Stellungnahme DK zum European Banking Authority’s draft RTS on the permanent and temporary uses of the IRB Approach

26. September 2014

By way of departure from the policy under the 2006 CEBS Guidelines No. 10 (Guidelines on the implementation, validation and assessment of Advanced Measurement (AMA) and Internal Ratings Based (IRB) Approaches), regarding the determination of the "exposures in non-significant business units as well as exposure classes or types of exposures that are immaterial in terms of size and perceived risk profile“ (Art. 150(1) (c) CRR) the RTS Draft suggests a quantitative approach with a fixed ceiling for exposures that can be treated under the Standardised Approach.

In our understanding, the draft is thus geared towards the current policy adopted in Germany under the Solvency Ordinance (Sections 7-15 Solvency Ordinance). However, since 2006, in Germany said regulatory regime has had a rather negative track record. For instance, whilst not limited to, the rigorous German rules trigger mandatory inclusion of portfolios under the IRB Approach even if and when this is counterproductive from a risk management or economic perpective (c.f. also the comments on Article 3 for a more detailed discussion).

This is further compounded by the fact that the seeming simplicity of the definitions of the unweighted (Art. 3(a) Draft RTS) as well as of the risk-weighted (Art. 3(b) Draft RTS) “coverage ratios” is misleading. In Germany, the further debate on the rules highlighted the need for a continuous adjustment of the rules. However, such a continuous work in progress gave rise to increasingly comprehensive and ever more complex rules, that became increasingly unintelligible.

Last but not least, whilst the German regulation is already rather restrictive, it would become even more stringent still: Under the current proposals, the ceiling of 8 percent for (risk-weighted) assets eligible for treatment under the Standardised Approach shall and may not be exceeded in any case. Furthermore, in Germany, in order to ensure the feasibility of compliance in the first place, the definition of the "relevant exposures" had to be adjusted. Yet, there has been a failure to incorporate these amendments under the current proposal. […]

Im Blickpunkt

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