Response to consultation on revised Guidelines on limits on exposures to shadow banking
Q1: Do you experience any difficulties in your identification process of SBEs, especially regarding whether the SBE definition as specified in Commission Delegated Regulation (EU) 2023/2779 is clear enough or do you see room for improvement or need for an update (please explain/provide clear examples)?
It would be helpful, in our view, if the definition of SBEs were more closely linked to ESVG or NACE codes and to specific lists of shadow banking entities.
In our reporting, for example, we classified money market funds, hedge funds, factoring and leasing companies as shadow banking entities.
However, we subsequently received a rejection of the report from the supervisory authority.
We have classified the following ESVG codes as shadow banking entities:
- 1250E Financial leasing corporations
- 1250H Factoring entities
- 1270E Pawnshops engaged in lending
In addition, challenges arise in the identification of these two categories. Thery are defined very broadly.
Therefore, additional definitions or clearer guidance should be provided to ensure better orientation and classification. For example: NACE Code.
- 1250K Other specialised financial corporations
- 1250Z Other financial institutions, unclassified
We therefore request an improvement and update of the sector classifications as well as the ESVG and /or NACE codes.
The current definition leaves considerable room for interpretation, which consequently leads to negative feedback responses or rejection of the report.
A clearly defined list of NACE codes or ESVG codes is also required to ensure technically correct programming and reporting processing.
In this way, differing interpretations of shadow banking entities can be avoided and a rejection of the report can be prevented
A more detailed specification of SBE would be helpful for smaller banks as the identification of SBE still leaves room for interpretation and is very labor-intensive. Especially when there are not large exposures with SBEs the approach causes a lot of effort without a relevant output.
Q3: Do you encounter challenges in obtaining sufficient data on SBEs (e.g., leverage, liquidity profile, interconnectedness, portfolio quality) to apply the principal approach? If so, please describe the main obstacles and how they affect your ability to comply with the Guidelines.
We encounter difficulties in obtaining the required data because some of this information is not publicly available and we do not have direct access to it, for example in the case of money market funds.
For certain information, we must pay additional fees, for example to law firms or commercial databases that are not freely accessible and charge for providing such information.
Q6: Being part of the removed SBE definition, the previous threshold of 0.25% of the eligible capital for recognising exposures falling under the EBA/GL/2015/20 is deleted in the draft updated GL. Will there be any impact (costs, time required, etc.) for your institution? Please elaborate.
First question, why 0,25% of eligible capital instead of Tier 1?
The removal of the threshold may create disproportionate operational burden relative to the prudential benefit obtained from monitoring very small exposures.
In particular, the inclusion of immaterial exposures could increase operational complexity without materially improving risk sensitivity.
A proportionality-based de minimis threshold or simplified treatment for low-risk and low-materiality exposures could therefore be considered.
The aggregated amount of exposures to shadow banking entities should only be reported to the supervisory authority if it exceeds 0.25% of Tier 1 capital.
Where the aggregated amount remains below this threshold, no reporting requirement should apply.
Institutions shall be required to perform the calculation on an ongoing basis and to provide appropriate evidence thereof to the competent supervisory authority upon request.