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ABI: negative opinion on EBA decisions

The Association intends to assess the legitimacy of the move.
Real risks of credit squeeze for the economy.

The Italian Banking Association (ABI) confirms its negative assessment of the move carried out by the EBA. As also formally pointed out to the EBA, the move appears flawed by an inconsistent application of the criteria for establishing the weighted assets for the risk between the various European jurisdictions.

When presenting the results of the stress tests, the EBA had to make it clear that the national Authorities adopt different approaches for calculating the so-called floors in the event of use by the bank of internal rating models (IRB and AMA) and had to proceed to indicate which floor calculation option had been adopted for each bank.

It is evident that these differences may give rise to equity deficits which do not reflect the real exposure to risk, however forcing the banks to unnecessarily recapitalise with significant negative consequences.

Having also adopted the mark to market approach for Government securities, in the absence of any indications regarding the issuers’ solvency, as well as having caused anomalous volatility on said securities market, it appears entirely contradictory with respect to the difficult economic phase Europe is experiencing.

Furthermore, ABI insists that the timing of the move and the consequent recapitalisation transactions are inappropriate and clearly buck the trend with respect to the agreed opinion that the rules must not increase the economy’s cyclical nature.