EUU, Alm.del - 2019-20 - Bilag 260: Notat, høringssvar samt besvaret spørgeskema om implementering af anbefalingerne fra Basel-komitéen

Europaudvalget 2019-20
EUU Alm.del Bilag 260
Offentligt

MINISTER FOR INDUSTRY,

BUSINESS AND FINANCIAL

AFFAIRS

Dear Executive Vice-President Valdis Dombrovskis

First accept my sincere congratulations on your appointment as Executive

Vice-President for An Economy that Works for the People.

Thank you for the opportunity to respond to the consultation on the imple-

mentation of the Basel III standards.

Generally, we find that there are many reasonable and, in our view, positive

adjustments in the recommendations from the Basel Committee on Bank-

ing Supervision (BCBS) (e.g. the changes to operational risk and IRB mod-

els for credit risk). However, we continue to have strong reservations in

relation to the output floor, which has a number of adverse implications.

Most importantly, and although it is not the stated intention, the output

floor could result in a decrease in the risk sensitivity in the capital require-

ments of financial institutions by effectively disregarding those internal

models currently applied by the largest credit institutions in e.g. Denmark.

The result is that credit institutions will have incentive to increase risk tak-

ing as they can take on more risky exposures without corresponding in-

creases in capital requirements. In our view, this contradicts the fundamen-

tal purpose of the reforms.

Additionally, impact studies show that the Basel III package will lead to a

substantial and unjustified increase in capital requirements, by e.g. increas-

ing the capital requirements of the largest Danish credit institutions by ap-

prox. 40 percent. The output floor is the main contributor to this very sig-

nificant increase.

An implementation of the output floor should preserve a risk sensitive ap-

proach in terms of capital requirements. The output floor should generally

only work as a backstop to risk based capital requirements. This would not

be achieved for Danish credit institutions with the calibration of the output

floor proposed by the Basel Committee.

Denmark has been and continues to be a strong supporter of measures to

strengthen financial stability. We firmly believe that financial stability is

MINISTRY OF INDUSTRY,

BUSINESS AND FINANCIAL

AFFAIRS

Slotsholmsgade 10-12

1216 Copenhagen K

Denmark

Tlf.

+45 33 92 33 50

Fax.

+45 33 12 37 78

CVR-nr. 10092485

EAN nr. 5798000026001

[email protected]

www.em.dk

EUU, Alm.del - 2019-20 - Bilag 260: Notat, høringssvar samt besvaret spørgeskema om implementering af anbefalingerne fra Basel-komitéen

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best achieved through a risk sensitive approach to capital requirements,

properly regulated and supervised. Therefore, we support the regulatory

review of the IRB approach conducted by the European Banking Authority

(EBA) with the aim of reducing unjustified variability in IRB models, thus

ensuring comparability of risk estimates while at the same time preserving

the risk sensitivity of capital requirements.

We generally think that any inappropriateness in the IRB framework

should be addressed by improving the IRB framework instead of introduc-

ing a less risk sensitive capital requirement. Introduction of the output floor

effectively suspends the models without taking the current functioning of

the models into account. The substantial work already carried out by the

EBA in the IRB area will go a long way towards improving the IRB frame-

work. In combination with the changes in the IRB area as proposed in the

Basel III reforms, we question the need for further measures such as the

output floor.

We are looking forward to assisting you and the Commission services in

the implementation of the Basel III standards in order to preserve risk sen-

sitivity in the financial sector and ensure consideration of European speci-

ficities, in line with the Council conclusions from July 2016.

Yours sincerely,

Simon Kollerup