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E U R O P E A N B A N K I N G A U T H O R I T Y
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setting the EBA as a point of contact and co­
ordinator for relationships between the EU and
third countries. The EBA initiated its prepara-
tory work in view of the legislative mandates
which will be assigned to the Authority upon
the approval of the RRD in 2013. Given the pre-
liminary stage of the discussion on the RRD
until the end of 2012, this rule-making activity
was limited to the area of recovery plans and
resulted in achieving a significant progress in
developing draft technical standards specify-
ing the content, scenarios and assessment of
recovery plans.
At the beginning of 2013, the EBA is expected to
publish a recommendation requiring 39 major
EU cross-border banks to develop group re-
covery plans and have them discussed within
the supervisory colleges, closely monitored by
the EBA. These plans, to be in place by the end
of 2013, should be drafted in accordance with
the international standards, agreed under the
auspices of the FSB, and consistent with the
template prepared by the EBA, following the
relative discussion paper.
Furthermore, in 2013, the EBA will provide
its technical advice for the assessment of the
interplay between the RRD regime and vari-
ous legislative proposals regarding structural
measures for a banking sector, such as the so-
called Liikanen Report, and for the pos­sible
legislative proposals on ‘shadow banking’,
and on the recovery and resolution of finan-
cial institutions other than banks. On each of
these issues the EBA provided ad hoc opinions
during 2012. In particular, in its December
2012 opinion on the Liikanen report the EBA
emphasised the need to strike an appropriate
balance in the trade-off between preserving
the core features of the traditional European
model of universal banking and strengthening
the resilience of the financial sector by seg-
regating riskier capital market business into
a separate legal entity. Only a thorough im-
pact assessment could provide an evaluation
of the potential benefits of such measures on
the European banking sector and on the real
economy and compare them with their costs.
The EBA also stressed the need to maintain
full consistency between the legislation on
bank recovery and resolution and any addi-
tional structural measures.
4.1.3. Impact of regulation on the
economy and growth
In 2012, the EBA issued a report on the pru-
dential treatment of SMEs. The report provided
an analysis of the appropriateness of the risk
weights (RWs) for retail SME lending proposed
in the CRD IV/CRR framework and assessed
the possible effects of a reduction by one third
in relation to the current regulation and the
effect of an increase from EUR 1 million to
EUR 5 million on the regulatory thresholds
for SMEs. The report also included proposals
for alternative measures to be taken to create
the right incentives to SME lending. The report
was submitted to the European Commission
in September 2012 and based on supervisory
authorities’ data and central banks’ balance
sheet data, it concluded that a great caution
should be exercised in altering the RWs or the
threshold for SME retail exposures to avoid
any risk of jeopardising financial stability while
advising to consider alternative measures to
provide capital alleviation.
Under the current timelines, the EBA will with-
in the area of credit risk prepare a report on the
pro-cyclicality and comparability of IRBmodels.
The EBA is mandated in Article 477 to report on
this to the Commission. Given the importance
of IRB models in the risk management of in-
stitutions, the EBA considers this work impor-
tant for a uniform implementation of the CRR
across institutions, as different implementation
practices may lead to inefficient and less pru-
dent risk allocation within institutions
In 2013, the EBA foresees to produce a number
of deliverables in the new prudential area of li-
quidity and leverage where it is crucial to avoid
unintended consequences. Work will continue
on definitions for high-quality liquid assets
(HQLA) and the economic impact assessment,
with the aim to report to the EU Commission
by the end of the year. In cooperation with the
ECB, ESRB and ESMA, the EBA will consider
a large span of potential consequences of the
liquidity coverage ratio such as the impact on
SMEs, trade finance and monetary operations.
The EBA will also continue to assess the im-
pact of the leverage ratio based on the interim
reporting exercise for the leverage ratio.
According to the European Commission’s pro-
posals on the SSM, the EBA’s voting mechan­
ism is expected to change while the Authority
will maintain its role in setting single rules for
the single market as a whole. The new voting
mechanism will provide enhanced guarantees
to the non-SSM supervisors so as to ensure
the right balance in the rule-making process.