Response to consultation on draft revised guidelines on methods for calculating contributions to deposit guarantee schemes

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Question 2: Do you have comments concerning the proposed allocation of responsibilities to the DGS, competent authority and designated authority in the Guidelines?

We note the EBA observation that not all failures of covered institutions automatically lead to the use of DGS funds while other forms of DGS interventions using DGS funds might be necessary to stabilise a failing institution. However, we also note that in arriving at its conclusion the EBA has not provided any insights to its assessment as to how, effectively and/or efficiently, such available interventions were utilised. We would therefore welcome greater clarity of definition of “DGS intervention” and, where possible, the promptness of utilising such intervention to protect covered deposits in accordance with Article 11 of the DGSD.

Question 3: Do you have any comments on changing the reference from the ‘annual’ calculation of contributions to the ‘periodic’ calculation of contributions and on the clarification to set the periodic target level in section 4.2 of the Guidelines?

We note and appreciate the intention of the EBA’s proposal to amend timing reference to ‘periodic’ calculation of contributions. However, it is unclear how the balance will be achieved between permitting the DGS to have the ability to move from calculating contributions annually to periodically (and thereby allow them to potentially seek several instalments over a period that may be within any year) with the EBA proposal that a DGS ‘should’ set the level of contributions as evenly as possible across time. We would welcome clear guidance for the DGSs on how they will achieve that balance if such a proposal is to advance.

Question 4: Do you have comments on the proposed approach to account for covered deposits held in beneficiary accounts or other deposits where there is uncertainty to the coverage, as set out in section 4.3 of the Guidelines?

The issues raised in this section of the CP are not arising as an issue for our member credit unions, however, we do agree that the proposed approach is prudent.

Question 6: Do you have comments on the definition or calculation of the core indicators?

The CP refers to the harmonisation of the liquidity coverage ratio (LCR) and net stable funding ratio (NSFR) are now applied throughout the EU. It should be noted that credit unions in Ireland are subject to very stringent liquidity requirements, therefore, EBA may wish to reconsider the proposed deletion of the indicator “liquidity ratio” as it continues to apply to credit unions (see additional comment in attached document).

Question 7: Do you have comments on the proposed changes to the minimum weights of core indicators and the maximum weight of any indicator, as set out in section 4.5 (ii) of the Guidelines?

While not all the core indicators are applicable to credit unions in Ireland, e.g. their assets are not risk weighted for compliance with required regulatory reserve ratio of 10% of total assets, (which results in them being required higher levels than other financial institutions), we have no objection to the proposed weightings.

Question 8: Do you have comments on the proposed changes to the formula to calculate minimum contributions, as set out in section 4.6 (i) the Guidelines?

The current may be flawed and overly complex, however, it is operationalised and would appear to be working. The CP states that “a very limited impact on the minimum contributions but would make calculations simpler”, we have no reason to challenge that but would ask that before a final determination is reached that the competent authority be asked to run the figures and demonstrate the view of the EBA to be accurate.

Question 9: Do you have comments on the proposed minimum thresholds for the IRS of some core indicators, as set out in section 4.5 (iii) of the Guidelines?

As stated in questions 8, some of the core indicators do not apply to credit unions on Ireland. We support the appropriateness of granting flexibility to the national authorities to decide how best to calibrate this indicator for their banking market. This should ensure greater recognition of the nature scale and complexity within the diverse range of institutions covered by the DGSs.

Question 10: Do you have comments on the proposed changes to the formula for translating the ARS into the ARW, as set out in section 4.5 (v) of the Guidelines?

Appreciating the desire to eliminate / reduce the need for constantly reviewing the calibration of the ARS to ensure consistency of contributions, we hold a concern that the use of the enhanced sliding scale formula will necessitate determination of lower and upper thresholds without any clarity of the impact of the degree of change that may be inherent on such a determination. This is particularly concerning for low-risk institutions as the impact of moving bucket carries a disproportionate impact.

Question 11: Do you have comments on the proposed regular review and recalibration, as set out in section 4.7 of the Guidelines?

The revised draft guidelines contained in sections 76 to 82 inclusive are supported by CUDA, we would suggest that consideration be given to reduce the review period of at least every five years.

Question 12: Do you have any further comments regarding the proposed revised Guidelines?

See attached document for further comments.

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Name of the organization

Credit Union Development Association (CUDA)