk because of the problems of the entity on which they are financially dependent.

4.3

The expensive, complex reporting requirements, which are a source of high costs and complications for the sector, have also been harmonised and simplified. The most obvious change is the requirement to report the 20 largest exposures on a consolidated basis where the IRB approach is used. The various limits applicable have been replaced by a single limit of 25 %.

4.4

The numerous exemptions, which are often difficult to understand, have to a large extent been abolished; only those which do not seem to be a high risk continue to apply. The list is still quite long, however, but in general seems to meet carefully-determined prudence criteria.

4.5

The EESC endorses the proposed new rules in general, but it has some comments on a number of important points:

4.6

‘Exposures arising from undrawn credit facilities that are classified as low risk off-balance sheet items’ (Article 113) warrant particular attention. The overall limits on credit-card spending are high, particularly as regards certain types of institution. At times when there is a squeeze on credit the margin of undrawn credit can shrink rapidly. The EESC believes that potential exposures arising from undrawn credit on cards warrant careful, prudent assessment.

6.1

The crisis which has struck the global financial markets has revealed the need for supervisory methods and structures to be reviewed with a view to averting systemic crises and reacting to emergencies.

6.2

The rules on exchange of information and cooperation have been reviewed: Article 42a introduces the concept of ‘systemically relevant branches’, recognising that in specific cases the interests of the host country take precedence over the principle of the home Member State. The EESC fully endorses this approach, which is fundamentally important.

6.3

Basically, the new rules allow host authorities to make a request to the authorities of the home Member State, or the consolidating supervisor where appropriate, for a branch in their country to be considered systemically ‘relevant’ if its market share exceeds 2 % or it has a significant presence on the national market. The request must include a kind of ‘impact assessment’, anticipating possible suspension or closure of operations on the payment and clearing and settlement systems, and the impact on the market of measures of this kind.

6.4

There is a set timetable governing the procedure according to which a branch can be considered ‘relevant’. It would also be useful to lay down the rules to apply in real emergencies (Article 130), so that urgent measures can be adopted. The newly-established colleges of supervisors (Article 131(a) - see point 6.5) and, in any case, the existing Committee of European Banking Supervisors, should ensure simplified procedures with the necessary guarantees.

6.5

The creation of colleges of supervisors (Article 131(a)) is particularly useful. They are established by the consolidating supervisor, and the authorities of the Member States concerned participate in them. Their task is essentially to provide ongoing, effective monitoring of cross-border groups (and hopefully to adopt appropriate measures in times of emergency) by pooling information and jointly devising appropriate supervision methodologies. The EESC welcomes this decision and all the monitoring rules proposed, which are in line with the more efficient programmes announced earlier in the text and with the wishes of the Financial Services Forum.