EBA issues Opinion on measures to address macroprudential risk

The European Banking Authority (EBA) published today an Opinion following the notification by the French High Council for Financial Stability (HCSF) of its intention to tighten the large-exposure limits applicable to large and highly indebted non-financial corporations (NFCs) resident in France or groups of connected NFCs assessed to be highly indebted and based in France. Based on the evidence submitted, the EBA does not object to the adoption of the proposed measure, which the HCSF intends to apply only to global or other systemically important institutions (G-SIIs and O-SIIs) with the aim of accounting for changes in the intensity of macroprudential/systemic risk that could pose a threat to financial stability in France.

 

With the application of the proposed measure, French systemically important institutions shall not incur an exposure exceeding 5 % of their eligible capital (versus the prescribed large exposures limit of 25%) for NFCs or groups of connected NFCs, which are assessed to be highly indebted. This low limit will act as a backstop to safeguard these institutions from excessive risk-taking and prevent the build-up of future vulnerabilities.

 

In its Opinion, addressed to the Council, the European Commission and the French Authorities, the EBA acknowledges that the objective of limiting indebtedness levels of large and already indebted French NFCs is appropriate with a view to promoting financial stability and preventing future systemic shocks to the French and EU economies. 

 

In light of this conclusion, the EBA does not object to the deployment, by the HCSF, of macroprudential measures. 

The present notification from the HCSF is the first case in which a designated authority has made use of Article 458 of the CRR to set stricter large-exposure limits.