12.3.2016   

EN

Official Journal of the European Union

C 97/1

(1)

The pro-cyclical amplification of financial shocks to the real economy through the banking system and financial markets has been one of the most destabilising elements of the global financial crisis. An economic downturn following a period of excessive credit growth can lead to large losses in the banking sector and spark a vicious circle. In such a situation, measures taken by credit institutions to strengthen their balance sheets can constrain credit supply to the real economy, exacerbating the economic downturn and further weakening their balance sheets.

(2)

The countercyclical capital buffer is designed to work against these pro-cyclical dynamics by increasing the resilience of the banking sector. The rules requiring the maintenance of countercyclical capital buffers form part of the new global regulatory standards on bank capital adequacy (the Basel III framework) issued by the Basel Committee on Banking Supervision (BCBS) in December 2010 and implemented in the Union by Directive 2013/36/EU. By increasing the countercyclical buffer rate, designated public authorities or bodies can require the banking sector to build up additional capital in periods when system-wide risks from excessive credit growth are increasing. When such risks materialise, authorities can set the countercyclical buffer rate at a lower rate and allow this buffer of additional capital to be used to absorb unexpected losses. This enables the banking sector to continue providing credit to the real economy and to comply with regulatory capital requirements.

(3)

Cross-border lending brings an international dimension to the countercyclical capital buffer. Losses can arise from exposures of Member States’ domestic banking sectors to third countries. Such losses could be significant if a third country to which a Member State’s domestic banking sector has material exposures entered an economic downturn following a period of excessive credit growth.

(4)

The Basel III framework on the countercyclical capital buffer is designed to capture this international dimension. In particular, under the framework, jurisdictions should recognise each other’s countercyclical buffer rates. If an authority in one jurisdiction increases the countercyclical buffer rate to protect its domestic banking sector from excessive credit growth, authorities in other jurisdictions should apply the same countercyclical buffer rate to the exposures of their domestic banks to that country. Under the framework, banks calculate their buffer requirements on the basis of the geographic location of their exposures. The Basel III framework provides for mandatory jurisdictional reciprocity for countercyclical buffer rates of up to 2,5 %, subject to transitional provisions. If applied in a consistent manner across jurisdictions, such jurisdictional reciprocity would help protect the banking sector in a given jurisdiction from risks associated with excessive credit growth in other jurisdictions.

(5)

As the BCBS standards are not legally binding, jurisdictions across the world might not implement the countercyclical capital buffer in the same manner. They might delay its implementation or might not implement it at all. In the Union, Article 136 of Directive 2013/36/EU sets out the way in which designated authorities must set countercyclical buffer rates for domestic exposures. Further guidance on setting countercyclical buffer rates for domestic exposures, as required by Article 135 of Directive 2013/36/EU, is provided in Recommendation ESRB/2014/1 of the European Systemic Risk Board (4). In the Union, a common legal framework designed to overcome the bias for inaction is thus in place, and the quarterly setting of countercyclical buffer rates for domestic exposures will be mandatory from 2016. However, there is uncertainty as to whether and to what extent third countries that are not members of the BCBS will implement the countercyclical capital buffer.

(6)

Designated authorities have legal powers to protect their banking sectors from risks arising from excessive credit growth in third countries. In particular, Article 139 of Directive 2013/36/EU allows designated authorities in certain circumstances to set a countercyclical buffer rate for exposures to a third country that domestically authorised institutions have to apply to calculate their institution-specific countercyclical capital buffer. A designated authority can act in situations where a countercyclical buffer rate has not been set and published by the relevant third-country authority for that third country, or if it considers that the countercyclical buffer rate set by the relevant third-country authority for that third country is not sufficient to protect the Member States’ domestic banking sectors from potential losses associated with excessive credit growth in the third country in question.

(7)

Setting countercyclical buffer rates for exposures to third countries can, if done in an uncoordinated manner, result in different capital requirements within the Union for exposures to the same third country and the same risks. When analysing developments in a third country, designated authorities might reach different conclusions as to whether or not credit growth in that country is excessive and poses a risk to their domestic banking system that needs to be mitigated. Even if designated authorities arrive at the same risk assessment, they might reach different conclusions as to the level of the appropriate countercyclical buffer rate necessary to mitigate that risk.

(8)

Recognition of countercyclical buffer rates for exposures to third countries can, if done in an uncoordinated manner, also result in different capital requirements within the Union. Recognition of countercyclical buffer rates set by other designated authorities or by relevant third-country authorities is required by Union law for rates up to 2,5 %, subject to transitional provisions between 2016 and 2019 as set out in Article 160 of Directive 2013/36/EU. While, in accordance with Recommendation ESRB/2014/1, designated authorities should generally recognise countercyclical buffer rates beyond mandatory levels, this applies only to countercyclical buffer rates set by designated authorities in other jurisdictions within the Union, and not to those set by relevant third country authorities for third countries. This means that the way in which countercyclical buffer rates set by relevant third country authorities are recognised might differ across jurisdictions within the Union. In particular, prior to 2019, some designated authorities might opt to apply the transitional provisions, while other designated authorities might opt to deviate from them. In addition, from 2019, some designated authorities might opt to voluntarily recognise countercyclical buffer rates in excess of 2,5 %, while others might opt not to do so.

(9)

Different capital requirements within the Union for exposures to the same third country and the same risks would typically be undesirable, as they would undermine a level playing field within the Union and provide an opportunity for regulatory arbitrage. Credit institutions in Union jurisdictions where a lower countercyclical buffer rate applies to the exposures to a given third country than that applicable in other Union jurisdictions would have an incentive to gain market share by increasing their lending to that third country. Such an increase in lending could lead to large, concentrated exposures to a particular third country by credit institutions in a particular jurisdiction. Ultimately, such an uneven playing field and the resulting incentives for regulatory arbitrage could threaten financial stability in the Union.

(10)

The European Systemic Risk Board (ESRB) has a role to play in ensuring that, with respect to a particular third country, the same countercyclical buffer rates for exposures to third countries would typically apply across the Union. The ESRB has an explicit mandate to achieve coherence on this under Article 139(3) of Directive 2013/36/EU. The ESRB considers that it can best fulfil this mandate by promoting a coherent approach across the Union for recognising and setting countercyclical buffer rates for exposures to third countries.

