Response to consultation on Guidelines on stress tests for deposit guarantee schemes
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The organisation of tests regarding personnel is depending on the size of the DGS as well as on other specific issues, thus only the goals and a certain time-frame should be dealt with by the EBA guidelines: The rest should to be evaluated and cleared by every DGS with its respective local authority. Depending on the results of the first tests the local authority may instruct external audits of (individual or all) further tests.
The funding tests don’t seem to be appropriate yet: As far as alternative funding methods are not set legally we see no additional value to make arrangements for a hypothetical payout case. An unsecured facility granted to a DGS is highly unrealistic, given the increasingly complex regulatory framework. The limited cross border test seems to be fine.
1) What is the best way to ensure the objectivity of the stress tests assumptions and process? Do you support systematically requiring separation between the steering staff and stress test participants? If not, do you support concrete alternatives, for example external audit? What additional details could be laid down with regard to external intervention?
The objectivity of the stress test assumptions and process cannot be ensured by separation: The objectivity has to be ensured in the planning phase by the DGS-Board, who is responsible for all matters of the tests as well as for all other matters regarding the DGS. How the test participants are controlled and supervised and how the results are evaluated are genuine tasks of the DGS Board, who is responsible for the implementing of changes within the DGS as a result of the tests, either.The organisation of tests regarding personnel is depending on the size of the DGS as well as on other specific issues, thus only the goals and a certain time-frame should be dealt with by the EBA guidelines: The rest should to be evaluated and cleared by every DGS with its respective local authority. Depending on the results of the first tests the local authority may instruct external audits of (individual or all) further tests.
2) Do you agree with the approach proposed, which draws on the methodology developed by the Commission for assessing Member State requests under Article 10(6) of the DGSD?
In general we agree. Nevertheless, we see a need to make the rules not too formal as to enable the flexibility and proportionality needed to react to local needs and (future) developments.3) Is it sufficient to test an institution’s SCV files on the basis of a sample, or should all SCV files tested? Which process should a DGS follow in order to define a sample of the SCV file to be tested, and to consider that the sample tested is sufficiently representative of the institution’s full SCV file?
The test of a sample should be sufficient. The definition of a sample should follow the same rules as the definition of a sample done by an auditor.4) It is difficult to forecast the financial impact of covering temporary high balances protected under Article 6(2) of the DGSD, or beneficiary accounts (protected under Article 7(3) of the DGSD. The ability to perform such assessment depends on the circumstances, for example the existence of certain kind of deposits which can be earmarked. Nevertheless do you agree on the need to undertake, at least at a very general level and in a qualitative way, an assessment of the arrangements in place in order to identify THBs and deposits on beneficiary accounts upon failure?
As THBs depend on individual singular circumstances unknown to banks, and on customer request, the actual possible impact of THB can’t be predicted at all. Thus we do not see any possible way to undertake any test in this area.5) Do you agree with the list of priorities above and the 2019 time horizon? Do you agree that as a matter of priority operational tests should focus on payout? Do you believe minimum size criteria should be set in this regard, and which absolute or relative thresholds would you suggest? Do you agree with the calibration of the funding test, and if not what concrete suggestion would you make? Is the limited cross border test sufficient, or should the requirement be strengthened and prescribe, for example fully-fledged cross-border simulation, in light of the Guidelines on Cooperation Agreements currently under development?
Whereas the list of priorities seems to be ambitious but contains relevant tasks, the 2019 time frame is too short: Not having international rules for some questions (e.g. cross-border framework) in place yet, it does not seem possible to make all the testing efforts in a qualitative manner in time (that means, including re-testing, if some tasks have not been solved in the first test). Whereas the focus on payout scenario seems to be fine, the tests on resolution tasks do not seem possible: The resolution authority has to be in the driving seat. How should DGSs plan/make a test?The funding tests don’t seem to be appropriate yet: As far as alternative funding methods are not set legally we see no additional value to make arrangements for a hypothetical payout case. An unsecured facility granted to a DGS is highly unrealistic, given the increasingly complex regulatory framework. The limited cross border test seems to be fine.