The members of the EACB welcome the opportunity to comment on the Basel Committee for Banking Supervision’ second consultative document on the treatment of step in risk.
We appreciate that the Committee highlights the importance a bank-specific assessment to be evaluated by the supervisor rather than proposing a standardised approach. It is extremely important that the framework entails no automatic Pillar I capital or liquidity charge additional to the existing Basel standards.
We see, however, that the following issues still need to be adequately considered in the development of the framework:
- The implementation might be very burdensome, especially as it would be based on many uncertain assumptions (as a forward looking approach is required), e.g. for the identification of potential "non-contractual step-in obligations".
- Material actions are expected (e.g. inclusion in the regulatory/accounting scope of consolidation, liquidity requirements, stress testing, provisioning) based on these uncertain assumptions.