(11)

This Recommendation is designed to ensure that the same countercyclical buffer rate for exposures to a particular third country would typically apply across the Union. It covers: (a) the recognition by designated authorities of a countercyclical buffer rate set by a relevant third-country authority for that third country; (b) the setting by designated authorities of a countercyclical buffer rate for exposures to a third country; (c) the setting by designated authorities of the countercyclical buffer rate at a lower rate when risks in a particular third country abate or materialise; and (d) the communication by designated authorities of the countercyclical buffer rate for exposures to a third country.

(12)

Recommendation A is designed to ensure that designated authorities will typically recognise the same rate of the countercyclical capital buffer set by a particular third-country authority for that third country. To achieve this, it builds on the requirement laid down in Union law to recognise in full countercyclical buffer rates up to 2,5 %, subject to transitional arrangements. It is recommended that designated authorities coordinate their recognition of countercyclical buffer rates set in excess of 2,5 % through the ESRB. Where this occurs, the ESRB will issue a recommendation to provide guidance to designated authorities on whether and to what extent the higher countercyclical buffer rate set by a third country should be recognised. While the setting of countercyclical buffer rates by third countries that are members of the BCBS will be monitored by the ESRB Secretariat, designated authorities should inform the ESRB when a third country that is not a member of the BCBS sets a countercyclical buffer rate in excess of 2,5 %. It is further recommended that designated authorities notify the ESRB when they are unclear as to whether a particular measure adopted by a third country should be recognised under Directive 2013/36/EU as a countercyclical capital buffer. In such cases, the ESRB will issue a recommendation to provide guidance.

(13)

Recommendation B is designed to ensure that designated authorities, when exercising their powers to set a countercyclical buffer rate for exposures to a particular third country, set this rate at the same level. Designated authorities are encouraged to exercise their powers under Article 139 of Directive 2013/36/EU. In particular, designated authorities should establish to which third countries the banking system in their jurisdiction has material exposures. Further, they should monitor developments in those third countries for signs of excessive credit growth. If designated authorities discover such signs in one of those third countries they monitor and they consider that setting a countercyclical buffer rate for exposures to that third country is needed, they should inform the ESRB. If the ESRB considers that mitigating actions should be coordinated across the Union, it will issue a recommendation to designated authorities on setting the appropriate countercyclical buffer rate for exposures to the third country in question.

(14)

Recommendation C is designed to ensure that, where setting the countercyclical buffer rate for exposures to a particular third country at a lower rate is warranted because risks have either abated or materialised, the same lower countercyclical buffer rate applies across the Union. To this end, it is recommended that, when setting the countercyclical buffer rate for exposures to a particular third country at a lower rate, designated authorities should follow the same route they followed when the countercyclical buffer rate was increased. This means that, if designated authorities have recognised or set a countercyclical buffer rate for exposures to a third country in accordance with an ESRB recommendation, they should work with the ESRB to determine the appropriate level of the countercyclical buffer rate for exposures to the third country when the third country in question sets the countercyclical buffer rate at a lower rate. Where this occurs, the ESRB will adopt a recommendation to provide guidance to designated authorities on the appropriate countercyclical buffer rate for exposures to the third country in question. While the setting of countercyclical buffer rates by third countries that are members of the BCBS will be monitored by the ESRB, designated authorities should inform the ESRB when a third country that is not a member of the BCBS sets the countercyclical buffer rate at a lower rate. It is further recommended that, if, following an ESRB recommendation, designated authorities have recognised or set a countercyclical buffer rate for exposures to a third country, they should notify the ESRB if they consider that risks in that third country have abated or are materialising.

(15)

Recommendation D is designed to ensure that decisions on countercyclical buffer rates for exposures to third countries are clearly communicated within the Union. This should help manage public expectations, ensure that actions between designated authorities can be coordinated and that the credibility, accountability and effectiveness of macroprudential policy are enhanced. To achieve this, designated authorities should apply the same principle set out in Recommendation ESRB/2014/1 for communicating countercyclical buffer rates for domestic exposures to the process of recognising, setting and reducing countercyclical buffer rates for exposures to third countries.

(16)

Under Article 136 of Directive 2013/36/EU, each Member State is required to designate a public authority or body that will be responsible for setting and recognising countercyclical buffer rates. In addition, Council Regulation (EU) No 1024/2013 (5) assigns specific tasks to the European Central Bank (ECB). In particular, the ECB may apply higher requirements for countercyclical capital buffers than those applied by the national designated authorities participating in the Single Supervisory Mechanism, and has all the powers and obligations that designated authorities have under relevant Union law. For this exclusive purpose, the ECB is considered a designated authority.

(17)

ESRB recommendations are published after the General Board has informed the Council of its intention to do so and provided the Council with an opportunity to react,

1.

When a relevant third-country authority sets a countercyclical buffer rate for that third country in excess of 2,5 %, designated authorities are recommended to promptly inform the ESRB with a view to seeking guidance on uniform recognition across the Union, unless the rate applies to a country that is a member of the BCBS or the ESRB has already been informed about the particular countercyclical buffer rate by another designated authority. Designated authorities are recommended to use the template in Annex I to this Recommendation to inform the ESRB.

2.

When designated authorities are unclear as to whether a particular measure adopted by a third-country authority should be recognised under Directive 2013/36/EU as a countercyclical buffer rate, designated authorities are recommended to promptly inform the ESRB, unless the ESRB has already been informed by another designated authority. Designated authorities are recommended to use the template in Annex I to this Recommendation to inform the ESRB.

1.

Designated authorities are recommended to identify material third countries on an annual basis. Such identification should be based on, but not necessarily limited to, quantitative information on the exposures of domestically authorised institutions to third countries. Designated authorities are recommended to submit a list of such material third countries to the ESRB in the second quarter of each year using the template in Annex II to this Recommendation.

2.

Designated authorities are recommended to monitor risks from excessive credit growth in material third countries identified in accordance with paragraph 1, at a minimum, at annual intervals, except for countries which are already monitored by the ESRB in accordance with Decision ESRB/2015/3 (6). Designated authorities are recommended to notify the ESRB of cases where they decide not to monitor a material third country because that country is already being monitored by the ESRB in accordance with Decision ESRB/2015/3. Designated authorities are recommended to use the template in Annex II to this Recommendation to notify the ESRB of such cases.

