Response to consultation on draft technical standards on own funds - Part IV
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Furthermore, we cannot understand, either, why the distributions on voting instruments, in relation to comparable instruments, must be low. Unfortunately, the standards provide no reasons in this respect. This condition cannot be met by certain institutions, such as those under public law, due to their lack of voting instruments.
The distribution ratio of recent years is not directly or exclusively affected by a dividend multiple. Rather, it represents the conduct of distribution of the institutions. This is especially true for the first years under the CRR regime. Under certain circumstances it may be useful to limit distributions. However, the condition mentioned in Article 28 (3) CRR (no disproportionate drag) is not directly related to this in our opinion.
Furthermore, the proposed benchmark does not harmonise with other requirements in the CRR/CRD IV, such as Article 141 CRD IV which regulates the restrictions on distributions when the combined buffer requirements are not met. We think that limits should only be determined when the institution is not in compliance with the requirements in CRR/CRD IV.
In general, we are not aware of any legal justifications in the CRR/CRD IV or in the RTS to propose a benchmark for a level for a payout ratio of 30% (for all CET1 instruments).
Question 7 should say, 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 corresponding data or methods available. Nevertheless, we would like to strongly ask to consult credit institutions (again) regarding potential methods which might be considered.
- Another formal remark related to the online consultation form: It cannot be filled out using Internet Explorer."
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 mainly clear. However, we would like to question the necessity of Test 1. In our opinion, Test 2, and the last three conditions mentioned, are not applicable to cer-tain institutions, such as institutions under public law like the German savings banks. In general, voting rights do not exist in these institutions, and thus, the required proportionality consideration between voting and non-voting instruments is not possible. Therefore, we would like to propose to adapt the standards accordingly.Furthermore, we cannot understand, either, why the distributions on voting instruments, in relation to comparable instruments, must be low. Unfortunately, the standards provide no reasons in this respect. This condition cannot be met by certain institutions, such as those under public law, due to their lack of voting instruments.
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 addressed in Ques-tions 1 and 2. Therefore, it is not clear to us why there is a reference to this paragraph again here.Is the chosen approach applicable to all instruments that may be issued by non-joint stock institutions?
No comments.How do you assess the proposed levels of 30% for the payout ratio in paragraph 5(d) of Article 7b?
According to Article 28 (3) CRR, paying a dividend multiple is possible if such a dividend multiple does not cause a disproportionate drag on own funds. As stated by the justifications for Test 2, the 30% limit for the distributions over the last five years should prevent the disproportionate drag. This correlation is not obvious for us.The distribution ratio of recent years is not directly or exclusively affected by a dividend multiple. Rather, it represents the conduct of distribution of the institutions. This is especially true for the first years under the CRR regime. Under certain circumstances it may be useful to limit distributions. However, the condition mentioned in Article 28 (3) CRR (no disproportionate drag) is not directly related to this in our opinion.
Furthermore, the proposed benchmark does not harmonise with other requirements in the CRR/CRD IV, such as Article 141 CRD IV which regulates the restrictions on distributions when the combined buffer requirements are not met. We think that limits should only be determined when the institution is not in compliance with the requirements in CRR/CRD IV.
In general, we are not aware of any legal justifications in the CRR/CRD IV or in the RTS to propose a benchmark for a level for a payout ratio of 30% (for all CET1 instruments).
Is the application of the different tests clear? How do you assess the approach retained for non-joint stock companies?
There seems to be a mistake in the online form, since Question 3 and 7 are identical.Question 7 should say, 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 corresponding data or methods available. Nevertheless, we would like to strongly ask to consult credit institutions (again) regarding potential methods which might be considered.
- Another formal remark related to the online consultation form: It cannot be filled out using Internet Explorer."