The application of the proportionality principle in practice

Transcription

The application of the
proportionality principle in
practice:
Preparing recovery plans for
smaller (national) banks
KPMG Austria
Vienna, April 2015
Agenda
1.
BRRD transposition into national legislation
2.
Proportionality principle in Austria
3.
KPMG approach for establishing recovery plans for LSIs
© 2015 KPMG Austria, österreichisches Mitglied des KPMG-Netzwerks unabhängiger Mitgliedsfirmen, die KPMG International
Cooperative („KPMG International“), einer juristischen Person schweizerischen Rechts, angeschlossen sind. Alle Rechte
vorbehalten. Printed in Austria. KPMG und das KPMG-Logo sind eingetragene Markenzeichen von KPMG International.
1
1. BRRD transposition into national legislation
Development of the regulatory framework for recovery and resolution planning for
Austrian banks
 BIRG – Banking Intervention and Restructuring Act since 2014 – Banks with balance sheet total > EUR 30 billion had to draw up a
recovery plan until 30th of June 2014 and a resolution plan until 31st of December 2014
 BIRG is now substituted through BaSAG (Recovery and Resolution Act); smaller banks (LSIs) have to convey the recovery plans to
the FMA until 30th of September or 30th of November 2015 according to the FMA regulation (“BaSaPV”)
 Basis of the BaSAG: BRRD – Bank Recovery and Resolution Directive (2014/59/EU)
 Cancellation of waivers for banks BS < EUR 5 billion  Obligation to draw up recovery plans for ALL Austrian banks
1. Jan 2014 (entered into force)
12. June 2014 (published)
1. Jan 2015 (entered into force)
Banking Intervention and
Restructuring Act (BIRG)
Bank Recovery and Resolution
Directive (BRRD)
Amendment Recovery and Resolution Act
(BaSAG)
 Recovery plans
 Recovery plans
 Transposition of BRRD into national legislation:
− to be prepared by the credit institution
− balance sheet total more than EUR 30
billion: Deadline 30th of June 2014
− more detailed requirements by the EBA a few
months after taking effect
− balance sheet total below EUR 30
billion: Deadline 30th of June 2015
 Resolution plans
− balance sheet total more than EUR 30
billion: Deadline: 31st of December 2014
− balance sheet total below EUR 30
billion: Deadline: 31st of December 2015
 Resolution plans
− to be prepared by the regulator
− introduction of specific resolution tools
− provision of specific legal prerequisites for
resolution of banking groups and banks with
international operations
− introduction of the European resolution fund
− detailed requirements concerning the preparation
of recovery plans (including implementation of the
EBA-standards)
− introduction of resolution tools into national
legislation (including bail-in)
 Material changes from BIRG
− obligation for preparing resolution plans lies with
the resolution authority
− the supervision is equipped with extensive powers
(establishment of a new, independent resolution
authority, possibility of early intervention
measures)
2
Elements of the new BaSAG (2015) compared to BIRG (2014)
FMA as
Resolution
Authority
Resolution
Colleges
Resolution
Plan
BaSAG
(2015)
Resolution
Tools
Early
Intervention
Recovery
Plan
Austrian
Resolution
Funds
3
Expectations of the Austrian supervision with regard to the elaboration of recovery
and resolution plans are described in explanatory notes
„Explanatory Notes 2014 on the
Establishment of Recovery Plans“
„Explanatory Notes 2015 on the Establishment of
Recovery Plans according to BaSAG“
„Explanatory Notes 2014 on the
Establishment of Resolution Plans“
The explanatory notes for the drawing up of recovery plans should be critically scrutinized and applied by the banks
