CEBS Publishes an Analytical Report on Prudential Filters

CEBS has published today the findings of an analysis it has carried out with regard to prudential filters.
In December 2004 CEBS issued its guidelines on the use of prudential filters for regulatory capital. The objective of these prudential filters is to maintain the definition and quality of regulatory capital for institutions using IFRS for prudential reporting. The analytical report issued today aims to assess CEBS' members compliance with these guidelines and to present their impact in quantitative terms on regulatory own funds. It also provides a basis for discussion on the possible scope for further convergence of these filters.

The initiative has to be seen as a follow-up to an earlier, internal exercise CEBS carried out shortly after the publication of the guidelines and to the IAS impact assessment study, the results of which were published in February 2006.
The analytical report shows that the implementation of the prudential filters has improved over time and that a very high level of compliance with the CEBS guidelines has been achieved amongst members.

Notwithstanding this very high level of compliance, the flexibility provided in the guidelines has led to some diversity among countries, notably regarding the treatment of unrealised gains. The treatment of these gains together with national adjustments to pension schemes, have been identified as the areas where there are, at present, the most notable differences and which may offer the greatest scope for further convergence.

As shown in the quantitative analysis these areas also represent the biggest adjustments in quantitative terms, both at aggregate level and in most cases also at national level.

Based on these findings CEBS has concluded that it will aim at further convergence on the treatment of unrealised gains within the context and timeframe of the discussion on the redefinition of regulatory capital. CEBS will also continue to assess the need and the economic appropriateness of harmonised adjustments to regulatory figures related to IAS 19.
To ensure that its conclusions are in line with the views of the banking community CEBS will be present and discuss the report and its conclusions at a public hearing scheduled for 16 October.