3.

Designated authorities are recommended to notify the ESRB of situations where they consider that a relevant third-country authority should set and publish a countercyclical buffer rate for that third country, or where the level of the countercyclical buffer rate set and published by a relevant third-country authority for that third country is not considered sufficient to protect domestic financial institutions from the risks of excessive credit growth in the third country in question. Designated authorities are recommended to use the template in Annex I to this Recommendation to notify the ESRB thereof.

1.

If a countercyclical buffer rate set by a relevant third-country authority for that third country is recognised on the basis of an ESRB recommendation, and the relevant third-country authority sets the countercyclical buffer rate at a lower rate, designated authorities are recommended to promptly inform the ESRB with a view to seeking guidance on uniform recognition or setting of the new lower countercyclical buffer rates, unless the rate in question applies to a country that is a member of the BCBS, or the ESRB has already been informed of the new lower countercyclical buffer rate by another designated authority. Designated authorities are recommended to use the template in Annex I to this Recommendation to inform the ESRB thereof.

2.

If the relevant third-country authority sets the countercyclical buffer rate at a lower rate and the countercyclical buffer rate applying to exposures to that third country was set on the basis of an ESRB recommendation, designated authorities are recommended to promptly inform the ESRB thereof with a view to seeking guidance as to whether a lower countercyclical buffer rate should be applied to exposures to that third country, unless the rate in question applies to a country that is a member of the BCBS or the ESRB has already been informed of the new lower countercyclical buffer rate by another designated authority. Designated authorities are recommended to use the template in Annex I to this Recommendation to inform the ESRB thereof.

3.

If the countercyclical buffer rate applying to exposures to a third country was set on the basis of an ESRB recommendation, and a designated authority considers that the risks are materialising or abating, that designated authority is recommended to promptly notify the ESRB thereof with a view to seeking guidance as to whether a lower countercyclical buffer rate should be applied to exposures to that third country, unless the ESRB has already been informed thereof by another designated authority. Designated authorities are recommended to use the template in Annex I to this Recommendation to notify the ESRB thereof.

(a)

‘countercyclical buffer rate’ has the same meaning as in Article 128(7) of Directive 2013/36/EU;

(b)

‘designated authority’ has the same meaning as in Recommendation ESRB/2014/1;

(c)

‘domestically authorised institution’ means an institution that has been authorised in the Member State for which a particular designated authority is responsible for setting the countercyclical buffer rate;

(d)

‘material exposures’ means exposures which could potentially result in substantial losses to the domestically authorised institutions in a given jurisdiction, negatively affecting financial stability in that jurisdiction;

(e)

‘material third country’ means a third country to which domestically authorised institutions have material exposures;

(f)

‘relevant third-country authority’ means the public authority or body responsible for setting countercyclical buffer rates in a third country;

(g)

‘third country’ means any jurisdiction outside the European Economic Area.

(a)

information on the type of action taken and its timing;

(b)

an assessment as to whether the actions taken achieved the objectives of this Recommendation;

(c)

detailed justification of any inaction or departure from this Recommendation, including any reasons for delay in reporting.

1.

Addressees are requested to report to the ESRB, the Council and the Commission the actions they have taken in response to this Recommendation, or justify any inaction, in accordance with the deadlines set out below.

2.

Recommendation A – Designated authorities are requested to promptly implement Recommendation A(1) and A(2) in the event that the situation envisaged by the relevant Recommendation occurs, and to submit a report to the ESRB by 31 December 2020 on the implementation of Recommendation A(1) and A(2).

3.

Recommendation B – Designated authorities are requested to:

4.

Recommendation C – Designated authorities are requested to promptly implement Recommendation C(1), C(2) and C(3) in the event that the situation envisaged by the relevant Recommendation occurs and, by 31 December 2020, to report to the ESRB on the implementation of Recommendation C(1), C(2) and C(3).

5.

Recommendation D – Designated authorities are requested to report to the ESRB by 31 December 2016 on the implementation of Recommendation D.

6.

The General Board will decide when this Recommendation needs to be reviewed or updated in light of experience gained in setting and recognising countercyclical buffer rates for exposures to third countries in accordance with Directive 2013/36/EU or in light of developments in internationally agreed practices.

(a)

The ESRB Secretariat:

(b)

The General Board assesses the actions and the justifications reported by the addressees and decides whether or not this Recommendation has been complied with, and whether or not the addressees have adequately justified their inaction.

12.3.2016   

EN

Official Journal of the European Union

C 97/9

(1)

In the Union, the financial system is highly integrated. This means that foreign entities often provide cross-border financial services. In the single market, financial service providers in a certain Member State can choose between providing financial services via subsidiaries or branches located in another Member State or providing cross-border financial services directly. This situation can lead to national macroprudential policy having sizeable cross-border effects.

(2)

Foreign financial service providers providing cross-border financial services, either directly or through their branches in other Member States, are not usually affected by the macroprudential policy measures that apply to national financial service providers in those Member States. As a result, financial service providers that would otherwise fall within the scope of such requirements, i.e. because they have a local subsidiary, have an incentive to route their activities through alternative channels to circumvent host country measures. The leakages and regulatory arbitrage that result from such behaviour could undermine the effectiveness of national macroprudential policy measures.

(3)

Furthermore, competition may be distorted if branches of foreign financial service providers and foreign financial service providers that provide cross-border financial services directly use their competitive advantage, such as lower capital requirements for exposures generated in the activating Member State, over domestic financial service providers and subsidiaries of foreign financial service providers in that Member State, in order to increase their market share.

(4)

Macroprudential policy measures taken in one country will have external effects on financial stability in other countries through cross-border linkages. In general, these effects will be positive, since macroprudential policy reduces systemic risk and the probability and impact of systemic crises, thereby also improving financial stability in other Member States. However, such effects may also be negative. For instance, despite being exposed to the same risks as domestic financial service providers and subsidiaries of foreign financial service providers, branches of foreign financial service providers and foreign financial service providers providing cross-border financial services directly will not usually be required to build-up resilience against these risks, for example by being subject to national capital measures in their home Member State. Moreover, to the extent that these financial service providers enjoy a competitive advantage over domestic financial service providers and the subsidiaries of foreign financial service providers, this might encourage them to increase their exposure to the relevant macroprudential risks in the activating Member State, thereby exposing the home Member State to greater risk. If these macroprudential risks relating to the provision of financial services were to materialise, the capital buffers of these financial service providers might prove to be insufficient, which would have negative consequences for their home financial systems.

