CEBS started a public consultation on a number of aspects of then large exposures regime as part of developing its response to the Commission's Second Call for Advice. The consultation paper sets out CEBS' preliminary views and includes a summary of CEBS' key findings from Part 1 of its Advice to allow respondents to have a complete understanding of the overall review of the large exposures rules.
The consultation paper includes some discussion of a high level market failure/regulatory failure analysis for the issues under consideration. In addition, Annex 1 outlines CEBS' high level impact assessment of the policy options set out in its Part 1 Advice to the European Commission.
CEBS considers a key issue to clarify is the concept of connected clients and it proposes a clear distinction between 'connected clients' and 'connected parties'. It also provides its views on the treatment of credit risk mitigation techniques.
CEBS discusses the merits of different options for the treatment of intra-group exposures under the large exposures regime considering in its analysis the potential costs of imposing intra-group exposure limits as well as the benefits. It also discusses alternative proposals for the treatment of interbank exposures based on a differentiated impact analysis of applying the proposed regime to all unsecured interbank exposures.
The paper also included other issues like the scope of application of the large exposure rules; possible recognition of good credit risk management; the feasibility of a 'one size fits all' approach; the appropriateness of the existing rules for the trading book; the extent to which supervisory reporting could be more closely aligned to that of the institutions; possible supervisory reactions to the breach of limits; and possible exemptions from the large exposures regime.
CEBS will have to report back to the Commission by the end of March 2008. A public hearing will be held on 15 January 2008.
Deadline for comments is 22 February 2008.
Press release
Consultation paper
© Graham Bishop
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