EUR-Lex Access to European Union law
This document is an excerpt from the EUR-Lex website
Document 52012DC0400
REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL Second Report on Effects of Directives 2006/48/EC and 2006/49/EC on the Economic Cycle
REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL Second Report on Effects of Directives 2006/48/EC and 2006/49/EC on the Economic Cycle
REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL Second Report on Effects of Directives 2006/48/EC and 2006/49/EC on the Economic Cycle
/* COM/2012/0400 final */
REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL Second Report on Effects of Directives 2006/48/EC and 2006/49/EC on the Economic Cycle /* COM/2012/0400 final */
TABLE OF CONTENTS 1........... Introduction.................................................................................................................... 3 2........... Cyclicality of regulatory
capital requirements.................................................................... 4 3........... Impact of capital requirements
on bank capital levels....................................................... 6 4........... Impact of bank capital levels on
bank lending activity....................................................... 7 5........... Impact of credit availability on
the economic cycle........................................................... 8 6........... Measures to address
pro-cyclicality................................................................................ 8 6.1........ Single Rule Book............................................................................................................ 9 6.2........ Countercyclical Capital Buffer
(CCB)............................................................................. 9 6.3........ Leverage Ratio............................................................................................................... 9 6.4........ Credit Rating Agencies (CRAs).................................................................................... 10 6.5........ Small and Medium-sized
Enterprises (SMEs)................................................................ 10 7........... Conclusions.................................................................................................................. 11 8........... References................................................................................................................... 13 REPORT FROM
THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL Second Report on Effects of Directives
2006/48/EC and 2006/49/EC on the Economic Cycle 1. Introduction 1. The minimum capital
requirements for banks under the EU Capital Requirements Directive (CRD)[1], based on the Basel II framework, are risk sensitive. In consequence,
as credit and market risk increases in a downturn, minimum capital requirements
for banks will also increase to meet those higher risks. Banks may need to
raise additional capital to meet these higher requirements at a time when their
capital resources are being eroded by losses and opportunities for raising
capital are scarce and costly. This may constrain banks' lending capacity into
the economy, amplifying the downturn. Similarly, during an economic upturn when
prices steadily rise and defaults decrease, the apparent reduction in risk may
reduce capital requirements and increase lending, boosting the economy further.
If the regulation has such an effect it is described as 'pro-cyclical'. 2. The possibility that the
CRD may contribute to the pro-cyclicality observed in the financial system
under the predecessor Basel I framework led to the inclusion in the CRD of
Article 156[2] which requires the European Commission (Commission) to periodically
examine whether the CRD has 'significant effects on the economic cycle' and
to submit a biennial report to the European Parliament and the Council together
with any appropriate corrective measures. 3. The Commission prepared its first report on
pro-cyclicality in 2010. This second report is again based on the analysis of
the ECB, which was supported by the Impact Study Group (ISG) that was set up
jointly by the ESCB Financial Stability Committee (FSC) and the European
Banking Authority (EBA) in 2011 as a successor of the Joint Task Force on the
Impact of the new Capital Framework (JTFICF). The focus of the ECB report was a
quantitative analysis of IRB bank data, although there is brief discussion of
the likely pro-cylicality of the Standardised Approach, included in this
report.[3] 4. Analysing the relationship
between regulatory capital requirements and the pro-cyclical lending of banks
remains a complex exercise. As outlined in the first report, the main questions
to be answered are the following: (a)
Are capital requirements cyclical? (b)
If yes, do cyclical capital requirements have an
