Previous text of paragraph 70
is replaced by paragraphs 70-
Members States may decide
that members of an IPS pay
lower contributions to the
DGS. As reflected in recital 12
of Directive 2014/49/EU, this
option has been introduced in
order to recognise ‘schemes
which protect the credit
institution itself and which, in
particular, ensure its liquidity
Where a Member State avails
itself of this option, the
aggregated risk weight (ARW)
of an institution which is also a
member of a separate IPS may
be reduced to take into
account the additional
safeguard provided by the IPS.
In this case, the reduction
should be implemented by
including an additional risk
indicator, related to IPS
membership, in the risk
category Business model and
management of the calculation
method. The IPS membership
indicator should reflect the
additional solvency and
liquidity protection provided
by the scheme to the member,
taking into account whether
the amount of the IPS ex-ante
funds, which are available
without delay for both
recapitalisation and liquidity
funding purposes in order to
support the affected entity if
there are problems, is
sufficiently large to allow for
credible and effective support
of that entity. Additional
funding commitments callable
upon request and backed by
liquidity reserves held by IPS
members in IPS central
institutions may also be taken
into account. The level of the
IPS funding should be
examined in relation to the
total assets of the IPS member
Where a Member State allows
a DGS, including an IPS
officially recognised as a DGS,
to use the available financial
means for alternative
measures in order to prevent
the failure of a credit
institution, such DGS may
include in its own risk-based
calculation an additional factor
based on the risk-weighted
assets of the institution. In this
case, the formula is as follows:
= CR × ARW
) × µ
Where A is the amount of
risk-weighted assets in
Before the implementation of
competent authorities should
assess, as part of the approval
procedure referred to in
paragraph 14, whether its
introduction is commensurate
with the risk of having to
intervene in order to prevent
the failure of institutions
beyond the protection of
One respondent requests that the guidelines should
IPS that can be quantified an examined by the national
The EBA considers that the guidelines
already include sufficient flexibility to take
these items into account.
One respondent stated that fundamental principles
based on CAMEL approach and practical experience
from the work of established guarantee schemes have
been taken on board.
Two respondents wrote that the guidelines should be as
simple and as practical as possible.
The EBA welcomes this positive feedback.
Three respondents expressed concerns that the
solid and lack empirical validation (see also answers to
practical experiences in Member States.
For this purpose, the EBA conducted a test
exercise addressed to competent
authorities across the EU with the
cooperation of national DGSs. The
responses to the test exercise and further
views of various stakeholders, informed
the current shape of the guidelines.
In addition, Article 13(3) of Directive
2014/49/EU envisages further review of
these guidelines once more empirical
evidence is available.
institution should only be disclosed to the institution
Principle 7 of the guidelines already
itself and not to the public.
Two respondents stated that the proposed contribution
calculation only takes into account the objective of
building up sufficient funds.
Paragraph 17 states that the objective of a
the target level, but also to ensure that
the cost of financing DGSs is borne by
credit institutions and to provide risk
minimising incentives. Core indicators
were chosen with setting the right
incentives in mind.
One respondent argued for no minimum contributions.
element of the calculation method.
not be sensitive to the risk profile of banks.
Article 13(1) of Directive 2014/49/EU
stipulates that the calculation of
contributions to DGSs shall be based on
the amount of covered deposits and the
degree of incurred risk by the respective
synergies between DGS evaluation and SREP and that
DGSs should preferably rely on SREP.
The guidelines allow the use of SREP score
as an additional indicator, if this score is
available to the DGS.
Question 2. Do you
consider the level of detail
of these draft guidelines
to be appropriate?
Eight respondents stated that the overall level of detail
The EBA welcomes this positive feedback. N/A
One respondent pointed out that the level of detail
based system of contributions. However, the same
respondent stated that the guidelines are too detailed
for well-established and accepted systems, as they
require significant modifications.
The EBA is convinced that not only new
but also established systems can benefit
from these guidelines. The EBA’s mandate
is to outline a method applicable to all
Two respondents are not satisfied with the level of
validate the proposed methods.
The EBA considers that the guidelines
For this purpose, the EBA conducted a test
authorities across the EU with the
views of various stakeholders informed
the final shape of the guidelines.
One respondent suggested that for banks with multiple
should be possible.
The scope of protection under Directive
2014/49/EU is the solo institution.
Therefore, the EBA thinks that the
indicators should be calculated on solo
basis to ensure calculation of
contributions is as institution-specific as
One respondent noted that the guidelines could benefit
The EBA has introduced minor changes to
make the text clearer and thinks that the
the ‘bucket’ method.
guidance provided in Annex 1 is sufficient.
proposed formula for
to DGS sufficiently clear
The majority of respondents (seventeen) find the
formula to be sufficiently clear and transparent.
