1. Proportionality BASEL III - CRR – CRD – EBA BTS
&
Mario Nava
EBA Proportionality workshop – Own Funds session
22 October 2013
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2. Principle of Proportionality
Article 5(4) of Treaty on European Union
"Under the principle of proportionality, the content and form of Union action shall not exceed what is necessary to achieve the objectives of the Treaties."
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3. Scope of BASEL III vs scope of CRR/CRD4
Scope Basel: large, internationally active banks
Measures proportionate for these banks
EU: about banks, only some of those large, inter-nationally active measure not proportionate for ALL banks
Internal market
Need for level playing field
Single Rule book (CRR/CRD apply to all banks)
Basel III rules for large, internationally active banks have to be adapted for smaller banks to satisfy principle of proportionality
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4. Proportionality under CRR/CRD4
Instances where Principle is referred to:
The term "proportionate to the nature, size and complexity" is used 10 times in CRR/CRD.
CRR
CRD
Recital 4 3
Article 6
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5. Areas covered explicitly by proportionality
General Provision (recital 46 CRR)
Reporting (eg: CRR 99)
Supervision (CRD 79)
ICAAP (CRD 73)
Recoverey and resolution plans (CRD 74)
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6. Proportionality & Business Model: The case of mutuals, cooperatives and savings banks
Definition of capital: cap, multiple, redemption
Special rules for decentralised banking structures:
networks in which banks are permanent permanently affiliated to a central body
banks connected via institutional protection schemes
banking groups with cross-guarantee schemes in place
The rules on remuneration have been adapted to accommodate cooperatives which are not able to pay part of their managers variable remuneration in shares, as foreseen by the general rule
Basel has adopted specific rules for the liquidity systems of cooperative banks, which allow for a preferential treatment for certain deposits. The rules on Liquidity in the CRR will be recalibrated after a thorough review and monitoring by EBA, which will take different business models into account.
The same applies to the introduction of a leverage ratio in 2018: The will be a thorough review that is expected to capture the broadest range of impacts, including those on the business model of cooperative banks. Only after this review the final calibration of the leverage ratio will be carried out.
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