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ALLIED IRISH BANKS DUBLIN

Yes do agree with a threshold for applying the simplified method – however the figure of €15bn for combined off-on balance looks quite low if how the threshold is calculated – it seems clear for derivatives that fair value is the replacement cost of mark to market which is fine but then this is added to the fair value of AFS assets – is this at the market value level or at the RWA level – if at the fair value level it would imply most banks would not qualify – given that section 15 of the CP document says’ Most Institutions will be using the simplified approach’ can it be confirmed how balance sheet items are treated for the €15bn threshold
Just getting the external auditors agreement
Yes in theory but the compliance time costs are likely to be quite high for the core approach and there are likely to be multiple approaches by banks to the calculations – so even for the same assets could be bank A having a different AVA than Bank B
The core approach is quite complicated, data intensive and subject to a lot of potential management judgements. Standard financial and risk reporting do not naturally produce information in the form envisaged by the QIS and will require almost 1005 manual intervention

A simpler, if somewhat cruder approach would be along the lines of the simplified approach with a bigger threshold applied. This would also reduce the management judgement element and allow better comparability across institutions
The use of article 34 to apply to non-trading assets i.e. banking book AFS assets is a new development which certainly for sovereigns is inconsistent with the proposed sovereign filter for AFS reserve (up to 1 Jan 2017) . The AVA approach where there are concentration risks in the peripheral banks on domestic sovereigns is likely to result in a not immaterial capital write-down and reduce demand for peripheral sovereign debt
STEPHEN O'REILLY OR SIMON MURRAY (simon.p.murray@aib.ie)
0035316417654