German Insurance Association - Gesamtverband der Deutschen Versicherungswirtschaft e.V. (GDV)
GDV‘s Comments on the FCD
EFCC Roundtable Session “Scope”
Dr. Axel Wehling
08.09.2008, Brussels
German Insurance Association - Gesamtverband der Deutschen Versicherungswirtschaft e.V. (GDV)
FCD review: Heading to an economic view?
2015
level of
alignment
full economic view
(capital requirements and own funds)
2012
?
2009
2005
?
economic view
accounting view
Basel II
(CRD)
FCD
2002
1970
Solvency II
Basel I
banking
regulation
Solvency I
financial conglomerate
regulation
insurance
regulation
German Insurance Association - Gesamtverband der Deutschen Versicherungswirtschaft e.V. (GDV)
Current situation in identifying a financial conglomerate
(Art. 3 FCD) is not in line with an economic view
Main criteria in identifying a financial conglomerate:
•
activities mainly in the financial sector (> 40 % of balance sheet total)
•
significant activities in different financial sectors:
a) (balance sheet of sector/total balance sheet + SCR of sector/total SCR)/2 > 10 % or
b) balance sheet total of smallest financial sector > 6 billion €
•
supervisors may decide not to regard a group as financial conglomerate if only b) is
fulfilled taking into account the relative size (< 5 %) and the market share in MS (< 5 %)
The current identification of financial conglomerates is:
•
not in line with an economic view (but based on arbitrary accounting figures) and
•
not sufficiently risk based putting the FCD objectives in question.
German Insurance Association - Gesamtverband der Deutschen Versicherungswirtschaft e.V. (GDV)
GDV‘s position on the scope: define financial
conglomerates by proportionality and allow opt-in
•
for groups running no material risks and without impact on the stability of the
financial market, supplementary financial conglomerate supervision is not necessary
•
the GDV advocates to apply the proportionality principle taking into account the
nature, scale and complexity on the basis of a consolidated economic view
•
using risk based measures (e. g. Solvency II capital requirements) would be more
appropriate than purely accounting figures (if available, market consistent valuation is
preferable instead of book values according to local GAAP)
•
the flexible application of the proportionality principle should not hinder to be subject of a
financial conglomerate supervisory regime voluntarily (opt-in clause) if the group falls
below a certain threshold (say, 10 billion €).
German Insurance Association - Gesamtverband der Deutschen Versicherungswirtschaft e.V. (GDV)
Review of the Scope of FCD - When is financial
conglomerate supervision needed at top?
•
if the nature, scale and complexity of risks (= proportionality) of financial institutions
is not captured adequately by
• solo supervision
• sectoral group supervision
•
therefore, financial conglomerate supervision should result from the application of the
proportionality principle based on a consolidated view on the group
•
since financial conglomerates do manage risks in an integrated manner, supervision
should reflect this way of management congruently
German Insurance Association - Gesamtverband der Deutschen Versicherungswirtschaft e.V. (GDV)
Back-up
German Insurance Association - Gesamtverband der Deutschen Versicherungswirtschaft e.V. (GDV)
Review of the Scope of FCD – Which entities/participations
should fall in the scope of a financial conglomerate?
•
the overall risk position of a financial conglomerate is mostly a result of the risk
exposure by its relevant entities
•
as regard capital adequacy calculations including other irrelevant entities does not
change the picture and would only result in additional burden for groups
•
a too wide interpretation of the term “participation” in financial conglomerate supervision
is not appropriate and would not reflect the proportionality principle
relevant entities?
German Insurance Association - Gesamtverband der Deutschen Versicherungswirtschaft e.V. (GDV)
Conclusions on the scope of financial conglomerate
supervision
•
applying the proportionality principle restricts the scope of entities being supervised
additionally within a financial conglomerate
•
a too wide interpretation of participations is not appropriate and results in distortions
•
the costs of financial conglomerate supervision have to be minimised without loss of
reliability and relevance