Even though most respondents support the calculation
formula as such, seven respondents asked for more
guidance on when and how to apply the adjustment
factor, µ. More specifically, they wonder who will be
responsible for determining the state of the economic
Each year DGSs must determine the
guidance provided in paragraph 37.
The determination of the annual target
level should take into account the
objectives stated in paragraph 19.
Therefore, the annual target level should
be set after considering macroprudential
To avoid over- or undershooting of the
annual target level, contributions shall be
adjusted using the adjustment factor, µ.
To clarify this issue, the EBA
amended a paragraph
discussing the adjustment of
annual target level based on
the business cycle and clarified
that µ shall only be used to
ensure the DGS does not over-
In line with the fourth
subparagraph of Article 10(2)
of Directive 2014/49/EU,
when establishing the annual
target level, the DGS or
designated authority must
also take into account the
phase of the business cycle
and the pro-cyclical impact
that contributions may have
on the financial position of
member institutions. The
cyclical adjustment achieved
via an increased or decreased
annual target level should be
established so as to avoid
contributions during economic
downturns, and to allow for a
faster build-up of the DGS
One respondent is of the opinion that the formula is not
weighing methodology will not be transparent to
The EBA acknowledge that the
methodology is complex. Therefore,
Annex 1 is provided to explain in detail
each step of the methodology.
Three respondents pointed out that it must be ensured
not postponed into later periods.
Principle 2 of the guidelines states that
DGSs should aim to spread the
contributions as evenly as possible over
the build-up period. The authorities may
set the annual target level higher or lower
depending on the business cycle and
expected evolution in the covered
contributions if there is a substantial pay-out during the
Article 10(2) of Directive 2014/49/EU
build-up period an extension of maximum
4 years is allowed. The EBA considers the
guidance provided in Directive
2014/49/EU and in principle 2 of the
guidelines to be sufficient.
are protected, µ should only be used after the target
level is reached.
The adjustment factor µ should only be
used to avoid over- or undershooting of
the annual target level.
DGSs should aim to spread the
the build-up period.
Question 4. Considering
the need for sufficient risk
consistency across the EU,
do you agree on the
minimum risk interval
(75%-150%) proposed in
Fifteen respondents support the proposed minimum
interval. Three of which (including BSG) support
allowing wider intervals. Four respondents oppose
allowing wider intervals.
Considering the ambiguity in responses
deems that flexibility should be kept as it
is. It will allow DGSs to use the interval in
such a way that best fits national banking
Three respondents stress that the interval should be
respondent claims that the arguments to increase
contributions for institutions carrying more risk are not
stronger than to reduce it for institutions with less risk
and suggest a symmetric interval of 75-125%.
The results of the EBA test exercise
confirmed that the proposed minimum
interval offers an appropriate balance
between the need for harmonisation and
providing institutions with risk-mitigating
Two respondents state that the amount of covered
contributions rather than the risk-weighting.
states that contributions to DGSs shall be
based on both the amount of covered
deposits and the degree of risk incurred
by each institution.
Three respondents put forward that it should not be
Paragraph 47 of the guidelines establishes
that the full interval must not be used
Question 5. Do you agree
indicators proposed in
these guidelines? If not,
please specify your
reasons and suggest
alternative indicators that
can be applied to
institutions in all Member
The BSG agree to the proposed indicators but underline
that it should be ensured that it will not lead to
excessive reporting requirements for institutions.
Since the indicators are based on data
competent authorities it will not lead to
additional reporting requirements. This is
further reinforced in Principle 6 which
states that the required data for the
calculation of contributions should not
lead to excessive additional reporting
States. Do you foresee
consequences that could
stem from the suggested
The NPL-ratio is questioned by eight respondents
performing loans. It is argued that it may cause unequal
treatment of institutions.
The results from the EBA test exercise
showed that there was strong support to
use the NPL-ratio even in the absence of a
One respondent wanted clarification as to whether the
In order to avoid misunderstanding, the
wording in Annex 2 is amended to clarify
that when calculating the NPL-ratio, non-
performing loans gross of provisions
should be used.
The following provision has
been added to the table in
Annex 2. ‘Non-performing
loans’ should be reported
gross of provisions.
Eight respondents state that the Return on Assets
predictor of default and that it may disfavour credit
unions. A couple of respondents suggest to replace it
with a Return on Equity indicator instead as it would
better reflect the institution’s ability to restore capital.
Some suggest removing it entirely.
EBA deems the Return on Assets indicator
to be more universal than Return on
Equity and other profitability measures. It
is also a widely used measure of
Five respondents argued that the RWA-ratio should be
excluded because it favours institutions using the IRB-
approach in calculating RWA. Further, it is argued that it
would disfavour smaller, less complex institutions that
use the standardised approach. A dual-approach
regarding RWA is suggested.
The use of risk-weighted measures is well-
established for regulatory capital
purposes. Annex 2 of the guidelines states
that different calibration approaches are
allowed for institutions calculating
minimum own funds requirements using
advanced and standardised methods.