impact on the level of capital that banks desire or actually hold? (c)
If yes, does the desired or actual level of bank
capital have an impact on the cyclicality of lending? (d)
If yes, does cyclical lending have an impact on
the economic cycle? 5. On July 2011, the
Commission proposed a legislative package for the reform of banking regulation,
including a directive (CRD IV) and a regulation (CRR). The Commissions'
proposal includes some measures that may mitigate pro-cyclicality. This
report concludes with an outlook on the extent to which these counter-cyclical
policy measures may mitigate the pro-cyclical impacts of the CRD on the
financial and economic cycle. 2. Cyclicality
of regulatory capital requirements 6. There is a consistent view
among the national supervisory authorities surveyed by the ECB in 2011 that the
CRD minimum required capital (MRC) is more risk-sensitive and tends to be more
cyclical than previous Basel I requirements. The increase of cyclicality in
capital requirements is mainly attributed to the higher risk sensitivity of the
overall framework, in particular as regards the calculation of capital
requirements under the internal ratings based (IRB) approaches. 7. The ECB quantitative
analysis examined the extent to which input risk parameters to IRB models,
namely probabilities of default (PDs) and loss given default (LGDs) estimations,
and exposures, are correlated with macroeconomic factors, and how much this
feeds through into cyclical MRC. Their findings are to be treated as
preliminary indications rather than robust empirical results.[4] 8. The ECB found that PDs of non-defaulted
corporate and retail exposures tend to increase more strongly with lower
macroeconomic activity, lower property prices and higher unemployment, fulfilling
one precondition for cyclical capital requirements. By comparison, there was a
rather limited cyclical impact found for LGDs, likely to reflect that LGD
values employed in banks' internal models are somewhat stickier than respective
PDs and thus may react less immediately to changes in the macroeconomic
environment. Changes in exposure were correlated with lagged changes in
industrial confidence and consumer confidence (indicators for the economic
cycle) for the corporate and retail portfolio respectively, also implying
cyclicality: banks reduce exposures to these portfolios in the face of an adverse
economic outlook. Overall, the assessment of the input parameters
to MRC calculations suggests some counterbalancing effects between cyclical
risk parameters such as PDs or LGDs on the one side and cyclical developments
in exposures on the other: in a downturn the effect of a higher PD may be
offset by a cut back of exposures when combined as inputs into the MRC. These
counterbalancing effects may render the cyclical effect on overall MRC somewhat
unclear or even non-stable over time as the speed of adjustments may differ
across parameters and portfolios. 9. The results of the
estimation of changes in overall bank-level MRC do not point to a significant
relationship between the change in MRC and GDP growth for the overall sample at
the bank (rather than portfolio) level. However, when the analysis is limited
to Group 1 banks[5] there is a significant correlation between a decline in GDP growth and
an increase in MRC. This tentatively points to some MRC cyclicality for Group 1
banks. 10. It should be noted that the
dataset was limited to IRB banks with many smaller Group 2 banks – that use the
Standardised Approach – excluded. Therefore, MRC cyclicality for Group 2 banks
as a whole may also be significant, although statistical evidence for this is
beyond the scope of the ECB study (see §13). 11. There are indications for
some cyclicality of MRC at the portfolio level. For lagged GDP growth, the
principle indicator of the economic cycle, there is a significant negative
relationship with the MRC of the corporate portfolio of Group 1 banks only.
However, there is also a significant negative relationship between lagged
commercial property prices and the corporate portfolio MRC for all banks in the
sample.
For the retail portfolio, GDP growth also has a relationship with the Group 1
banks only, although to a lower significance level. Changes in unemployment
rates have a significant impact on retail portfolio MRC for the overall sample,
with no significant difference for Group 1 banks. 12. To summarise, cyclical
effects at portfolio level seem to be mitigated at the bank level. As already
indicated by the findings on counterbalancing cyclical effects among the MRC
parameters, these mitigations are likely to be primarily due to portfolio
adjustment concerning the size and composition of banks’ overall portfolios.
However, the observed reallocations of assets were likely triggered by the
financial crisis rather than changes in the underlying risk parameters per se.
