Opinion

CEBS publishes its second advice on options and national discretions

Date: 10/06/2009

The Committee of European Banking Supervisors (CEBS) today publishes its second advice on options and national discretions.

Following CEBS's advice on the reduction of options and national discretions in the Capital Requirements Directive published in October 2008, the European Commission requested further technical advice on eight national discretions and on an additional group of national discretions relating to real estate, ‘where more granularity, criteria or impacts is needed, should those options be removed or transformed into a general rule'.

CEBS regrets that the very short time available to develop its advice was not sufficient to allow for public consultation and to conduct an impact assessment on its proposals. However, industry input was requested on the national discretions on the recognition of other unfunded credit protection for dilution risk, as these discretions were highlighted as being of special interest for some parts of the industry in the first CEBS's advice.

CEBS presents its analysis on each of the national discretions and proposes in particular:
 
  • to include additional criteria in the respective provisions in the Capital Requirements Directive on the national discretions on the treatment of high-risk items and on the recognition of other physical collateral;
  • to keep the national discretions on the recognition of other unfunded credit protection for dilution risk and on the recognition of receivables as collateral; and 
  • that further work should be conducted on the remaining discretions for which further technical advice was sought (i.e. on the adequate percentages to calculate potential future credit exposures, on guidance to harmonise the treatment of entities as ‘public sector entities', on the appropriate treatment of covered bonds, on prudence of the treatment of real estate as collateral and on guidance to harmonise the treatment of eligible ‘short-term exposures').