Response to consultation on RTS on minimum requirement for own funds and eligible liabilities (MREL)
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We propose creating a specific peer group for Bausparkassen on account of the similarity of their business. In view of the past history of low losses arising in the case of Bausparkassen, a special group for Bausparkassen would make sense. In this respect, consideration should be given to the security mechanisms specific to the Bauspar system. For example, Bausparkassen set aside a technical security reserve (“Fonds zur bauspartechnischen Absicherung”) which is not classified as own funds, but serves to cover the risks and to maintain the business operations of the Bausparkassen.
RISKS AND SYSTEMIC RISKS
- Criterion 5 – Business model, funding model and risk profile
In this connection too, we would first like to emphasise the specific nature of the business model of the Bausparkassen, which would point to the need to provide for a peer group for Bausparkassen.
The draft standards provide in Article 6(1) that the resolution authority is informed by the competent supervisory authority of the outcomes of the supervisory review and evaluation process. On the basis of the knowledge gained, the resolution authority has to assess if possibly risks and vulnerabilities are adequately reflected in the capital requirements (paragraph 2). However, as a result of the supervisory review and evaluation process, a capital add-on may possibly already have been ordered by the supervisory authority, which will then be considered as a component of the loss absorption amount.
We therefore suggest clarification (to Article 6(2)) in line with the aim (see Criterion 1), ‘to avoid requiring the resolution authority … to act as a “shadow” supervisor’.
3. Should any additional benchmarks be used to assess the necessary degree of loss absorbency? If yes, how should these be defined and how should they be used in combination with the capital requirements benchmark? Should such benchmarks also allow for a decrease of the loss absorption amount compared to the institution’s capital requirements?
The loss absorption amount should be considerably lower for banks with a low-risk business model, in particular those which operate under special local supervision and local banking law, such as Bausparkassen.We propose creating a specific peer group for Bausparkassen on account of the similarity of their business. In view of the past history of low losses arising in the case of Bausparkassen, a special group for Bausparkassen would make sense. In this respect, consideration should be given to the security mechanisms specific to the Bauspar system. For example, Bausparkassen set aside a technical security reserve (“Fonds zur bauspartechnischen Absicherung”) which is not classified as own funds, but serves to cover the risks and to maintain the business operations of the Bausparkassen.
5. Is it appropriate to have a single peer group of G-SIIs, or should this be subdivided by the level of the G-SII capital buffer? Should the peer group approach be extended to Other Systemically Important Institutions (O-SIIs), at the option of resolution authorities? If yes, would the appropriate peer group be the group of O-SIIs established in the same jurisdiction? Should the peer group approach be further extended to other types of institution?
The peer group approach should be extended to Bausparkassen (cf. Q 2 and Q 3).RISKS AND SYSTEMIC RISKS
- Criterion 5 – Business model, funding model and risk profile
In this connection too, we would first like to emphasise the specific nature of the business model of the Bausparkassen, which would point to the need to provide for a peer group for Bausparkassen.
The draft standards provide in Article 6(1) that the resolution authority is informed by the competent supervisory authority of the outcomes of the supervisory review and evaluation process. On the basis of the knowledge gained, the resolution authority has to assess if possibly risks and vulnerabilities are adequately reflected in the capital requirements (paragraph 2). However, as a result of the supervisory review and evaluation process, a capital add-on may possibly already have been ordered by the supervisory authority, which will then be considered as a component of the loss absorption amount.
We therefore suggest clarification (to Article 6(2)) in line with the aim (see Criterion 1), ‘to avoid requiring the resolution authority … to act as a “shadow” supervisor’.
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EFBS position paper MREL_en_18 2 2015.pdf
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