(5)

Against this background and to ensure the effectiveness and consistency of macroprudential policy, macroprudential policy makers need to give due consideration to such cross-border effects and, when warranted, deploy suitable policy instruments to address them. To achieve this aim, the European Systemic Risk Board (ESRB) recommends an approach that is based on two main pillars, namely: (a) the systematic assessment of the cross-border effects of macroprudential policy; and (b) a coordinated policy response in the form of voluntary reciprocity for macroprudential policy measures when needed. It is also important that these pillars are implemented as consistently as possible throughout the Union.

(6)

To date, the systematic assessment of the cross-border effects of macroprudential policy has not received the attention it deserves. This is partially due to the fact that knowledge relating to (potential) spillover channels remains limited and the available data has not been fully examined with a view to analysing cross-border effects. As a result, the ESRB considers it important for all available data to be used systematically to better understand and assess cross-border effects.

(7)

It is important to set out a procedure that targets the systematic assessment of the cross-border effects of macroprudential policy and aims to ensure that macroprudential policy makers make an ex ante assessment of any potential cross-border effects of their proposed measures. In addition, and considering the existing requirements of Regulation (EU) No 575/2013 of the European Parliament and of the Council (5), Directive 2013/36/EU and Recommendation ESRB/2013/1 of the European Systemic Risk Board (6), macroprudential policy makers should make ex post assessments of the actual cross-border effects of their policies. The analytical work conducted by the Member States will complement the analytical work conducted by the ESRB.

(8)

The coordinated policy response advocated by the ESRB takes the form of an arrangement for voluntary reciprocity for macroprudential policy measures. The voluntary nature of the arrangement, resulting from the nature of ESRB recommendations (7), differentiates such voluntary reciprocity from the mandatory recognition of certain macroprudential policy measures under Union law. This Recommendation, with the exception of recommendation A regarding the assessment of cross-border effects and recommendation B regarding the notification of macroprudential policy measures, is not intended to apply to macroprudential policy measures for which Union law already provides for mandatory recognition. Mandatory recognition is currently provided for with regard to measures taken pursuant to Articles 124(5) and 164(7) of Regulation (EU) No 575/2013, and for the countercyclical capital buffer (CCB) if it is set below the ceiling for mandatory recognition. The same exception applies to CCB rates that are above the ceiling for mandatory recognition, since Recommendation ESRB/2014/1 of the European Systemic Risk Board (8) already advocates the full reciprocation of CCB rates between Member States.

(9)

To ensure the effectiveness and consistency of national macroprudential policy measures, it is important to complement the mandatory recognition required under Union law with voluntary reciprocity, thereby also bringing branches of foreign financial service providers and foreign financial service providers providing cross-border financial services directly within the scope of national macroprudential policy measures. The ultimate objective is for the same set of macroprudential requirements to apply to the same type of risk exposure in a given Member State, irrespective of the legal status and location of the financial service provider. Hence exposure-based macroprudential policy measures, in particular those which target a specific risk exposure, should be reciprocated.

(10)

This Recommendation provides guidance to the relevant authorities with regard to adopting reciprocating measures in response to other relevant authorities' macroprudential policy measures. The listed macroprudential policy measures activated in one Member State should be reciprocated in all other Member States. Macroprudential policy measures will be listed in this Recommendation if the relevant activating authority requests reciprocation and if the ESRB regards the request for reciprocation as being justified. In order to ensure the efficiency of the voluntary reciprocity arrangement it is important that the ESRB is notified of such measures in a timely manner and in sufficient detail, using a standardised template.

(11)

In order to ensure the effectiveness of the voluntary reciprocity arrangement the relevant authorities will be expected to adopt reciprocating measures within a reasonable time frame. Longer time frames will be recommended for measures that are not available in all jurisdictions.

(12)

This Recommendation is intended to cover all macroprudential policy measures, irrespective of which part of the financial system they address. Based on the ESRB's mandate in Regulation (EU) No 1092/2010, the scope of this Recommendation goes beyond the application of macroprudential instruments provided for in Directive 2013/36/EU and Regulation (EU) No 575/2013. Hence, this Recommendation is intended to also cover measures that have not been harmonised under Union law. The scope of this Recommendation is subject to the respective jurisdiction of the relevant authorities and applies to macroprudential policy measures that the relevant authorities are mandated to adopt or activate.

(13)

National competent authorities, designated authorities as well as macroprudential authorities and the European Central Bank (ECB) (for Member States participating in the Single Supervisory Mechanism (SSM)) are considered relevant authorities, in particular if they are mandated to adopt or activate macroprudential policy measures. Moreover, Council Regulation (EU) No 1024/2013 (9) and Regulation (EU) No 468/2014 of the European Central Bank (10) assign specific supervisory tasks to the ECB. The ECB may apply higher requirements for capital buffers or more stringent measures than those applied by the national designated authorities. For this exclusive purpose, the ECB is considered, as appropriate, the competent or designated authority and has all the powers and obligations, which competent authorities and designated authorities have under the relevant Union law.

(14)

New macroprudential policy measures taken by the Member States participating in the SSM must go through the relevant SSM coordination procedures. The reciprocity arrangement, as defined by this Recommendation, is without prejudice to these internal SSM coordination procedures, and the ESRB's reciprocity assessment will only start once the internal SSM coordination procedures have been concluded.

(15)

Authorities may exempt financial service providers with non-material exposure to the identified macroprudential risk in the activating country (de minimis principle). This is a national discretion that authorities may also choose not to apply if reciprocity is considered a matter of principle.

(16)

To ensure the transparency and accountability of macroprudential policy measures, as well as their effective implementation, the relevant authorities should establish a communication strategy regarding reciprocation requests and any reciprocating measures, as part of their general communication strategy regarding macroprudential policy measures. With regard to reciprocation requests it is of particular importance that all authorities concerned are provided with any information that is relevant and necessary for their respective decision-making processes in a timely manner. Moreover, it is equally important that stakeholders (including, but not limited to, the direct addressees of macroprudential policy measures) are fully informed of any macroprudential policy measure that is relevant for them in a timely manner.

