08 July 2014
The EBA publishes today an Opinion on the macroprudential tools laid down in the Capital Requirement Regulation (CRR) and Directive (CRDIV). The Opinion assesses whether the current rules are effective, efficient and transparent as well as the possible degrees of overlap across different macroprudential tools and the consistency of the EU framework with global standards. The Opinion also includes policy recommendations that the EU Commission should consider in its review of the macroprudential toolkit.
The different macroprudential tools have been assessed against four key objectives and the results of the analysis are summarized in a ‘traffic light' table. The following objectives have been considered in the report: (i) macroprudential policy should contribute to financial stability; (ii) it should protect the EU single market; (iii) the goal and purpose of each macroprudential rule should be clearly defined; (iv) and the measures should be properly disclosed.
The main macroprudential rules to be improved are the following: the framework for Other Systemically Important Institutions (O-SIIs), the Systemic Risk Buffer (SRB) and the setting of risk weights and loss given default (LGD) floors for exposures secured by mortgages on immovable property. For the O-SII framework, the EBA recommends increasing the current 2% cap on the O-SII capital buffer, subject to an impact assessment to determine the appropriate capital level as well as more harmonization in setting the buffer rate. For the SRB, the EBA recommends that the goal and scope of this measure are analysed, and guidelines are developed to clarify its use and activation. Finally, the EBA recommends that the rules related to the setting of LGD floors for exposures secured by mortgages on immovable property are aligned with the setting of risk weights for these exposures.
In addition, the EBA recommends that the different authorities involved in the deployment of macroprudential measures coordinate their actions and that the hierarchy in the activation of the different macroprudential instruments is clarified.
This Opinion was developed in accordance with Art 513 of the CRR, which calls for a review of EU macroprudential rules. The advice provided by the EBA will inform the European Commission, who will report to the European Parliament and the Council on these rules by the end of 2014, and where appropriate, submit a legislative proposal to the European Parliament and the Council.
Franca Rosa Congiu