4
Agenda
1.
2.
3.
5
2. Proportionality principle in Austria
The Austrian supervisory authority (FMA) issued a national regulation in accordance
with article 4 (3) BaSAG regarding simplified obligations for LSIs
■ BIRG (2014) included a waiver for Banks BS < EUR 5 billion
1
2
■ Cancellation of the waiver with the final implementation of BRRD into national
legislation through BaSAG (2015)
BaSaPV
■ Austrian Bank Recovery Plan
Regulation:
■ Obligation to draw up recovery plans for ALL Austrian banks, except for
− members of an IPS or
− subsidiaries of a credit institution where the parent draws up a group
recovery plan covering all substantial institutions
■ Simplified Obligations for LSIs pursuant to the Austrian Bank Recovery Plan
Regulation (Bankensanierungsplanverordnung – “BaSaPV”)
3
4
■ BaSaPV specifies:
− contents and details of recovery plans
− first submission date and updating frequency
− contents and details of the information required from institutions
■ Competent authorities can impose full, unsimplified obligations at any time
■ When drawing up the BaSaPV FMA
took the criteria defined in article 4 (1)
BRRD into consideration
6
1
2
3
BaSaPV is dividing Austrian LSIs into categories according to the following criteria
Classification of Austrian LSIs
Category 1
• Institution BS ≤ EUR 350 million
• EU-parent consolidated BS ≤ EUR 350 million
• IPS consolidated BS ≤ EUR 350 million
Cross-border business ≤ 30 % BS > 30 %
Category 2
• Institution BS ≤ EUR 5 billion
• EU-parent consolidated BS ≤ EUR 5 billion
• IPS consolidated BS ≤ EUR 5 billion
Interbank business ≤ 50 % BS
> 50 %
• Institution BS > EUR 5 billion
• EU-parent consolidated BS > EUR 5 billion
• IPS consolidated BS > EUR 5 billion
Category 3
• Cross-border business > 30 % BS
• Interbank business > 50 % BS
7
1
2
3
The number of scenarios for LSIs depends on the category defined in BaSaPV
Scenario
Category
Category 1
Category 2
System-wide
Idiosyncratic
✘
Combination
✘
✘
Category 3
The Austrian regulator recommends category 2 and 3 institutions to include one slow-moving and one fast-moving scenario
8
1
2
3
The Austrian regulation uses indicators defined by EBA in the draft
guidelines as compulsory and optional
Comparing EBA indicators to BaSaPV categories
Category 1+2
Capital
Liquidity
Profitability
Asset
Quality
Category 3
■ Common Equity Tier 1 Ratio (CET-1)
■ Total Capital Ratio
■ Leverage Ratio (LR)
■
■
■
■
Liquidity Coverage Ratio (LCR)
Short-term Wholesale Funding Ratio
Net Outflow of Retail and Corporate Funding
Cost of Wholesale Funding
/
/
/
■ Return on Assets (ROA)
■ Return on Equity (ROE)
■ Significant Losses due to Administrative/Regulatory Fine or Adverse Court Ruling
/
/
■ Impaired and Past Due Loans / Total Loans (NPL)
■ Coverage Ratio (Loans and Debt Instruments)
■ Non-Performing Loans by Counterparty Sector
/
/
or
or
or
or
Three Additional indicators for category 3 LSIs compared to category 1 and 2
Category 3 institutions have to choose three additional indicators,
one from each category liquidity, profitability and asset quality
9
Simplified obligations for Austrian LSIs according to BaSaPV at one glimpse
Category 1
Classification
Criteria
 Institution BS ≤ EUR 350 million
 EU-parent consolidated BS ≤ EUR 350
million
Category 2
 Institution BS ≤ EUR 5 billion
 EU-parent consolidated BS ≤ EUR 5
Category 3
 All other LSIs BS < EUR 30 billion
billion
 IPS consolidated BS ≤ EUR 350 million
 IPS consolidated BS ≤ EUR 5 billion
 Cross-border business ≤ 30 % BS
 Interbank business ≤ 50 % BS
Scenarios
 System-wide
 System-wide and
 Idiosyncratic
 System-wide,
 Idiosyncratic und
 Combination
Indicators