(17)

The process recommended by this Recommendation and Decision ESRB/2015/4 (11) is designed to be as efficient and effective as possible in order to achieve voluntary reciprocation. In the context of the forthcoming review of the Union's macroprudential policy framework and in line with possible amendments to the existing toolset, the European Commission should, however, consider whether and in what manner the voluntary reciprocity arrangement as set out in this Recommendation could best be anchored in Union law to foster the effectiveness of national macroprudential policies. Ideally, the European Commission's proposal should be based on the voluntary reciprocity arrangement as elaborated in this Recommendation and in Chapter 11 of the ESRB Handbook on Operationalising Macroprudential Policy in the Banking Sector (hereinafter the ‘ESRB Handbook’) (12).

(18)

ESRB recommendations are published after informing the Council of the General Board's intention to do so and providing the Council with an opportunity to react,

1.

The relevant activating authorities are recommended to assess, prior to their adoption, the cross-border effects of the implementation of their own macroprudential policy measures. At the very least, the spillover channels operating via risk adjustment and regulatory arbitrage should be assessed, using the methodology set out in Chapter 11 of the ESRB Handbook.

2.

The relevant activating authorities are recommended to assess the possible:

3.

The relevant activating authorities are recommended to monitor at least once a year the materialisation and evolution of the cross-border effects of the macroprudential policy measures they have introduced.

1.

The relevant activating authorities are recommended to notify the ESRB of macroprudential policy measures as soon as they are adopted, and no later than two weeks after their adoption. Notifications should include an assessment of cross-border effects and of the necessity for reciprocation by other relevant authorities. The relevant activating authorities are requested to provide the information in English using the templates published on the ESRB's website.

2.

If reciprocation by other Member States is deemed necessary to ensure the effective functioning of the relevant measures, the relevant activating authorities are recommended to submit a request for reciprocation to the ESRB, together with the notification of the measure.

3.

If macroprudential policy measures were activated prior to the adoption of this Recommendation, or if reciprocation was not considered necessary when the measures were first introduced, but the relevant activating authority has subsequently decided that such reciprocation has become necessary, the relevant activating authorities are recommended to submit a request for reciprocation to the ESRB.

1.

The relevant authorities are recommended to reciprocate the macroprudential policy measures adopted by other relevant authorities and recommended for reciprocation by the ESRB.

2.

The relevant authorities are recommended to reciprocate the macroprudential policy measures listed in this Recommendation by implementing the same macroprudential policy measure as the one that has been implemented by the activating authority. If the same macroprudential policy measure is not available in national legislation, the relevant authorities are recommended to reciprocate, following consultation with the ESRB, by adopting a macroprudential policy measure available in its jurisdiction that has the most equivalent effect to the activated macroprudential policy measure.

3.

Unless a specific deadline is recommended in relation to the reciprocation of a macroprudential policy measure, the relevant authorities are recommended to adopt reciprocating macroprudential policy measures no later than three months, following the publication of the latest amendment of this Recommendation in the Official Journal of the European Union. The adopted and reciprocating measures should have the same activation date insofar as possible.

(a)

‘activation’ means the application of a macroprudential policy measure at national level;

(b)

‘adoption’ means a decision taken by a relevant authority regarding the introduction, reciprocation or amendment of a macroprudential policy measure;

(c)

‘financial service’ means any service of a banking, credit, insurance, personal pension, investment or payment nature;

(d)

‘macroprudential policy measure’ means any measure that addresses the prevention and mitigation of systemic risk as defined in Article 2(c) of Regulation (EU) No 1092/2010 and is adopted or activated by a relevant authority subject to Union or national law;

(e)

‘notification’ means a written notice in English to the ESRB from the relevant authorities, including the ECB pursuant to Article 9 of Regulation (EU) No 1024/2013, regarding a macroprudential policy measure in accordance with, but not limited to, Article 133 of Directive 2013/36/EU and Article 458 of Regulation (EU) No 575/2013, and which may be a reciprocation request from a Member State in accordance with, but not limited to, Article 134(4) of Directive 2013/36/EU and Article 458(8) of Regulation (EU) No 575/2013;

(f)

‘reciprocity’ means an arrangement, whereby the relevant authority in one jurisdiction applies the same, or equivalent, macroprudential policy measure, as is set by the relevant activating authority in another jurisdiction, to any financial institutions under its jurisdiction, when they are exposed to the same risk in the latter jurisdiction;

(g)

‘relevant activating authority’ means a relevant authority that is in charge of applying a macroprudential policy measure at national level;

(h)

‘relevant authority’ means an authority entrusted with the adoption and/or activation of macroprudential policy measures, including but not limited to:

1.

The relevant authorities may exempt financial service providers under their jurisdiction from applying a particular reciprocating macroprudential policy measure, if these financial service providers have non-material exposures to the identified macroprudential risk in the jurisdiction where the relevant activating authority is applying the macroprudential policy measure in question (de minimis principle). Similar to the practice adopted for the CCB in Article 130 of Directive 2013/36/EU, authorities may choose to exempt financial service providers with exposures below a set threshold from reciprocating this macroprudential policy measure. The relevant authorities are requested to report to the ESRB on such exemptions, using the template for notifying reciprocating measures published on the ESRB's website. When applying a de minimis principle, authorities need to monitor closely whether leakages and regulatory arbitrage materialise and close the regulatory loophole if needed.

2.

If the relevant authorities have already reciprocated and disclosed the measure before the measure is recommended for reciprocation in this Recommendation, the reciprocating measure does not need to be amended even if it differs from the one implemented by the activating authority.

1.

The relevant authorities are requested to report to the ESRB and the Council on the actions they take in response to this Recommendation, or adequately justify any inaction. Reports shall be sent every two years, with the first report due by 30 June 2017. The reports should contain as a minimum:

2.

In the event of shared responsibilities, relevant authorities should coordinate with each other in order to provide the necessary information on time.

3.

The relevant authorities are encouraged to inform the ESRB at the earliest opportunity of any proposed macroprudential policy measures.

4.

A reciprocating macroprudential policy measure is deemed to be equivalent if it has, insofar as possible:

1.

The ESRB Secretariat:

2.

The General Board assesses the actions and the justifications reported by the relevant authorities and, where appropriate, decides whether this Recommendation has not been followed and whether the relevant authorities have failed to adequately justify their inaction.