For instance, banks may have targeted a higher amount of assets eligible as
collateral in central bank liquidity operations to improve their liquidity
position and to be able to benefit from cheap central bank funding. In the
absence of the crisis, then, the MRC may have been more cyclical. 13. An
important additional factor that may contribute to the cyclicality of minimum
capital requirements derives from external rating actions concerning some
specific assets included in bank balance sheets. A substantial number of banks
in EU countries apply (fully or partially) the standardised approach (SA) for
the calculation of their capital requirements. Since the SA heavily relies on
the use of external ratings for regulatory purposes, any cyclicality in
external ratings would result in cyclical variations of capital requirements as
well.[6] Banks using the SA may be an additional and significant force for
any CRD-driven pro-cyclicality in bank lending. 14. Furthermore,
the requirements set by credit rating agencies (CRAs) are important factors in
banks’ capital allocation decisions, because banks often aim at maintaining or
reaching a target rating as a matter of business strategy, which may imply a
higher and more cyclical capital ratio than that mandated by the CRD. [7] 3. Impact
of capital requirements on bank capital levels 15. The ability and willingness
of banks to lend depends in part on the degree to which the minimum capital
constraints are binding. A pro-cyclical MRC increasing during an economic
downturn would cut more sharply into a bank's capital buffer above the minimum,
forcing a prudent bank to seek more capital or alternatively to reduce the MRC
by cutting lending. 16. The academic literature on
the behaviour of bank capital buffers over the economic cycle in general finds
that banks' capital buffers above the MRC decrease when business activity goes
up, implying excessive risk-taking during economic upswings and cutting back
lending in downturns.[8] 17. The ECB empirical analysis
finds slightly significant correlations between GDP growth and firm capital
buffers implying the reverse behaviour – higher buffers during upswings and
lower buffers in downturns. However, in view of the short sample period and
crisis-driven capital buffer raising in 2010H2 and 2011H1 these observations
must be treated with caution.[9] 18. Capital levels held by
banks can also be driven by anticipation of future regulatory requirements. Future requirements cover the regulation set out in “Basel III”
agreements, the recent measures of the EBA[10] and
any other additional national-level regulations concerning banks’ capital
ratios that have recently been approved or are expected to be approved in the
near future. Overall, survey indications point to some notable impact of
regulatory changes on both their balance sheets and lending policies, including
credit standards.[11] 19. EBA
has publicly disclosed preliminary evidence on the recapitalisation exercise.[12] The total actions give a preliminary aggregated capital surplus of
approximately 26%. The actions predominantly focus on direct capital measures
which account for 96% of the capital shortfall and for 77% of the total amount
of actions proposed. The majority of these are capital raising, retained
earnings and conversion of hybrids to common equity. Measures impacting
risk-weighted assets (RWAs) account for the remaining 23% of total amount of
actions. After taking account of the measures arising from EU State Aid
decisions on banks restructuring or other country programmes, the impact of
actions reducing lending into the real economy would be less than 1% of the
total amount. However, the Commission, EBA and ECB are
committed to conduct a close monitoring of the deleveraging process, whether related
or not to the recapitalisation plan. In particular, since deleveraging is
likely to occur with non-core activities and/or outside the home jurisdiction,
close home-host cooperation within the EU and also outside its borders is
important. Moreover, euro area banks' share of total
credit for Central and Eastern Europe (CEE) (47.3%) is high compared with other
emerging economies, suggesting a very high level of credit dependence and a
particularly high sensitivity to deleveraging decisions of the parent entities.
For some specific countries in the region the credit supply is controlled
almost entirely by euro area banking groups.[13] 4. Impact
of bank capital levels on bank lending activity 20. The large majority of
national supervisory authorities stated that there are clear links between
bank's capital management policies and their loan granting process. In most
cases the regulatory capital requirements of CRD play an important role.
However, authorities have not identified clear impacts of regulatory capital
requirements on certain asset classes or loan categories. Other drivers behind capital management
policies make it difficult to separate the influence of CRD on bank lending.
