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AECM issues position paper on CRD IV - Nov 2011

Actualités - 09/11/2011

Le document n'est pas accessible en français.

AECM issued its position paper regarding the EU implementation of the Basel III accord via the Capital Requirements Directive IV. Although they are not credit institutions, as financial intermediaries, AECM's member organizations are in general subject to prudential supervision at Member State level, reason for which the CRD is applied to them.

The main concern regards eligible credit risk mitigation techniques and particularly the risk mitigating role that is recognized by the current CRD framework for guarantees issued by guarantee institutions. This positive impact of guarantees in terms of risk mitigation and capital requirements should be maintained under the new version of the CRD. While this is in principle mentioned under Article 210, paragraph 2 of the Regulation proposal, there is need for clarification in other parts of the Directive to ensure that national supervisors will maintain this treatment.

There also should be a clarification in Article 209, para. 1.a. in the sense that public counterguarantees covers all of the risks covered by the primary guarantee and not all the entire risk of the underlying loan. A similar amendment is necessary for Article 210, para. 2.b. In addition, it should also be clarified that guarantees, that are counterguaranteed by public authorities, should be recognized without any further restrictions.

AECM also calls on the European institutions to take mutualised guarantee funds into consideration for Tier one own funds definitions, a specificity of the guarantee sector. Furthermore, the provisions of the sections of liquidity requirements and countercyclical buffers to not have a relevance for guarantee societies, which are limited to issuing guarantees and are not deposit taking institutions.

Finally, there is a need to introduce a provision into the Regulation that would taken into consideration the mitigating effect of counterguarantees provided by mutual guarantee societies that are subject to Prudential supervision.  To date, counterguarantees provided via this type of entities are not recognized as a bank credit risk mitigating factor. This in our view is not coherent with the fact that first level guarantees and co-guarantees provided by the same private sector are recognized as risk mitigating. Therefore, in order to improve the efficiency of the guarantee sector and use its available financial resources in the most rational manner, it would seem logical to treat counterguarantees issued by supervised private sector entities in the same manner as their first level guarantees and co-guarantees.

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