12.3.2016   

EN

Official Journal of the European Union

C 97/15

Council of the European Union

General Secretariat

DG C 1C

Rue de la Loi/Wetstraat 175

1048 Bruxelles/Brussel

BELGIQUE/BELGIË

Email: sanctions@consilium.europa.eu

12.3.2016   

EN

Official Journal of the European Union

C 97/16

Council of the European Union

General Secretariat

DG C 1C

Rue de la Loi/Wetstraat 175

1048 Bruxelles/Brussel

BELGIQUE/BELGIË

Email: sanctions@consilium.europa.eu

12.3.2016   

EN

Official Journal of the European Union

C 97/17

Focal Point for De-listing

Security Council Subsidiary Organs

Branch Room DC2 0853B

United Nations

New York, N.Y. 10017

UNITED STATES OF AMERICA

Tel. +1 9173679448

Fax +1 2129631300

Email: delisting@un.org

Council of the European Union

General Secretariat

DG C 1C

Rue de la Loi/Wetstraat 175

1048 Bruxelles/Brussel

BELGIQUE/BELGIË

Email: sanctions@consilium.europa.eu

12.3.2016   

EN

Official Journal of the European Union

C 97/18

Council of the European Union

General Secretariat

DG C 1C

Rue de la Loi/Wetstraat 175

1048 Bruxelles/Brussel

BELGIQUE/BELGIË

Email: sanctions@consilium.europa.eu

12.3.2016   

EN

Official Journal of the European Union

C 97/19

12.3.2016   

EN

Official Journal of the European Union

C 97/20

12.3.2016   

EN

Official Journal of the European Union

C 97/21

12.3.2016   

EN

Official Journal of the European Union

C 97/22

12.3.2016   

EN

Official Journal of the European Union

C 97/23

(1)

The European Systemic Risk Board (ESRB) is responsible for carrying out macroprudential oversight in order to contribute to the prevention or mitigation of systemic risks within the Union.

(2)

In order to discharge its responsibilities, the ESRB needs to assess macroprudential risks stemming from developments within the Union and in third countries. Such risks could arise from cross-border exposures of the Union’s banking system to third countries, which might serve as a contagion channel into the Union. In particular, excessive credit growth in a given third country could, if not addressed by means of macroprudential policies taken by that country, lead to large losses for the banking sector within the Union and, ultimately, pose a threat to financial stability within the Union.

(3)

Article 138 of Directive 2013/36/EU provides the ESRB with a specific mandate to address risks arising from excessive credit growth in third countries. Specifically, when actions taken by authorities in a third country are deemed insufficient, the ESRB can act to protect the Union’s banking sector from risks stemming from excessive credit growth in that third country. In particular, the ESRB may, by means of a recommendation, provide guidance to designated authorities within the Union on the appropriate countercyclical buffer rate for exposures to third countries.

(4)

In order to discharge this mandate, third countries to which the Union’s banking system has material exposures (hereinafter ‘material third countries’) need to be identified. The impact that excessive credit growth in a given third country might have on the Union’s banking system depends on the size and nature of the exposures of banks which have their head offices in the Union towards that third country. Given that the ESRB does not have the capacity to monitor developments in all third countries around the world, it considers that it can best discharge its mandate under Article 138 of Directive 2013/36/EU by monitoring only those third countries to which the exposures of the Union’s banking system are material for signs of excessive credit growth.

(5)

In order to identify material third countries, the ESRB intends to use supervisory data collected by the European Banking Authority (EBA) in accordance with Decision EBA/DC/2015/130 of the European Banking Authority of 23 September 2015 (5). Decision EBA/DC/2015/130 provides detailed information on exposures in the banking book of a sample of the largest 191 banks in the Union to all third countries globally. Although the data do not include exposures in the trading book, and do not cover all banks in the Union, the ESRB considers that the data are adequate for the purpose of identifying material third countries. Focusing on exposures in the banking book is considered adequate because they represent the majority of exposures. Moreover, netting arrangements and the use of, inter alia, derivatives and short positions make it difficult to allocate an exposure in the trading book to a given third country. Focusing on a sample of the largest banks is considered adequate because these banks tend to have the largest volume of cross-border activities and are, therefore, the banks that would be most affected if excessive credit growth in a third country was not being addressed. In 2014, the 191 banks in the sample accounted for around 92 % of the total assets of the Union’s banking system. As the ESRB does not need bank-specific exposure data for the purpose of identifying material third countries, it intends to request from the EBA the data gathered in accordance with Decision EBA/DC/2015/130 aggregated to country level. Such data requests are governed by Decision ESRB/2015/2.

(6)

The ESRB will identify material third countries on the basis of three exposure metrics: risk-weighted assets, original exposure and defaulted exposures in relation to third countries. The main purpose of using a number of metrics is to reflect a comprehensive view of the nature of the exposures to third countries. Focusing solely on risk-weighted assets could result in a situation in which significant exposures with low risk weights would not be given due consideration. By capturing the size of the exposures before risk weights are applied, original exposure compensates for this. Finally, defaulted exposures aim to capture those exposures which pose a greater credit risk to the banks.

(7)

The ESRB typically defines a third country as material when exposures of the Union’s banking system to that third country are at least 1 % for at least one of the above three metrics. Compared to non-financial corporations, banks’ equity levels tend to be small relative to their assets. This means that, even for what might appear to be small exposures when compared with the size of the balance sheet of a bank, losses can reach levels that threaten the solvency of banks and/or create doubt among the public about their solvency. This argument would require the setting of a low threshold, as adverse developments in a given third country could materially impact the capital position of banks. At the same time, the threshold used to identify material third countries should not consider third countries to which only one Member State is exposed, unless such exposures are large enough to pose a risk to the Union, beyond the individual Member State in question. To minimise these occurrences, a high threshold should be set, which ensures that only the largest exposures across Member States are captured. The ESRB considers that a threshold of 1 % of total exposures achieves the right balance between the two desirable outcomes above.

