EBA Issues Opinion on Measures to Address Macro-Prudential Risk
EBA issued an Opinion on the measures to address macro-prudential risk. This opinion was issued following the notification by the French High Council for Financial Stability (HCSF) of its intention to tighten the large-exposure limits applicable to large and highly indebted non-financial corporations (NFCs) resident in France or groups of connected NFCs assessed to be highly indebted and based in France. EBA does not object to the adoption of the measure proposed by HCSF. The present notification from HCSF is the first case in which a designated authority has made use of Article 458 of the Capital Requirements Regulation (CRR) to set stricter large-exposure limits.
Based on the evidence submitted, HCSF intends to apply the proposed measure only to global or other systemically important institutions (G-SIIs and O-SIIs), to account for changes in the intensity of macro-prudential or systemic risk that could pose a threat to financial stability in France. With the application of the proposed measure, French systemically important institutions shall not incur an exposure exceeding 5% of their eligible capital (versus the prescribed large exposures limit of 25%) for NFCs or groups of connected NFCs, which are assessed to be highly indebted. This low limit will act as a backstop to safeguard these institutions from excessive risk-taking and prevent the build-up of future vulnerabilities. In its Opinion, addressed to the Council, the European Commission and the French Authorities, EBA acknowledges that the objective of limiting indebtedness levels of large and already indebted French NFCs is appropriate, with a view to promoting financial stability and preventing future systemic shocks to the French and EU economies.
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Keywords: Europe, EU, France, Banking, Macro-prudential Risk, Financial Stability, G-SII, EBA
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