Response to consultation on draft Guidelines on retail deposits subject to different outflows for purposes of liquidity reporting
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As stated in our cover letter, in order to avoid ‘cliff effects’ we would prefer higher threshold amounts to be set. We would suggest >200k for high value deposits and >1m for very high value deposits. This is consistent with the treatment by the BCBS and therefore already reflected within banks’ reporting systems.
Once again we would emphasise that we have not observed any behaviour of clients with higher deposits to indicate that they are less stable than clients with deposits covered by the DGS.
Furthermore, the tool would be operationally difficult to implement as the selection of peer rates is highly subjective, arbitrary and might change over time. Most banks offer unique features to attract customers, which makes a direct comparison even more difficult to achieve. Moreover, a significant population of products have a combination of various components.
In addition we think it is difficult to define an appropriate peer group. For example, comparing globally operating banks does not factor in circumstances in the respective home country such as the economy, house banking relationship or individual/ voluntary DGS. Defining a peer, even within the respective home country, may be challenging given that business models might differ significantly.
In this context, it is also not clear how subsidiaries and branches of global banks would be treated. For example, for a bank headquartered in the Eurozone with an entity in UK, why would a GBP deposit be considered non-resident and therefore riskier than a deposit placed in EUR? In our view this is counter-intuitive.
Do you agree with this criterion for identifying a transactional account?
We agree with the definition of transactional accounts as stated within the consultation. However, we do not believe this should be limited to just those that receive a salary paid into them, particularly as the retail deposit category also captures SME depositors, some of whom will be paying out salaries. All regular payment activity should therefore be taken into account e.g. salaries, rents, direct debits, and regular business payments.Regarding established relationships, how would you assess that the contractual relationship with the institution and the minimum number of products are active in the sense of being actively managed?
Each bank might constitute an ‘established relationship’ differently (e.g. long standing savings accounts, insurance products, etc.) We therefore feel it should be left to each institution to determine, based on its own business model and internal risk management, what is considered stable or “established”. We would expect the flexibility in the guidelines to allow for this.What is your view concerning the threshold proposed for high and very high value deposits? Please give your reasons.
According to article 421(2) all amounts which are not covered by the Deposit Guarantee Scheme are already factored in with a higher outflow rate. Therefore an additional volume-based surcharge should not apply.As stated in our cover letter, in order to avoid ‘cliff effects’ we would prefer higher threshold amounts to be set. We would suggest >200k for high value deposits and >1m for very high value deposits. This is consistent with the treatment by the BCBS and therefore already reflected within banks’ reporting systems.
Once again we would emphasise that we have not observed any behaviour of clients with higher deposits to indicate that they are less stable than clients with deposits covered by the DGS.
Do you agree with the criterion for considering a deposit to be rate driven?
Whilst in principle we agree with the criteria to decide which product can be considered as rate-driven, we believe in practise it is not straight-forward to identify these rate-driven deposits. This is particularly true in a low interest rate environment where a few basis points would trigger a change in the regulatory treatment if a product was classified as rate-driven with potentially higher outflow rates. We respectfully ask that the EBA could provide some guidance on what is meant by ‘significantly’ in this context.Furthermore, the tool would be operationally difficult to implement as the selection of peer rates is highly subjective, arbitrary and might change over time. Most banks offer unique features to attract customers, which makes a direct comparison even more difficult to achieve. Moreover, a significant population of products have a combination of various components.
In addition we think it is difficult to define an appropriate peer group. For example, comparing globally operating banks does not factor in circumstances in the respective home country such as the economy, house banking relationship or individual/ voluntary DGS. Defining a peer, even within the respective home country, may be challenging given that business models might differ significantly.
Do you agree with the criteria to identify this risk factor?
To a certain extent we would agree that non-resident deposits might be less “sticky” than resident deposits. However this risk factor seems more appropriate for banks operating in only one jurisdiction. Global banks are set up to provide services to clients on a cross-jurisdictional basis. It is not logical to conclude that a German client, who banks with DB in Germany, and holds accounts with DB in other jurisdictions, is a higher risk than a client with accounts only in Germany. There is no evidence to substantiate this risk factor.In this context, it is also not clear how subsidiaries and branches of global banks would be treated. For example, for a bank headquartered in the Eurozone with an entity in UK, why would a GBP deposit be considered non-resident and therefore riskier than a deposit placed in EUR? In our view this is counter-intuitive.