(8)

The ESRB will compile a list of material third countries and update this list annually on the basis of criteria that govern additions to and deletions from that list. Banking exposures evolve over time, reflecting both cyclical and structural developments in economic and financial integration across the world. The process of identifying material third countries needs to reflect this evolution. To that end, criteria that govern additions to and deletions from the list of material third countries have been defined. They are designed to be: (a) conservative — for a third country to be added to the list is easier than to be deleted from it; and (b) transparent — criteria for adding to and deleting from the list are based on simple rules. In addition, the ESRB can exercise discretion when determining whether a third country is material for the banking sector of the Union. Such discretion is most likely to be exercised in cases where a third country is on the verge of meeting the materiality criteria.

(9)

The General Board will be asked to approve each revision of the list of material third countries via written procedure. If an objection is raised, the General Board will vote. The ESRB Secretariat will, on an annual basis, prepare a draft list of material third countries based on the application of the addition and deletion criteria. The Advisory Technical Committee will be able to exercise its discretion and amend the draft list prior to submission to the General Board.

(10)

Material third countries identified in accordance with this Decision will be monitored by the ESRB Secretariat. Other third countries might be monitored by other jurisdictions in the Union depending on their materiality for the domestic banking system of a given Member State. Expertise gained from the Risk Dashboard and from earlier work on the countercyclical capital buffer will be used to identify those indicators which are more relevant in terms of the early identification of excessive credit growth.

(11)

The ESRB has initially identified six third countries as material, based on supervisory data with a reference date of 30 June 2014. The third countries initially identified as material are the Federative Republic of Brazil, the Hong Kong Special Administrative Region of the People’s Republic of China, the People’s Republic of China, the Republic of Turkey, the Russian Federation and the United States of America. Amendments to this list of material third countries should be published on the ESRB’s website.

(12)

The first revision of the list of material third countries, as identified by the ESRB, will take place in the second quarter of 2017, using supervisory data with a reference date of 31 December 2016. This reflects the need to have sufficient data to apply the addition criteria. Due to the fact that there will be insufficient data to apply the deletion criteria, this first revision will consider only potential additions to the list of material third countries.

(13)

Subsequent revisions to the list of material third countries will take place using supervisory data with a reference date of the 31 December of each relevant calendar year. Once sufficient data to apply the deletion criteria are available, subsequent revisions will also consider potential deletions from the list of material third countries,

(a)

‘countercyclical buffer rate’ has the same meaning as in Article 128(7) of Directive 2013/36/EU;

(b)

‘exposure’ has the same meaning as in Article 5(1) of Regulation (EU) No 575/2013 of the European Parliament and of the Council (6);

(c)

‘monitoring/monitored by the ESRB Secretariat’ means the governance, maintenance and regular update of a set of indicators and quantitative tools by the ESRB Secretariat to signal potentially excessive credit growth in material third countries;

(d)

‘third country’ has the same meaning as in point 1(g) of Section 2 of Recommendation ESRB/2015/1.

(a)

risk-weighted exposure amounts;

(b)

original exposures; and

(c)

defaulted exposures.

(a)

Template C 09.01: intersection of rows 070, 080, 090, 100, 110, 120, 130, 140, 150, 160, and columns 010, 020 and 080; and

(b)

Template C 09.02: intersection of rows 030, 060 and 140, and columns 010, 030 and 110.

(a)

the arithmetic mean of exposures to the third country in the eight quarters preceding the reference date was at least 1 % for at least one of the metrics listed in Article 3(2); and

(b)

the exposures in each of the two quarters preceding the reference date were at least 1 % for at least one of the metrics listed in Article 3(2).

(a)

the arithmetic mean of exposures to that country in the 12 quarters preceding the reference date was less than 1 % for all metrics listed in Article 3(2); and

(b)

the exposures in each of the two quarters preceding the reference date were less than 1 % for all the metrics listed in Article 3(2).

12.3.2016   

EN

Official Journal of the European Union

C 97/28

(1)

The European Systemic Risk Board (ESRB) is responsible for macroprudential oversight within the Union. In this regard, the ESRB aims to contribute to the prevention or mitigation of systemic risks to financial stability in the Union, including risks that stem from outside the Union. As part of this task, the ESRB works to avoid regulatory arbitrage and cross-border leakages by ensuring that the same or equivalent macroprudential requirements apply to the same risks across the Union. To ensure the effectiveness of macroprudential policy measures, the ESRB considers three tasks as being of particular importance. These tasks are mandated by Union law and/or follow from Regulation (EU) No 1092/2010.

(2)

First, the ESRB is mandated by Article 133 of Directive 2013/36/EU and Article 458 of Regulation (EU) No 575/2013 to assess the appropriateness of macroprudential policy measures before they are adopted by the Member States or the European Central Bank (ECB).

(3)

Second, the ESRB assesses the potential adverse cross-border spillover effects of specific macroprudential policy measures and, if a reciprocation request has been received from the relevant activating authority, evaluates whether specific macroprudential policy measures taken by the Member States should be reciprocated across the Union in accordance with the framework set out in Recommendation ESRB/2015/2 of the European Systemic Risk Board. Pursuant to Article 134 of Directive 2013/36/EU and Article 458 of Regulation (EU) No 575/2013, Member States may ask the ESRB to issue recommendations to other Member States requiring reciprocation of their macroprudential policy measures. In accordance with its mandate, the ESRB may also recommend the reciprocation of measures whose reciprocation is subject to national discretion.

(4)

Third, the ESRB contributes to achieving coherence across the Union for countercyclical capital buffer (CCB) rates applying to exposures to third countries. It is specifically mandated by Article 138 of Directive 2013/36/EU to issue recommendations with a view to ensuring that such CCB rates are sufficient to protect Union institutions from the risk of excessive credit growth in third countries. According to Article 139 of Directive 2013/36/EU, the ESRB may issue recommendations to achieve coherence across Member States when they exercise the powers granted by that Article in the area of setting and recognising CCB rates for exposures to third countries.

(5)

In relation to its first task of assessing the appropriateness of certain macroprudential policy measures prior to their adoption, in 2014 the ESRB established an Assessment Team mandated with analysing these measures and preparing opinions and recommendations. Since the ESRB’s second and third tasks have a number of aspects in common with its first task, it would be advisable to extend the mandate of the existing Assessment Team to cover all three tasks. In view of the Assessment Team’s extended mandate it would then also be necessary to amend the composition of the Assessment Team to encompass a wider range of expertise. Furthermore, the terms of office for certain members of the Assessment Team, appointed in accordance with Decision ESRB/2014/2 of the European Systemic Risk Board (8), need to continue until the expiration of the relevant terms of office.

