In December 2011, the EBA issued a Recommendation asking national supervisory
authorities to ensure banks had sufficient capital to withstand unexpected losses
in case of a further deterioration of the economic situation. Since the legal
framework for assessing capital levels has changed with the entering into force
of the so-called “CRD IV package”, the EBA has decided to replace the 2011 recapitalisation
Recommendation with a new measure on capital preservation.
In particular, the Recommendation on capital preservation asks competent authorities
to ensure that banks maintain a capital floor in terms of nominal amount which
corresponds to the amount of capital required to be in place by 30 June 2012 to
meet the EBA’s Recommendation.
Andrea Enria, Chairperson of the EBA said: “Preserving capital in European banks is essential for maintaining the flow of
lending to the real economy”.
In case banks fall below this nominal amount, they are expected to produce credible
plans to restore their capital base. Only in specific circumstances will exceptions
be granted on a case by case basis. Exceptions can be granted by national authorities,
in consultation with the EBA, if a bank is undergoing a specific restructuring
or a de-risking programme or if a bank’s capital levels are deemed to already
exceed the CET1 requirements under fully implemented CRD/CRR rules.
Next steps
National authorities, in close cooperation with the EBA, will assess banks’ capital
plans during the transition to the CRD/CRR full implementation. To this end, banks
will be requested to submit their capital plans and monitoring templates to their
respective national authorities by 29 October 2013. When reviewing capital plans, national authorities should discuss and challenge
banks’ assumptions, and consider the potential impact of stress events.
Legal basis
The Recommendation on capital preservation was issued on the basis of Article
16 of Regulation (EU)
1093/2010 which establishing the EBA. The EBA expects all competent authorities
to whom the
Recommendation is addressed to comply with it and to incorporate it into their
supervisory practices as appropriate.
http://www.eba.europa.eu/-/the-eba-publishes-a-recommendation-on-the-preservation-of-capital