Division Bank and Insurance
Austrian Federal Economic Chamber
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1045 Vienna
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Mr. Patrick Pearson
Head of Unit
EU-Commission
Your ref., Your message of
Our ref., person in charge
Extension
Date
BSBV 189/Dr.Ru/Br
3137
14th of July, 2008
Re: CRD potential changes on securitisation
Dear Mr. Pearson,
the Division Bank and Insurance of the Austrian Federal Economic Chamber, as the
representative of the entire Austrian banking industry, takes the following position on the EU
Commission’s updated proposals for the securitisation provisions:
General Remarks:
o We appreciate the Commission’s considerations not to pursue the proposed amendments of
Article 95.
o With regard to the draft text of Article 122a (new) proposing an alternative treatment for
exposures to transferred credit risk under the Capital Requirements Directive (CRD), we
would like to provide the following comments:
The proposal which is now aiming at banks acting as investors, requiring them to ensure that
they invest in credit risk transfer products only if the originators and distributors of credit
risk retain some exposures themselves (10%), actually means prohibition for banks to invest
unless the specified condition has been fulfilled. We would like to express our concern about
the possible introduction of this regulation, and we oppose it, for the following reasons:
-
Prohibition to invest with regard to a universal bank is a new concept, so far unknown in
the CRD. It is also unaligned with the structure of Solvency II.
-
This segment is strongly related to the US market and therefore regulatory action in the
EU should be coordinated with the Fed.
-2-
Specific comments:
o It is not in keeping with prevailing market practices for an arranger to commit to holding a
share of the transaction, whereas it is market practice for the arranger to hold a nonnegligible share voluntarily. Arrangers basically want complete freedom in the structuring
and management of their portfolios. The proposed change would deny arrangers the
possibility of reacting to strategic changes in their portfolio policy (e.g., withdrawal from a
geographical area). Arrangers that do not hold any shares in a transaction run a high risk of
loss of reputation if a transaction becomes distressed, which would be detrimental to the
future syndication efforts of such arrangers.
o Moreover, there are still doubts about the “level playing field”, since Article 122a of the CRD
would apply only to investing credit institutions of the EU area, whereas investing credit
institutions outside the EU would be unrestricted in their investment decisions.
o The proposed broad scope (securitisation, credit derivative, syndication, other risk transfer
mechanisms) requires a thorough preliminary impact study of how the functioning of the risk
transfer markets would be impaired.
o The draft does not indicate whether the exception under 3 (b) of Article 122a concerning
credit quality step of 3 or better must be satisfied only at the time of making the investment
or whether it must be satisfied for the entire duration of the transaction. If the latter
applies, it is unclear how the originator can satisfy the obligations under Article 122a (1)
retroactively once a rating is lowered.
Yours sincerely,
Dr. Herbert Pichler
Managing Director
Division Bank & Insurance
Austrian Federal Economic Chamber