(6)

To enable the ESRB to discharge these three tasks, the relevant authorities are recommended to notify the ESRB of macroprudential policy measures, including those that go beyond the requirements set out in Union law. These notification requirements are set out in Articles 129(2), 130(2), 131(7) and (12), 133, 134(2), 136(7) and 160 of Directive 2013/36/EU as well as Article 99(7) and Article 458 of Regulation (EU) No 575/2013. Moreover, Recommendation ESRB/2015/2 recommends that the relevant authorities notify the ESRB of all adopted macroprudential policy measures.

(7)

The operating procedures of the Assessment Team for each of its three tasks must reflect the different timelines by which the ESRB is required to discharge its respective tasks. In particular, the ESRB will deliver its opinions or recommendations on the measure in question within one month of receiving a notification, in accordance with Article 133 of Directive 2013/36/EU and Article 458 of Regulation (EU) No 575/2013. The ESRB will aim to amend Recommendation ESRB/2015/2 within three months of being notified of such measures. If the ESRB considers that action on the CCB rate applying to exposures to a specific third country is needed, it will aim to issue a recommendation within three months of having become aware of a potential risk from excessive credit growth in the third country concerned.

(8)

Decision ESRB/2014/2 needs to be repealed and replaced by this Decision in order to include the two additional tasks for the Assessment Team and the corresponding changes to its composition,

(a)

ESRB recommendations and opinions on national macroprudential policy measures in accordance with Article 133(14) and (15) of Directive 2013/36/EU and Article 458(4) of Regulation (EU) No 575/2013;

(b)

Amendments to Recommendation ESRB/2015/2 to incorporate additional notified macroprudential policy measures recommended for reciprocation in accordance with, but not limited to, Article 134(4) of Directive 2013/36/EU and Article 458(8) of Regulation (EU) No 575/2013;

(c)

ESRB recommendations, on the setting and recognition of a specific CCB rate for the exposures to a specific third country in accordance with, but not limited to, Articles 138 and 139 of Directive 2013/36/EU (hereinafter the ‘ESRB recommendations on specific third country CCB rates’).

(1)

‘adoption’ has the same meaning as in Section 2(1) of Recommendation ESRB/2015/2;

(2)

‘countercyclical buffer rate’ means countercyclical buffer rate as defined in Article 128(7) of Directive 2013/36/EU;

(3)

‘Darwin’ means the internal document management system of the ESRB;

(4)

‘macroprudential policy measure’ has the same meaning as in Section 2(1) of Recommendation ESRB/2015/2;

(5)

‘notification’ has the same meaning as in Section 2(1) of Recommendation ESRB/2015/2;

(6)

‘notifying authority’ means a relevant authority transmitting a notification to the ESRB;

(7)

‘opinion’ means any opinion to be issued by the ESRB following the receipt of a notification regarding a macroprudential policy measure, in accordance with Article 133 of Directive 2013/36/EU and Article 458 of Regulation (EU) No 575/2013;

(8)

‘reciprocity’ has the same meaning as in Section 2(1) of Recommendation ESRB/2015/2;

(9)

‘recommendation’ means any recommendation to be issued by the ESRB in accordance with, but not limited to, Articles 133(14), 134(4), 138 and 139 of Directive 2013/36/EU and Article 458 of Regulation (EU) No 575/2013;

(10)

‘relevant activating authority’ has the same meaning as in Section 2(1) of Recommendation ESRB/2015/2;

(11)

‘relevant authority’ has the same meaning as in Section 2(1) of Recommendation ESRB/2015/2;

(12)

‘relevant third-country authority’ has the same meaning as in Section 2(1) of Recommendation ESRB/2015/1;

(13)

‘third country’ has the same meaning as in Section 2(1) of Recommendation ESRB/2015/1.

(a)

If the Assessment Team determines that a discussion on the reciprocation of the measure under consideration is warranted, the ESRB Secretariat shall submit the Assessment Team’s assessment and the draft amendment of Recommendation ESRB/2015/2 to a meeting of the ATC for discussion. Such discussion shall also consider the types of measure whereby reciprocation by other Member States of the measure under consideration might be achieved. Where the same measure as the one under consideration is not available in the national legislation of all other Member States, the Assessment Team shall identify other measures with an equivalent effect that reciprocating relevant authorities may use on a best effort basis.

(b)

If the Assessment Team determines that no discussion is necessary because the notified measure is exposure-based and is available in all other Member States, the ESRB Secretariat may transmit the draft amendment of Recommendation ESRB/2015/2 via Darwin to all members of the ATC for a written procedure. In this case, the draft amendment of Recommendation ESRB/2015/2 shall request reciprocation of that measure by all other Member States.

(a)

when a relevant third-country authority asks for recognition of a buffer rate above 2,5 %;

(b)

when the ESRB is informed by a designated authority in accordance with recommendation A(1), of Recommendation ESRB/2015/1, or when — for countries that are members of the Basel Committee on Banking Supervision (BCBS) — the ESRB Secretariat becomes aware that a relevant third-country authority has set a CCB rate for that third country in excess of 2,5 %;

(c)

when the ESRB is informed by a designated authority in accordance with recommendations A(2) and B(3) of Recommendation ESRB/2015/1;

(d)

when the ESRB is informed by a designated authority in accordance with recommendation C(1), of Recommendation ESRB/2015/1, or when the CCB rate set by a relevant third-country authority, which is from a country that is a member of the BCBS, was recognised on the basis of an ESRB recommendation, and the ESRB Secretariat becomes aware that the relevant third-country authority has set the CCB rate at a lower rate;

(e)

when the ESRB is informed by a designated authority in accordance with recommendation C(2), of Recommendation ESRB/2015/1, or when the CCB rate set by a relevant third-country authority, which is from a country that is a member of the BCBS, was set on the basis of an ESRB recommendation, and the ESRB Secretariat becomes aware that the relevant third-country authority has set the CCB rate at a lower rate;

(f)

when the ESRB Secretariat finds indications of excessive credit growth in one of the third countries identified as material for the Union, as defined in Article 4 of Decision ESRB/2015/3.

12.3.2016   

EN

Official Journal of the European Union

C 97/36