Response to consultation on draft technical standards on own funds - Part IV
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Moreover, we cannot comprehend why the distributions on voting instruments have to be low in proportion to comparable instruments. Unfortunately, the standard does not provide a reason for this. Due to the lack of voting instruments, this condition as well cannot be met by institutions organised under public law.
The payout ratio of recent years is not influenced directly and exclusively by multiple distributions. Rather, it is an indication of the institution's distribution policy. This is in particular true of the first years under the regime of the CRR. Under certain circumstances, it may be reasonable to limit distributions. Hence, in our opinion, the precondition stated in Art. 28 (3) CRR (no disproportionate outflow) is not directly connected with this.
Q7: Please provide data on the distributions as well as possible references to be used as benchmarks for the distributions on voting instruments issued by non-joint stock companies. How would you assess that distributions on voting instruments issued by non-joint stock companies are low? Can you suggest a methodology?
Unfortunately, we do not have appropriate data or methods. However, we urgently ask to (again) consult the industry as to any methods which may come into consideration.
Is the application of the different tests clear? How do you assess the approach retained for non-joint stock companies?
The regulatory content of the tests is basically clear. In our opinion, however, test 2 and the last three of the conditions named cannot be applied to institutions under public law. Usually, voting rights do not exist there, so that it is not possible to perform the requested proportionality assessment between voting and non-voting instruments. We, therefore, suggest to adjust the standard in this respect.Moreover, we cannot comprehend why the distributions on voting instruments have to be low in proportion to comparable instruments. Unfortunately, the standard does not provide a reason for this. Due to the lack of voting instruments, this condition as well cannot be met by institutions organised under public law.
How do you assess the applicability of the conditions in paragraph 2?
Paragraph 2 refers to the conditions for joint-stock companies which have been examined already at questions 1 and 2. Therefore, we cannot understand why reference to this paragraph is made again here.Is the chosen approach applicable to all instruments that may be issued by non-joint stock institutions?
We believe the paragraph is not appropriate, cf. also the replies to questions 3, 4 and 6.How do you assess the proposed levels of 30% for the payout ratio in paragraph 5(d) of Article 7b?
According to Art. 28 (3) CRR, multiple distributions may be made, provided the multiple distributions do not constitute a disproportionate drag on own funds. According to the reasons given regarding test 2, the 30% limit for the distributions of the most recent five years is to prevent a disproportionate outflow. We cannot see the connection.The payout ratio of recent years is not influenced directly and exclusively by multiple distributions. Rather, it is an indication of the institution's distribution policy. This is in particular true of the first years under the regime of the CRR. Under certain circumstances, it may be reasonable to limit distributions. Hence, in our opinion, the precondition stated in Art. 28 (3) CRR (no disproportionate outflow) is not directly connected with this.
Is the application of the different tests clear? How do you assess the approach retained for non-joint stock companies?
This question does not correlate with Q7 in the consultation paper. Hence, we will her state the answer to Q 7:Q7: Please provide data on the distributions as well as possible references to be used as benchmarks for the distributions on voting instruments issued by non-joint stock companies. How would you assess that distributions on voting instruments issued by non-joint stock companies are low? Can you suggest a methodology?
Unfortunately, we do not have appropriate data or methods. However, we urgently ask to (again) consult the industry as to any methods which may come into consideration.