28 October 2004
CEBS will soon start a consultation process to achieve a common solvency ratio reporting framework for credit institutions and investment firms under the future EU capital requirements regime. This framework should reduce the reporting burden on credit institutions and investment firms, improve the co-operation between supervisors and help move towards a "level playing field" across the EU.
In its meeting held in London on 28 October 2004 the Committee noted the good progress achieved already by its expert group and agreed to undertake a full consultation with market participants early next year.
Implementation of new international accounting standards and the new Capital Requirements Directive provide the EU with a unique opportunity to harmonise the data framework, as all authorities will need to develop new reporting requirements. CEBS is keen to seize the opportunity to promote greater convergence in this area, noting also that the industry has raised this as a key priority.
WORK CONTINUES ON NATIONAL DISCRETIONS
AND PRUDENTIAL FILTERS
The proposed Capital Requirements Directive contains a large number of regulatory options which may be applied on the basis of national circumstances. CEBS has identified more than 140 options. Forty of these options were in fact granted to supervised institutions in order to allow them sufficient flexibility in implementation of new approaches. CEBS has conducted an intense analysis of how the remaining options are likely to be exercised in Member States and how the number could be reduced to enhance the level playing field, while at the same time providing some flexibility to accommodate the needs of the local markets.
CEBS' analysis has been sent to the Council Working Group and the suggesting which discretions could be removed from the proposed directive. CEBS contribution is published on its website.
CEBS continues its work in finding ways to implement the results into the Directive text also at a later stage, in particular when the Directive will already have been adopted by the Council and the European Parliament. CEBS will also continue its work on supervisory convergence in the use of national discretions, thus leading in due course to possibilities for their further reduction.
CEBS Consultative Panel has agreed to support CEBS in finding new ways to reduce the number of different options.
From January 1st, 2005 European listed companies, at the minimum, will have to publish consolidated financial statements based on the new IFRS rules. This will mean a significant move from current accounting practices. At the same time, as accounting numbers remain the basis for the computation of prudential ratios, this change will have an impact on the content of own funds and therefore on the solvency ratios to be reported by credit institutions and investment firms.
CEBS suggests the adoption of some prudential adjustments (prudential filters) to institutions applying IFRS in order to avoid changes which are inappropriate for prudential purposes.
CEBS has provided a first input to the Commission on this issue as prudential filters might need to be incorporated in the new Capital Requirements Directive.