First Submission
Date
Updating Frequency
Common Equity Tier 1 Ratio (CET-1)
Total Capital Ratio
Return on Assets (ROA)
Impaired and Past Due Loans / Total
Loans (NPL)
Total Capital Ratio
Loans (NPL)
Total Capital Ratio
Loans (NPL)
 One additional indicator from the
categories liquidity, profitability and
asset quality
2015-11-30
2015-09-30
2015-09-30
Every 2 years
Once a year
Once a year
10
Agenda
1.
2.
3.
11
3. KPMG approach in establishing recovery plans
Practical example: Introduction
KPMG illustrates the application of the proportionality principle for LSIs in Austria by using two example
banks
Automotive Bank
■ Autobank of a leading German carmaker
■ Headquartered in Salzburg (Austria)
Description
■ Operates mainly in CEE through branches
■ High share of cross-border business
■ Refinancing mainly through German banks
Key Financials
Private Bank
■ Target group: high-net-worth individuals with
financial assets > EUR 500.000 in German
speaking countries
■ Headquartered in Vienna
■ Family owned since 1892
■ Balance Sheet total: EUR 2 bn
■ Balance Sheet total: EUR 150 mio
■ Cross-border business: EUR 800 mio
(40% of BS)
■ Cross-border business: EUR 60 mio
(40% of BS)
■ Interbank business: EUR 1,2 bn (60% of BS)
■ Interbank business: EUR 30 mio (20% of BS)
How does the proportionality principle affect these banks when developing recovery plans?
12
Practical example: Classification of example banks
Classification of Austrian LSIs
Category 1*
First submission
date: 2015-11-30
•
•
•
Autobank
✘
Institution BS ≤ EUR 350 million
EU-parent consolidated BS ≤ EUR 350 million
IPS consolidated BS ≤ EUR 350 million
Cross-border business ≤ 30 % BS > 30 %
Category 2
•
•
•
First submission
date: 2015-09-30
Private Bank
✘
Institution BS ≤ EUR 5 billion
EU-parent consolidated BS ≤ EUR 5 billion
IPS consolidated BS ≤ EUR 5 billion
Interbank business ≤ 50 % BS
•
•
•
Institution BS > EUR 5 billion
EU-parent consolidated BS > EUR 5 billion
IPS consolidated BS > EUR 5 billion
•
Cross-border business > 30 % BS
•
Interbank business > 50 % BS
> 50 %
✘
✘
Category 3
First submission
date: 2015-09-30
Result:
* In category 1 cross-border and interbank business are not considered.
The balance sheet amount is the only criteria used.
Category 3
since its a residual category
Result:
Category 1
13
Overview of the general structure of a recovery plan and weighting of the
single elements
A recovery plan essentially comprises the following seven elements:
• Description of the group structure and business model
• Identification of critical functions and core business areas
• Identification of internal and external interconnectedness
2. Indicators
• Indicators for early identification of critical situations and monitoring the
effects of applied recovery options
3. Recovery Options
10 %
PP
• Financial measures to restore sustainable financial stability
• Non financial measures (such as communication measures), to support
the effectiveness of financial measures
5%
35 %
4. Scenarios
• Detailed description of progress of existence-threatening crisis (near default),
assessing the validity of defined recovery options, to verify indicators,
structures and processes (governance)
5. Framework & Governance
• Organizational structures and processes for monitoring the recovery indicators
(monitoring), escalation and decision on activation of recovery measures in times of
crisis and updating the recovery plan
15 %
6. Information Management
• Description of required information for the elements of the recovery plan
• Description of the processes for short-term provision of the required information for the
implementation of recovery options (e.g. sale of portfolios)
10 %
7. Implementation Plan
• Planning the integration of the recovery plan in the overall bank management
• Measures to remove impediments, which conflict with the activation of recovery options
10 %
PP
= Proportionality principle especially applicable
PP
Core Elements
1. Strategic Analysis
15 %
14
3. KPMG approach in establishing recovery plans – Indicators
Practical example: Identification of minimum indicators for
the example banks
Minimum indicators applicable to the example banks
Autobank
Capital
Liquidity
Profitability
Asset
Quality
Private Bank
■ Common Equity Tier 1 Ratio (CET-1)
■ Total Capital Ratio
■ Leverage Ratio (LR)
■
■
■
■
Short-term Wholesale Funding Ratio
Net Outflow of Retail and Corporate Funding
Cost of Wholesale Funding
■ Return on Assets (ROA)
■ Return on Equity (ROE)
■ Significant Losses due to Administrative/Regulatory Fine or Adverse Court Ruling
■ Impaired and Past Due Loans / Total Loans (NPL)
■ Coverage Ratio (Loans and Debt Instruments)
■ Non-Performing Loans by Counterparty Sector
Results and benefit of applying the proportionality principle
• Instead of applying the entire minimum list of indicators according to EBA the Autobank as category 3 institution has to include only 8
indicators in their recovery plan, whereas the number of indicators is reduced to 5 for the Private Bank.
• The reduced number of indicators is reflected in decreased administrative costs when developing recovery plans and monitoring the
indicators over the course of time.
15
Thank you!
Contact
Bernhard Freudenthaler
Senior Manager, Financial Services Advisory
Porzellangasse 51
A - 1090 Vienna
bfreudenthaler@kpmg.at
Tel.
Fax
+43 1 31 332 - 138
+43 1 31 332 - 500
KPMG Austria, an Austrian Member Firm of KPMG International, a Swiss cooperative.
© 2015 KPMG Austria, Austrian member firm of the KPMG network of
independent member firms affiliated with KPMG International
Cooperative („KPMG International“), a Swiss entity. All rights reserved.
Printed in Austria. KPMG and the KPMG logo are registered
trademarks of KPMG International.

The application of the proportionality principle in practice

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