13 February 2015

EBF response to EBA consultation on "Draft Guidelines on methods for calculating contributions to Deposit Guarantee Schemes"

The EBF believes that the EBA Guidelines on methods for calculating contributions to Deposit Guarantee Schemes on the whole achieve the aim of harmonisation.

It is very important to highlight that the final guidelines should lead to a simple but nevertheless predictable methodology. Furthermore, the guidelines should seek to minimise any duplication of the prudential regulation (e.g. CRR and BRRD) either in terms of reporting or regulatory consequences as these will have already assessed and internalised the specific risks of each bank. At the end of the day, the DGS contribution will affect the price of deposits and the commercial policy. Hence, the methodology should avoid any kind of high unexpected volatility and must be transparent enough so that entities can manage and anticipate its impact.

A contribution rate (cr) determined from the target level in combination with a defined calculation formula and setting levels of thresholds for aggregate risk weights (arw) are the pillars of a harmonized method for calculating contributions to DGSs that leads to a level playing field in Europe. The question arises, however, of how harmonised a pre-determined set of risk indicators with thresholds of weights for each risk indicator should be. As it is common sense that the risk categories and the risk sensitivity among banking systems (heterogeneous vs. homogenous banking systems) and within the banking industry (e.g.: global banks – local banks, wholesale banks – retail banks, investment banks – commercial banks, transaction banks – mortgage banks) differ considerably, a "harmonised" pre-determined setting of risk components and weights may lead to unequal treatment – hence to a contradiction of harmonisation and more importantly to a non-level playing field. Thus, DGSs are allowed to develop and use their own calculation methods in order to tailor contributions to market circumstances and risk profiles.

Harmonisation with regard to the aspect of risk measurement should not necessarily mean a uniform risk model for a ll DGSs and thus for all covered European banking structures (one size fits all approach) but should mean using adequate risk models. Hence DGSs should not only be allowed to use their own risk models (comply or explain option) but DGSs should be supported by the Guidelines to use respectively or to develop their own risk models. The target should not be to recommend a uniform model but to recommend adequate models and to set a flexible framework to achieve this target.

While contribution should be calculated on a solo basis with regard to covered deposits and risk profile, in those cases where we have no data on solo basis (e.g. using waiver) or we have structures where a solo basis would lead to inappropriate results, consolidated figures for the risk part could be used.

The approach should take account where possible intra-group support i.e. where a guarantee from the parent company or the company on top of the consolidation hierarchy exists to cover losses of the subsidiary and guarantee an adequate level of capitalisation. This is in line with the objective of the risk based levy methodology to reflect the probability of default and risk to the DGS fund. In addition, by fully facilitating a consolidated approach the Guidelines could avoid a huge and unnecessary reporting obligation on banks with multiple licences in a single DGS as reporting to each national authority would be streamlined.

The EBA should further explore synergies between the DGS evaluation and SREP carried out by the ECB or the national competent authorities.

Full response

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