Securitisation and Regulation News

CRD 4: Danish EU Council Presidency publishes compromise proposals; EBA consults on draft regulatory technical standards on own funds; ESRB sets out principles for macro-prudential policies

The Danish EU Council Presidency has published compromise texts for the proposed fourth package of amendments to the Capital Requirements Directive (CRD 4), comprising a directive governing access to deposit-taking activities and the prudential supervision of credit institutions and investment firms and a regulation on prudential requirements for credit institutions and investment firms.

In advance of the texts being finalised, the EBA has published a consultation paper on draft regulatory technical standards on own funds as part of the future CRD 4 implementation process. Amongst other things, the consultation paper covers: (1) Common Equity Tier 1 capital; (2) additional Tier 1 capital; (3) deductions from Common Equity Tier 1 capital and from own funds in general; (4) general requirements like indirect holdings arising from index holdings, supervisory consent for reducing own funds; and (5) transitional provisions for own funds in terms of grandfathering.

Comments are due by 4 July 2012. Separate consultations on a number of remaining regulatory technical standards on own funds will follow in the second half of 2012.

In addition, the European Systemic Risk Board (ESRB) has published a letter intended to help EU legislators to further develop the legal basis for policies to address future threats to EU financial stability within CRD 4. The ESRB supports the establishment of a set of commonly defined prudential rules on the supervision of banks within the EU, based on the full implementation of the Basel III agreement as endorsed by the leaders of the G20. However, the ESRB considers it essential from a macro-prudential perspective that these rules can be tightened temporarily, by both EU and Member State authorities, in order to tackle future threats to the financial system and to the flow of credit to the economies of the EU. According to the ESRB, that calls for a framework which provides for discretion - with safeguards - for these authorities to act in this way where necessary.

In its letter, the ESRB identifies the following three principles to underpin this macro-prudential framework: (1) flexibility to undertake a broad range of actions; (2) scope to act early and effectively; and (3) efficient coordination of actions by Member States.

Proposed directive - Presidency compromise
Proposed regulation - Presidency compromise