Such drivers include the risk appetite policies of banks, stress tests, Pillar
I/II requirements and RAROC[14] and portfolio growth targets. As regards other supply and demand
side factors that may affect the cyclicality in loan exposures, authorities
have divergent views, but these other factors are mostly seen as more important
than regulatory capital requirements. Relevant factors for loan supply include the
macroeconomic environment (cost of funding, availability of capital and
liquidity, market confidence) and banks' individual lending strategy. Loan demand
is mainly influenced by macroeconomic conditions (growth rate, inflation,
unemployment, income development, insolvencies, consumption (expectation),
exports etc.), but market conditions (interest rates, funding availability)
were also mentioned. Authorities also noted that impairments and write-offs of
loans are more cyclical than regulatory capital requirements for performing
loans. Fair value accounting and IFRS are also seen as important drivers for
bank lending activity. 5. Impact
of credit availability on the economic cycle 21. Quantifying the impacts of
MRC changes on lending and GDP remains difficult. The ECB reviewed the results
of an analysis carried out by the Macroeconomic Assessment Group (BIS, 2010)
that was set up by the Basel Committee on Banking Supervision and the Financial
Stability Board to assess the macroeconomic effects of the transition to higher
capital and liquidity requirements under Basel III. However, this study is
mentioned for illustrative purposes only as it focused on a one-off transition
to higher requirements rather than determining a standard co-movement between
MRC, lending and GDP. 22. MAG noted that standard
macroeconomic models do not readily allow for direct investigation of the
effects of prudential policy changes on lending and GDP. While different models
employed by the MAG capture many of the key aspects, there is no single model
that incorporates all the relevant mechanisms. Therefore the study presents the
median outcome of several models as a central estimate of the impact across
models and countries.[15] 23. However, given all the
caveats encountered in the ECB's quantitative analysis of MRC cyclicality, for
instance the very limited data available and the impact of the financial crisis
both via additional regulatory changes, government interventions and
behavioural adjustments, it seems to be too early to make a quantitative estimate
of how big the pro-cyclical impact of CRD capital requirements on lending and
GDP might be. 6. Measures
to address pro-cyclicality 24. In July 2011, the
Commission proposed a legislative package for the reform of banking regulation,
including a directive (CRD IV) and a regulation (CRR). This follows the Basel
III agreement and will meet the key objective of maintaining the credit supply
to the real economy in the EU. 25. The proposal includes a
number of measures that may mitigate pro-cyclicality in banking lending: a single
rule book, a countercyclical capital buffer, the introduction of a leverage
ratio, reduced dependency on credit rating agencies for prudential
requirements, and scope to undertake further measures to enhance loan
availability for small and medium sized enterprises. 6.1. Single
Rule Book 26. As noted above in §19, due
to the integration of the EU banking sector, de-leveraging of credits in
international banks in response to regulatory requirements set by national
supervisors may occur outside home jurisdictions. The introduction of a single
rule book will not only reduce regulatory arbitrage but also mitigate the
pro-cyclical effects of asymmetric de-leveraging in "host countries". 6.2. Countercyclical
Capital Buffer (CCB) 27. One key regulatory response
to the perceived pro-cyclicality of bank lending is the countercyclical buffer
(CCB), an integral part of the Commission's CRD IV proposal. This extra buffer,
built up gradually over good economic times, can be released in an economic
downturn to allow banks to absorb their losses in an orderly way that does not
lead to costly increases in the price of credit, which can aggravate recession.
