Response to consultation on Report on the appropriate target level basis for resolution financing arrangements under BRRD
Go back
Moreover, any change in the reference point should be accompanied by an assessment of the impact it would have on the level of contribution for each Member State. The current calculation methodology of the contributions is the result of negotiations between the parties concerned. The impact of any change to this methodology should be duly assessed.
Finally we suggest that:
- In option 1 (page 23), the link between RF and DGS should have a better score at least “++” least) and the correlation should receive a “+” ;
- In option 2, the last criteria on page 25 should reveive “---“ because estimating funding needs on the basis of both bailinable and not bailinable liabilities is a nonsense.
Moreover, regarding the Single Resolution Fund (SRF), a separate review of that basis is provided for under the SRM regulation, but only by 31 December 2018. Having different rules between BRRD and SRM does not seem appropriate.
From an accountancy perspective there are several differences between local GAAPs in UE, that could lead to major discrepancies on the way to calculate total liabilities and institutions at solo level will be particularly impacted due to taking account of intragroup exposures.
As a consequence, the FBF strongly rejects the three recommended options.
Question 1: Do you think the report is missing any crucial criteria or arguments in favour or against a particular option?
The report does not take sufficiently into account the burden that would represent any change in the target level for the resolution authorities and the institutions. This drawback is mentioned by the EBA but not assessed (“The report does not, however, attempt to measure these costs and their impact on each Member State”). As the building-up phases of the resolution funds have already started, this point is however an essential criterion that should be taken into account in the analysis.Moreover, any change in the reference point should be accompanied by an assessment of the impact it would have on the level of contribution for each Member State. The current calculation methodology of the contributions is the result of negotiations between the parties concerned. The impact of any change to this methodology should be duly assessed.
Finally we suggest that:
- In option 1 (page 23), the link between RF and DGS should have a better score at least “++” least) and the correlation should receive a “+” ;
- In option 2, the last criteria on page 25 should reveive “---“ because estimating funding needs on the basis of both bailinable and not bailinable liabilities is a nonsense.
Question 2: Do you have a preference for one of the following recommended options?: (a) total liabilities (including own funds), (b) total liabilities excluding own funds, (c) total liabilities excluding own funds less covered deposits.
The FBF strongly recommends not to change the reference point. Indeed, and as demonstrated in the report, the current reference point (covered deposits) is the most suitable operationally (best option regarding “dynamic and smoothness of contribution”, “practical consideration” and “simplicity and transparency”). “Covered deposits” as the reference point also allows to have a common basis for the target levels of the resolution financing arrangement and the DGS funds, which makes it easier to raise the optimal level of those funds.Moreover, regarding the Single Resolution Fund (SRF), a separate review of that basis is provided for under the SRM regulation, but only by 31 December 2018. Having different rules between BRRD and SRM does not seem appropriate.
From an accountancy perspective there are several differences between local GAAPs in UE, that could lead to major discrepancies on the way to calculate total liabilities and institutions at solo level will be particularly impacted due to taking account of intragroup exposures.
As a consequence, the FBF strongly rejects the three recommended options.
Question 3: Is there any other option which would be preferable to those in the recommendation? Please provide the rationale supporting your view.
The FBF believes that the best option is to keep the current reference point (covered deposits). As stated in the report, the overall level of the resolution financing arrangements is expected to remain constant even if any change to the basis would occur. The consequences and possible benefits arising from changing the reference point would thus be limited. Changing the reference point would be of very limited value and relevance, but would inevitably lead to confusion.Upload files
20160830_EBA_CP_201608_FBF_response_FRU.pdf
(499.63 KB)