Executive Summary Sheet

Impact assessment on proposals amending Regulation (EU) 575/2013 on prudential requirements for credit institutions and investment firms, Directive 2013/36/EU on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, Directive 2014/59/EU establishing a framework for the recovery and resolution of credit institutions and investment firms, Regulation (EU) No 806/2014 of the European Parliament and of the Council of 15 July 2014 establishing uniform rules and a uniform procedure for the resolution of credit institutions and certain investment firms in the framework of a Single Resolution Mechanism and a Single Resolution Fund

A. Need for action

Why? What is the problem being addressed? Maximum 11 lines

In the interests of financial stability and the Commissions jobs and growth agenda, there is a pressing need to; address a number of shortcomings in the existing regulatory framework; to implement a series of post crisis International measures; and to urgently complete the banking union initiatives. More specifically, at present there are significant risks to financial stability and a worrying lack of sustainable bank financing of the economy. In addition, more needs to be done to ensure that the taxpayer does not have to bear the burden of the failure of a 'too-big-to-fail' institution in the future. Moreover it is also essential to try and reduce, where possible, the disproportionate regulatory and compliance burdens. These issues can be attributed, in part to the following factors: A risk of excessive reliance on short-term wholesale funding to finance long-term activities; A risk of excessive leverage of institutions; Suboptimal Capital charges for SME exposures ; A risk of disorderly failure of systemically important institutions; Possible failures resulting from inadequate capital requirements for institutions; and Insufficient harmonisation of certain resolution provisions (for example those concerning insolvency ranking and moratorium)

What is this initiative expected to achieve? Maximum 8 lines

The initiative aims to, in the first instance, address the issues already highlighted above. In so doing it will also; enhance 'risk-capture' and. risk-sensitivity within the prudential framework'; improve the capacity of loss-absorption and recapitalisation of G-SIBs; and increase proportionality. In addition we envisage that the initiative will reduce administrative burdens, compliance costs' and the possibilities of risk arbitrage while enhancing the level playing field and ensuing greater legal certainty and coherency,

What is the value added of action at the EU level? Maximum 7 lines

EU action is necessary since the prudential requirements for institutions are already dealt with at EU level. As such an amendment of the CRR, CRD and BRRD legal instruments is considered to be the best alternative (see Article 114 TFEU for the CRR and BRRD and Article 53(1) TFEU for the CRD for the legal basis). Further action at EU level would promote a uniform application of the regulatory standards and the convergence of supervisory practices. It would also ensure a level playing field throughout the EU, which is important as banks – even though differing in geographical scope – operate in markets with a broader geographic scope and are free to provide services and establish in other Member States. Nevertheless, Member States and national competent authorities would retain existing powers to address specific national economic and financial features (macro-prudential policies and systemic risk buffers).

B. Solutions

What legislative and non-legislative policy options have been considered? Is there a preferred choice or not? Why? Maximum 14 lines

Both legislative and non-legislative options were considered for all aspects of the proposals. However, in the interest of legal certainty and to be conducive for ensuring an EU and Global level playing field, it will be necessary, particularly for the implementation of the International standards adopted by the Basel Committee on Banking Supervision (BCBS) or the Financial Stability Board (FSB), to implement these as legislative policy options. Similarly, the recalibration of the capital requirements for exposures to SMEs which supports the Commission's objective of growth and jobs, could be achieved only by making amendments to the CRR. Moreover, with regards to the proportionality objective, changes to the legal text would be imperative.. These include either removing some obligations from the existing legislation (e.g. reducing some disclosure requirements for less significant institutions, waiving some remuneration requirements for smaller and less complex institutions), or not introducing legal requirements for some institutions (e.g. limiting TLAC requirement only to global systemically important institutions (G-SII), or excluding public development banks from the leverage ratio requirement). In addition, there is a need to address the lack of harmonisation under the resolution provisions and this can only be achieved by introducing options that facilitate greater coherence in the application of moratorium tools and elaborating on the insolvency ranking of institutions' creditors .

Who supports which option? Maximum 7 lines