The members of the EACB welcome the opportunity to comment on the Committee proposal on constraints to the use of internal models (IRB) for the calculation of capital requirements for credit risk.
However, cooperative banks and mutuals have serious concerns about the Committee’s proposals.
All in all, the considered changes are manifold and the effects will be profound. Many of the effects are in our view not yet estimated properly. We will provide examples here below. And even for those effects that have been studied/ will be estimated in the QIS, several will clearly not be intended. Therefore we ask for consideration for the numerous concerns expressed and also for more time to debate these issues and to consider alternatives.
The aim of the BCBS for improved transparency and comparability seem understandable in principle. However, in this context other regulatory initiatives should also be considered, given their similar goal.
Increased comparability cannot prevail over risk sensitivity, IRB is still efficient for risk management and steering of credit risk, including within some of those retail portfolios. In addition, some of the proposals with regard to input floors are far too blunt an instrument with which to address variability or comparability concerns.
As they stand the proposals would almost inevitably lead to increased capital requirements in the system and in many jurisdictions could, with respect to retail markets in particular, have significant negative impacts on the consumer and a detrimental impact on the stability of the financial system.
It is of the utmost importance that targeted sectoral and regional analysis of impacts are performed, with the largest possible involvement of the industry.
The Committee should grant national discretion to allow IRB for jurisdictions where there is strong evidence of robust modelling approaches built on solid data foundations.
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