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Response to consultation Paper on Draft RTS on classes of instruments that adequately reflect the credit quality of the investment firm as a going concern and possible alternative arrangements that are appropriate to be used the purposes of variable remuneration
Go backQuestion 1: Are the provisions within Article 1-5 sufficiently clear?
Non-ApplicableQuestion 2: Is it appropriate to continue to require the same conditions for the use of AT1, Tier 2 and Other Instruments as under the current legislative framework?
EFET fully supports the need for a dedicated review of the capital requirements for specialized commodity and emission allowance dealers as provided for in Article 60 (1) (g) of the IFR. So far, such a dedicated review never took place neither under the CRR nor during the genesis of the IFR. For this reason the current IFR contains still substantial short comings, as the K-Factor regime of Part Three of the IFR (applicable after the transitional regime) does not sufficiently address the specifics of the business of specialized commodity and emission allowance dealers. For example, the capital requirements for credit risk are disproportionate for specialized commodity and emission allowance dealers because there is no intragroup hedging exemption for Credit & related Concentration Risk for industrial groups (only for financial firms) and the revised calculation formula (K-TCD = α * Exposure Value * Risk Factor * CVA) leads to substantially increased capital requirements. Therefore, we urge that the EU Commission and EBA will perform such a review in future with the aim to create an appropriate and proportionate prudential regime for specialized commodity and emission allowance dealers. Question 3: Are the provisions in Article 6 appropriate and sufficiently clear? Where respondents are of the view that the draft RTS should define a set of specific arrangements rather than providing conditions that such arrangements should meet, comments are most helpful, when they clearly describe the alternative arrangements that investment firms desire to use to ensure that variable remuneration is aligned with the long-term interest of the investment firm and its risk profile.
Non-ApplicableQuestion 4: Do respondents agree with the findings of the impact assessment? Where respondents have identified additional costs or burdens created by the draft RTS, it would be most helpful if respondents could specify and, where possible, quantify separately the costs for the implementation of the provision and the costs for the ongoing application of the provisions.
Non-ApplicableName of the organization
EFET - European Federation of Energy Traders
