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22 September 2016

AFME Position Paper: CRD 5/CRR2: Large exposures framework

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AFME's paper seeks to consider the main deviations of the large exposures (LE) framework under the Capital Requirements Regulation (CRR) from the BCBS framework.

The Commission issued a call for advice to the European Banking Authority (EBA) for the purpose of revising the large exposure framework as part of the CRR review in April 2016.

This review is considering whether to implement the agreed BCBS framework detailed in the document “Supervisory framework for measuring and controlling large exposure”, as well as the potential for reviewing existing exemptions to the large exposure rules laid down in Article 400(1)(j) and Article 400(2) CRR, with due consideration to the proportionality principle.

As part of the Commission and EBA’s review of the framework, due consideration should be given to the gross impact of proposed revisions rather than the impact of each proposed revision in isolation.  The gross impact will not necessarily be the sum of the individual parts, but the interaction between proposed revisions may have a compounding effect and impacts / unintended consequences should aim to be avoided. 

In particular, the Basel LE framework was designed to apply to internationally-active banks at a consolidated level.  Whereas, the implementation of the LE framework in the EU is much wider, applying to nearly all CRR regulated firms at both a solo and consolidated level.

Special consideration should be given to a consistent and coherent approach to dealing with the application of LE limits at a subsidiary level where intragroup exposures – if they are not exempted - can be constrained by LE limits which were intended for third parties.

Position paper



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