Response to consultation on draft revised guidelines on methods for calculating contributions to deposit guarantee schemes
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Answer Q1: FITD agrees with the proposed changes.
But, if the banks cannot identify beneficiaries in the ongoing, the approach to assume the whole amount of the beneficiary account as covered cannot be agreed and it should be revised and further discussed, while waiting for any possible clarification in the currently ongoing revision of DGSD.
FITD is of the opinion that the proposed approach poses a number of issues: i) it is not clear how banks could provide information on the covered-uncovered portions of the beneficiary accounts if they are not required to disclose such data by any regulation; ii) should they be able to send such data to the DGS, it is not sure whether the account holders (e.g. trust companies, other intermediaries) are allowed by applicable laws to disclose their clients’ data to the bank; iii) requiring to take into account all funds in the beneficiary accounts could significantly overestimate the amount of covered deposits and consequently that of the contributions due by member banks to get to the 0,8% target level; iv) it is not certain that the increase in contributions due to the inclusion of beneficiary accounts actually refers to deposits which in the event of liquidation would really be eligible (i.e. when beneficiaries-depositors cannot be eventually identified).
Before adopting this approach it would be also crucial to estimate the possible dimension of the beneficiary accounts phenomenon.
Only if data on beneficiaries are available to the bank (in the ongoing), then the relevant deposit amounts may be added to the deposit base for calculating contributions and the depositors-beneficiaries duly recorded in the SCV files of the bank. Only the account holder has the capacity to provide the needed identification for these purposes.
Where the banks cannot provide the needed information, flexibility should be allowed to DGSs on how to treat beneficiary accounts, not providing for a general rule to add the whole amount of the beneficiary accounts as in the proposed approach.
Finally, about the treatment of other deposits where there is uncertainty to the coverage: in the opinion of FITD, beside the other issues - already mentioned above - in some cases it would not be possible to even know the amount of the deposits in the ongoing; for instance, this is the case of THBs, which be ascertained and treated only in a liquidation scenario, by the liquidator.
The suggestion to consider consolidated indicators in the calculation is also motivate by: i) best practices of rating agencies, that consider the riskiness of the group to which a company belongs, by means of specific adjustment processes (notching up/down); ii) the regulatory nature, where supervision of banks is at individual and consolidated level because the economic and financial situation on a solo basis is heavily affected by infra group exposures; iii) the EBA guidelines combine consolidated and individual indicators in case member banks have received the waiver on liquidity ratios; iv) a marked based consideration is that a risky bank in a safe group would be assessed differently if it were in a risky banking group.
General comments
Question 1: Do you have any comments on the proposed changes to the addressees or definitions in the Guidelines?Answer Q1: FITD agrees with the proposed changes.
Question 2: Do you have comments concerning the proposed allocation of responsibilities to the DGS, competent authority and designated authority in the Guidelines?
FITD agrees with the proposed changes.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?
FITD agrees with the proposed changes.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?
In principle, FITD agrees that contributions should be paid on all covered deposits, including beneficiaries in beneficiary accounts.But, if the banks cannot identify beneficiaries in the ongoing, the approach to assume the whole amount of the beneficiary account as covered cannot be agreed and it should be revised and further discussed, while waiting for any possible clarification in the currently ongoing revision of DGSD.
FITD is of the opinion that the proposed approach poses a number of issues: i) it is not clear how banks could provide information on the covered-uncovered portions of the beneficiary accounts if they are not required to disclose such data by any regulation; ii) should they be able to send such data to the DGS, it is not sure whether the account holders (e.g. trust companies, other intermediaries) are allowed by applicable laws to disclose their clients’ data to the bank; iii) requiring to take into account all funds in the beneficiary accounts could significantly overestimate the amount of covered deposits and consequently that of the contributions due by member banks to get to the 0,8% target level; iv) it is not certain that the increase in contributions due to the inclusion of beneficiary accounts actually refers to deposits which in the event of liquidation would really be eligible (i.e. when beneficiaries-depositors cannot be eventually identified).
Before adopting this approach it would be also crucial to estimate the possible dimension of the beneficiary accounts phenomenon.
Only if data on beneficiaries are available to the bank (in the ongoing), then the relevant deposit amounts may be added to the deposit base for calculating contributions and the depositors-beneficiaries duly recorded in the SCV files of the bank. Only the account holder has the capacity to provide the needed identification for these purposes.
Where the banks cannot provide the needed information, flexibility should be allowed to DGSs on how to treat beneficiary accounts, not providing for a general rule to add the whole amount of the beneficiary accounts as in the proposed approach.
Finally, about the treatment of other deposits where there is uncertainty to the coverage: in the opinion of FITD, beside the other issues - already mentioned above - in some cases it would not be possible to even know the amount of the deposits in the ongoing; for instance, this is the case of THBs, which be ascertained and treated only in a liquidation scenario, by the liquidator.
Question 5: Do you have comments on the proposed changes to the core indicators and additional indicators as set out in section 4.5 (i)?
FITD agrees with the proposed changes.Question 6: Do you have comments on the definition or calculation of the core indicators?
NPL ratio should be computed net of provisions in case a coverage indicator (as additional ratio) is not used in the risk model.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?
FITD agrees with the proposed changes.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?
FITD agrees with the proposed changes.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?
FITD agrees with the proposed changes.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?
FITD agrees with the proposed changes.Question 11: Do you have comments on the proposed regular review and recalibration, as set out in section 4.7 of the Guidelines?
FITD agrees with the proposed changes.Question 12: Do you have any further comments regarding the proposed revised Guidelines?
Without prejudice to the fact that the riskiness must be calculated on an individual basis, consolidated data should also be considered for banks belonging to banking groups in order to correct individual risk, increasing or decreasing the overall riskiness of the bank.The suggestion to consider consolidated indicators in the calculation is also motivate by: i) best practices of rating agencies, that consider the riskiness of the group to which a company belongs, by means of specific adjustment processes (notching up/down); ii) the regulatory nature, where supervision of banks is at individual and consolidated level because the economic and financial situation on a solo basis is heavily affected by infra group exposures; iii) the EBA guidelines combine consolidated and individual indicators in case member banks have received the waiver on liquidity ratios; iv) a marked based consideration is that a risky bank in a safe group would be assessed differently if it were in a risky banking group.