The EACB welcomes the possibility of commenting on the ECB package's approach to options and discretions available in EU law. Gaining clarity regarding the ECB's expectations on the use of options and discretions in light of the adoption of the banking package (CRR3 and CRD6) is of paramount importance.
The EU banking system, and cooperative banks in particular, repeatedly proved to be resilient - even during the financial turmoil that hit markets in 2023. This evidenced the overall fitness of the regulatory framework to ensure financial stability at that moment. We should also note that the overall policy debate in the EU is moving towards the principles of simplification and competitiveness. With this background, several of the ECB's proposals set out in the draft Guide, especially regarding those options and discretions already available before the new banking package, are rather set to determine an unjustified increase in complexity and costs - weighing down on overall capacity to e.g. effectively allocate capital.
We would like to underline the following aspects in particular:
• The serious unintended consequences of the new approach set out by the ECB in Chapter 2, which would extend the risk weighting of insurance holdings assets within a conglomerate to AT1 and Tier 2 instruments. This goes beyond the CRR framework and does not consider that the EU supervision of financial conglomerates is advanced and well established. It requires internal control mechanisms and risk management procedures across bank and insurance activities. It enables solvency to be assessed after eliminating all intragroup capital and in light of all the banking and insurance risks taken at the consolidated level. The existing conditions for granting the non-deduction envisage that supervisors imperatively require integrated risk management. The new rule would imply a kind of disintegrated management of finance due to the creation of a loophole which will lead to favoring issuance by insurers.
• The necessity of a careful re-evaluation of several proposals dedicated to Institutional Protection Schemes (IPSs). In this area, we noted that certain choices are either non-practical (e.g. in the area of liquidity, stress testing, considerations regarding an institution leaving the IPS), unclear (e.g. definition of certain indicators), or even go beyond the primary legislation (e.g. in the area of funds available to the IPS, notice period to end the IPS).
• Finally, we see that, with regard to the trading book, the boundary section is overly complex and redundant with respect to the demonstration of trading intent across various paragraphs. We are concerned that the proposed approach would result in a dramatic and unjustified expansion of the transactions requiring supervisory pre-approval.