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

Go back

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?

BNY Mellon supports risk-based contributions. Banks have different business models and different risk profiles, which contribute to diversification and specialisation in the financial services sector to the benefit of customers and shareholders. Regulations should be tailored accordingly to these risks. In this regard, we believe that the risk indicators should factor risk-sensitive measures into the indicators. As an example, the risk-weighted assets to total assets ratio is an appropriate indicator, as it explicitly factors in the risk-weighting of assets into the ratio.

In regard to the capital indicators, BNY Mellon’s view is that the CET1 ratio or capital coverage ratio should be preferred, rather than the leverage ratio, because the leverage ratio is not, and is not intended to be, risk-sensitive.

As indicated in the Consultation Paper, capital indicators reflect the level of loss absorbing capacity of the institution. Higher amounts of capital held by the institution indicate that it has better ability to absorb losses internally, thus decreasing its likelihood of failure.

Given the intention of DGSD to have risk-based contributions, it is more appropriate in our view for the risk-weighting of assets to be taken into account for the purposes of the capital indicator.

If the EBA believes that the leverage ratio should still feature as a risk indicator (i.e., to have more than one capital indicator), we would recommend that the minimum weight of the leverage ratio is reduced, and the minimum weight of the CET1 ratio or capital coverage ratio is increased accordingly, so that more emphasis is given to the risk-weighted assets in the context of the capital indicator.

Upload files

Name of organisation

BNY Mellon