It will mitigate both the existing unresponsiveness of regulatory requirements
to risk build-up at the macro level and their cyclicality. 28. Since dynamics can be very
different across different markets, the buffers are determined on a national
market base. The European Systemic Risk Board would be in charge to develop
common guidelines and facilitate and coordinate this macroprudential tool
within the framework of its mandate. 29. The ECB report highlights
that although there are some conceptual issues that arise with regard to the
practical implementation of the CCB[16], the
overall amount of CCB would have followed a clear counter-cyclical trend. In
line with the credit growth in the years before the crisis and on the basis of
a hypothetical implementation of the CCB in 2005, the buffer guide would have
increased gradually, to a peak of circa 290bn euro for all countries in the EU
in 2007.[17] 6.3. Leverage Ratio 30. The Leverage Ratio is an
additional capital requirement that can become a binding ceiling on leverage beyond
a certain multiple of assets compared to Tier 1 capital. This would help to
limit excessive bank lending during the upswing of an economic cycle when banks
have momentum to expand balance sheets without an appropriate increase in
capital. 31. In line with Basel III, the
Commission has proposed the Leverage Ratio as a Pillar 2 measure with “a view
to migrating to a binding (pillar 1) instrument, after appropriate review and
calibration”. As the Leverage Ratio is a new instrument for the EU (and in its
current form for nearly the whole world) the Commission proposed a diligent
approach with a thorough review and parallel trial period before deciding on
the final form of the instrument.[18] 6.4. Credit Rating Agencies (CRAs) 32. Credit rating agencies (CRAs)
as well as economic capital models may also play an important role in the
determination of the actual capital level of banks. As noted in §13, external
ratings are closely correlated to the economic cycle, implying that capital
requirements linked to these will also follow a clear cyclical pattern, at least
at the level of individual exposures. The heavy reliance of the Standardised
Approach to credit risk on external ratings means that this issue is
particularly relevant for banks who have not yet migrated to the IRB approach. 33. In
view of this, the CRD IV proposal encourages the use of internal ratings, while
reducing the number of references to external ratings and strengthening
provisions on how external ratings can be used.[19] It respects
the principle of proportionality by allowing smaller credit institutions and
investment firms to opt for the less CRAs-dependent (and more risk sensitive)
IRB approach by permitting the use of the simplest possible rating procedures.[20] The use of the IRB approach requires independent risk assessment
capability and also incentivises better risk management techniques to control
the credit risk in bank portfolios. 34. Furthermore, the Commission
adopted a legislative proposal[21] on 15 November 2011 that includes a general obligation for all
regulated financial institutions to make their own credit risk assessments, and
similar proposals for insurers will follow later in 2012. The Commission is
also very much involved in and supportive of work going on in Basel seeking to
reduce the importance of ratings as a criterion for defining liquid assets and
looking for alternatives to calculate capital requirements for securitization
investments. All this should reduce the pro-cyclicality of financial regulation
arising from overreliance on CRAs. 6.5. Small
and Medium-sized Enterprises (SMEs) 35. SMEs are more bank-dependent
institutions since they have fewer opportunities to find alternative sources of
finance, and as the backbone of the European economy[22] any
pro-cyclicality in capital requirements may most significantly impact growth in
the real economy through constrained SME lending. 36. Access to bank loans for
SMEs was found to have deteriorated in the April to September 2011 ECB 'SAFE'
survey, and this trend was confirmed in the October 2011 to March 2012 survey.
According to these latest survey results, euro area SMEs' financing needs
increased during the period with 19% reporting an increase in their need
(demand) for bank loans, up from 17%, while 11% reported a decrease, compared
with 12% before. The net balance of firms reporting a worsening in the availability
(supply) of bank loans was 20%, up from 14% in the previous round.[23]
At the same time, in the latest (April 2012) ECB quarterly Bank Lending Survey
(BLS) the net tightening of credit standards on loans to SMEs fell from 28% in
the Q4 2011 to 1% in Q1 2012, with net tightening of credit standards to the
group of non-financial corporations as a whole falling from 35% to 9%, a much
larger drop than was expected by survey participants at the time of the
previous survey round. This could be explained by a marked decline in the net
percentage of euro area banks reporting that cost of funds and balance sheet
constraints had contributed to a tightening of credit standards – 8% of banks
reported a challenging market financing environment compared with 28% previously.