Four stakeholders argued that leverage ratio should not
so is not a good measure of risk. Also, it is argued that it
would disfavour institutions with low risk as they will
have lower capital requirements.
The purpose of including leverage ratio as
a core indicator is to provide institutions
with incentives to hold more capital
irrespective of risk-weighted assets.
Although IPS membership is not a core indicator, the
treatment of IPS members is raised by five respondents.
Some argue that it should be included as a core
IPSs only exist in a limited number of
Member States and so should not be
included as a core indicator. To ensure
consistency with the Delegated Act on
contributions to resolution funds, the IPS
indicator will be kept as an additional
One respondent asked for more guidance on how to
on equity and cost-to-income ratio.
Since the guidelines address DGSs
covering a wide variety of institutions it
may be counterproductive to give too
detailed instructions on how to interpret
high or low indicator values as the
conclusions drawn from these values may
differ depending on business model
and/or banking structure in a given
Some general comments on the core indicators include:
indicators from the income statement are better
indicators of risk, lack of qualitative indicators such as
SREP scores, institution-specific risk should not be mixed
with the risk to the DGS fund.
The anticipated risk-mitigating incentives
of the guidelines are, to a large extent,
related to the structure of the balance
sheet rather than to items in the income
As regards the stated lack of qualitative
factors, the flexible 25% allows DGSs to
add indicators of their choice, including
In addition to charging institutions for the
risk that they pose to DGSs, the purpose
of contributions is to provide DGSs with
funds. Therefore, it is reasonable that the
financial risk to the fund is an integrated
factor of the overall risk weighting.
Question 6. Do you agree
with the option to use
either capital coverage
ratio or Common Equity
Tier 1 ratio as a measure
of capital? Would you
favour one of these
indicators rather than the
other, and why?
Fifteen respondents support the use of CET1 ratio.
Fourteen respondents are silent on this issue. No one
objected to keeping the option of using either CET1
ratio or capital coverage ratio.
The CET1 ratio is a well-established capital
capital indicators in favour of the leverage ratio.
DGSs may increase the relative weight of
the leverage ratio if they consider that it
would better reflect the specific
characteristics of their banking sectors.
Question 7. Are there any
particular types of
institutions for which the
core risk indicators
specified in these
guidelines are not
available due to the legal
supervisory regime of
these institutions? Please
describe the reasons why
these core indicators are
Two respondents mentioned the exemption from
capital and liquidity requirements on solo basis in CRR
(Article 7-8 and 21) as a possible problem. It is unclear
whether in cases where institutions are subject to
exemptions, they should report all indicators on a solo
a waiver from meeting capital and/or
liquidity requirements on a solo basis the
corresponding capital/liquidity indicators
should be calculated at consolidated or
semi-consolidated level. Other indicators
should be calculated on solo basis.
Paragraphs 63-65 amended to
make this issue clearer:
For each member institution
the values of risk indicators
should be calculated on a solo
However, the value of risk
indicators should be
calculated at a consolidated
level where the Member State
exercises the option given in
Article 13(1) of Directive
Question 8. Do you think
that more guidance, or
specific thresholds, should
be provided in these
guidelines with regard to
calibration of buckets for
The vast majority of respondents stated that no more
guidance is needed.
One respondent thinks the guidelines should give
further guidance on a ‘standard approach’. If DGSs
choose a more advanced approach, the guidelines
should not give more guidance.
Defining a ‘standard approach’ risks
limiting the level of flexibility given to
national authorities. The EBA considers
that DGSs should be allowed a degree of
flexibility to be able to accommodate
national banking structures.
risk indicators, or
minimum and maximum
values for a sliding scale
One respondent stressed that the EBA should seek to
apply an evolutionary approach in the guidelines as both
the EBA and Member States will gain experience from
In line with Article 13(3) of Directive
2014/49/EU, the guidelines already state
in paragraph 16 of the ‘Background’
section that they will be reviewed by the
EBA in 2017 and at least every 5 years
Question 9. Do you agree
with our analysis of the
impact of the proposals in
this Consultation Paper? If
not, can you provide any
evidence or data that
would explain why you
disagree or might further
inform our analysis of the
likely impacts of the
Three respondents stated that they would benefit from
The EBA deems that the alternative
Assessment are sufficient.
Two respondents disagree on the wording of the Impact
Assessment which states that using the ‘bucket’
approach would provide banks with true incentives,
implicitly saying the ‘sliding scale’ approach would not.
As stated in the guidelines, the EBA allows
flexibility for DGSs to choose between the
‘bucket’ and the ‘sliding scale’ approach
without preferring one or the other
The wording of Section D
guidelines and recommendations
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My competent authority does not, and does not intend to, comply with the guidelines and
recommendations for the following reasons
Details of the partial compliance and reasoning:
Please send this notification to
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