Response to consultation on Guidelines on methods for calculating contributions to Deposit Guarantee Schemes (DGSs)

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Question 2: Do you consider the level of detail of these draft Guidelines to be appropriate?

No comments.

Question 3: Is the proposed formula for calculating contributions to DGS sufficiently clear and transparent?

Yes. Moreover, the given examples help understand the formula.

Question 4: Considering the need for sufficient risk differentiation and consistency across the EU, do you agree on the minimum risk interval (75%-150%) proposed in these Guidelines?

No comments.

Question 5: Do you agree with the core risk indicators proposed in these Guidelines? If not, please specify your reasons and suggest alternative indicators that can be applied to institutions in all Member States. Do you foresee any unintended consequences that could stem from the suggested indicators?

Generally speaking, ESBG agrees with most of the core risk indicators proposed in the Guidelines. However, we would like to add that the core risk indicators should be as similar as possible to the methods for calculating ex-ante contributions to resolution financing arrangements in order to facilitate the data collection for institutions. Besides, for institutions being supervised by the SSM, it would be convenient that risk indicators were consistent with the RAS (risk assessment) framework. In fact, some risk indicators are considered in both frameworks: for example, the leverage ratio, the Common Equity Tier 1 (CET1) ratio the Liquidity Coverage Ratio (LCR) and the Net Stable Funding Ratio (NSFR).

What has been said above implies that some other indicators are a bit more challenging to deal with: Particularly the non-performing loan (NPL) ratio, the return on assets (ROA) ratio and the unencumbered assets ratio. These ratios may be problematic in terms of content and definition.

 The disadvantage of the NPL ratio has to do with the fact that this ratio cannot be based on a single uniform definition, and consequently it may cause an unlevel playing field between Member States.
 Generally, there are doubts about the contents of the ROA ratio because this ratio is deemed to be rather inaccurate for the purpose of measuring the default risk.

Moreover, as mentioned above, ESBG welcomes the recognition of IPS as an indicator in the draft Guidelines. Nevertheless, the wording of paragraph 65 could lead to the conclusion that the extent to which a single member of an IPS could benefit from a reduced contribution to the DGS depends exclusively on the (quantitative) level of the IPS ex-ante funds. However, with reference to the requirements set in Art. 113(7) Capital Requirements Regulation (CRR) – which the competent authority has approved – qualitative requirements, such as early warning systems, quarterly reports, uniform risk assessment, legal obligation and the ability to grant support, funding measures (establishment of an ex-ante IPS-fund), homogeneous business profile and an annual consolidated/aggregated report are substantial characteristics that play a key role in the risk-mitigation of an IPS.

Accordingly, the existence of an IPS-fund is only one of several characteristics. ESBG therefore asks the EBA to appropriately recognise such qualitative measures in the final Guidelines.

Question 6: Do you agree with the option to use either capital coverage ratio or Common Equity Tier 1 ratio as a measure of capital? Would you favour one of these indicators rather than the other, and why?

ESBG would prefer the CET1 ratio as a measure of capital for two reasons: firstly for the sake of coherence with the ex-ante contributions to resolution financing arrangements (Commission Delegated Regulation (EU) 2015/63) and secondly because of the ratio’s good comparability across banking institutions.

Question 7: Are there any particular types of institutions for which the core risk indicators specified in these Guidelines are not available due to the legal characteristics or supervisory regime of these institutions? Please describe the reasons why these core indicators are not available.

No comments.

Question 8: Do you think that more guidance, or specific thresholds, should be provided in these Guidelines with regard to calibration of buckets for risk indicators, or minimum and maximum values for a sliding scale approach?

No comments.

Question 9: Do you agree with our analysis of the impact of the proposals in this Consultation Paper? If not, can you provide any evidence or data that would explain why you disagree or might further inform our analysis of the likely impacts of the proposals?

No comments.

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