Nevertheless, a respite from an even further tightening of credit standards
does not ease the challenging funding situation for SMEs. 37. SME exposures are subject
to a favourable treatment under the existing CRD. In the CRD IV proposal
capital requirements are increased across the board for all credit risk
exposures, which means that SMEs maintain their preferential treatment in Basel
II relative to other exposures. Even so, the Commission has requested the EBA
to analyse and report on the current risk weights of SME lending and the
thresholds employed for identifying SMEs in the context of the new Basel III
standards. Options to further improve the favourable treatment of SME exposures
include for instance decreasing the risk weighting from 75% to 50% or raising
the exposure threshold for SMEs from €1m to €2m or €5m. The Commission would
carefully consider these options within the overarching CRD IV objective of
enhancing financial stability. 38. It is also worth noting
that SMEs, to the extent that they are credit rationed by banks, are expected
to be the primary beneficiaries of smoothened pro-cyclicality brought about by
the enhanced countercyclical measures in CRD IV. 7. Conclusions 39. The ECB found some evidence
for a cyclical MRC driven by cyclical PDs for larger Group 1 banks using the
IRB approach to credit risk, offset somewhat by cyclical exposures (i.e.
reduced in a downturn). Although cyclical MRCs are tentatively identified at
the portfolio (corporate and retail) level, this effect seems to be mitigated
at the bank level when the whole sample of banks is considered. 40. This mitigation may
primarily be due to crisis-driven portfolio adjustment, for instance to target
more assets eligible as collateral in central bank liquidity operations, and
therefore absent the crisis there could have been firmer evidence for a cyclical
MRC. Banks using the Standardised Approach may also have a cyclical MRC due to
the method's reliance on external CRAs whose ratings are cyclical. 41. The ability and willingness
of banks to lend depends in part on the degree to which the minimum capital
constraints are binding. Although the MRC calculated under the current CRD may
have had some impact on actual capital levels held by banks, in addition to
several other factors expectations of stricter future regulatory requirements
may have resulted in capital targets set considerably above the MRC, with
significant impacts on balance sheets and lending policies. However, this is a
driver that is different from the cyclicality of the current legislation. 42. CRD IV, which will
implement Basel III in the EU, will represent a structural break with the past
with a more demanding MRC in terms of quality and quantity of capital required,
as well as new requirements for liquidity and leverage. Importantly, it will
include a number of countercyclical policy measures, including a single rule
book, a countercyclical capital buffer, a leverage ratio, and measures on CRAs
and SMEs. Where appropriate, the implementation of measures will be phased in
over time in order to avoid pro-cyclical effects. 8. References Basel Committee on Banking Supervision,
Bank for International Settlements, 16 December 2010, "Basel III: A global
regulatory framework for more resilient banks and banking systems",
available at http://www.bis.org/publ/bcbs189.pdf BIS (2010), Macroeconomic Assessment Group:
Interim Report, "Assessing the macroeconomic impact of the transition to
stronger capital and liquidity requirements", August 2010, available at http://www.bis.org/publ/othp10.pdf
ECB, EBA (2012), Pro-Cyclicality of Capital
Requirements, Second Report ECB (2010), "EU Banking
Structures", available at: http://www.ecb.int/pub/pdf/other/eubankingstructures201009en.pdf European Commission, June 2010,
"Report from the Commission to the Council and the European Parliament on
effects of Directives 2006/48/EC and 2006/49/EC on the economic cycle",
available at: http://ec.europa.eu/internal_market/bank/docs/regcapital/monitoring/23062010_report_en.pdf
Also includes further references European Commission, July 2011, New
proposals on capital requirements (CRD IV), further information available at: http://ec.europa.eu/internal_market/bank/regcapital/index_en.htm
[1] Comprising Directive 2006/48/EC of the European
Parliament and of the Council relating to the taking up and pursuit of the
business of credit institutions and Directive 2006/49/EC of the European
Parliament and of the Council on the capital adequacy of investment firms and
credit institutions [2] In 2009 amended by Directive 2009/111/EC of the European
Parliament and of the Council of 16 September 2009 [3] The ECB's quantitative assessment includes quarterly
data from Q4 2008 – Q2 2011 from around 80 banks using the internal ratings
based approach (IRB) for the calculation of their capital requirements. Qualitative
assessment is based on survey evidence from national supervisory authorities and
the Eurosystem’s Bank lending Survey (BLS). [4] There remain two primary caveats: the implementation
of the CRD is relatively recent (advanced models used from 2008) thereby
limiting the availability of relevant data over a whole business cycle, so the
analysis depends on cross country differences in business cycle stages; and the
available sample period covers the recent financial crisis where crisis induced
behavioural changes and policy interventions may have distorted general
behavioural relationships. [5] A bank is considered a Group 1 bank if its Tier 1
capital is above €3 billion and it is well diversified and internationally
active. All other banks are classified as Group 2 banks. [6] See commentary and charts 1, 2 and 3 in the accompanying Staff Working Document [7] See also section 0 [8] See for example Ayuso, Perez and Saurina (2004),
Bikker and Metzemakers (2004), Lindquist (2004). Jokipii and Milne (2008) and
Stolz and Wedow (2011). [9] However the ECB notes that a few theoretical papers
(e.g. Heid (2007), Zhu (2008), Jokivuolle, Kiema and Vesala (2009) and Repullo
and Suarez (2009)) have pointed to the possibility of a change in banks’
capital buffer behaviour when moving to a Basel II-based framework. Banks may
decide to operate with additional buffers, and in more forward-looking manner,
to insure against the perceived more cyclical MRC. This might give rise to
capital buffers that move with the cycle; being higher in upturns and vice
versa. [10] The EBA set capital target for 70 European banks,
consisting of two parts to be implemented by June 2012. The first part is a
temporary capital buffer against sovereign exposures at market prices as of
September 2011. The second part consists in raising core Tier 1 capital ratios
to 9%. [11] See charts 4, 5, 6, 7 with some results from the euro
area Bank Lending Survey (BLS) on the impact of regulatory changes on banks’
lending behaviour. However, it must be emphasised that this is a different
phenomenon to the pro-cyclicality of existing requirements. [12] EBA website, 9 Feb 2012,
http://www.eba.europa.eu/News--Communications/Year/2012/The-EBAs-Board-of-Supervisors-makes-its-first-agg.aspx
[13] See Table 1: EU banking assets and charts 8 and 9 in
the SWD for further information and discussion on cross-border credit supply. [14] Risk adjusted return on capital, a risk-based
profitability measure [15] See chart 10: Macroeconomic Assessment Group model
study results in the SWD [16] The ECB examined the Basel III reference guide, the
credit-to-GDP ratio in different MS. [17] See chart 11 in the SWD [18] The CRD IV proposal tasks the EBA with preparing a
report on the effectiveness and impact of the Leverage Ratio to be submitted to
the Commission by June 2016. On the basis of the EBA report, the Commission
shall report to the European Parliament and the Council by 31 December 2016 on
the effectiveness and impact of the leverage ratio and 'where appropriate' make
in 2018 a legislative proposal for the introduction of a Leverage Ratio
(Article 482 (1)). [19] At the international level, the Financial Stability Board (FSB)
issued in Oct 2010 principles to reduce authorities’ and financial
institutions’ reliance on CRA ratings. (http://www.financialstabilityboard.org/publications/r_101027.pdf) [20] Recitals 28-29 of the July 2011 CRR proposal [21] See http://ec.europa.eu/internal_market/securities/agencies/index_en.htm
for further information [22] SMEs account for 99.8% of enterprises, 66.9% of
employees, and 58.4% of gross value added in the EU-27 (2010 estimate,
Eurostat/National Statistics Offices of Member States/Cambridge
Econometrics/Ecorys) [23] Survey on the access to finance of SMEs in the euro
area (SAFE) available at http://www.ecb.europa.eu/stats/money/surveys/sme/html/index.en.html