On 8 July 2014, the European Banking Authority (EBA) published an opinion for the European Commission on the macro-prudential rules in the Capital Requirements Regulation (CRR) and the CRD IV Directive (CRD IV).

In the report the EBA assesses the macro-prudential tools available under the CRR and CRD IV against four objectives of macro-prudential policy: these relate to financial stability, the singleness of the European financial market, clarity on the goal and purpose of each tool and transparent disclosure of policy.

The recommendations of the EBA include:

  • Increasing the current 2% cap on the other systemically important institution (O-SII) capital buffer, subject to an impact assessment to determine the appropriate capital level as well as more harmonisation in setting the buffer rate.
  • Analysing the goal and scope of the systemic risk buffer (SRB) and developing guidelines to clarify its use and activation.
  • Aligning the rules related to the setting of loss given default (LGD) floors for exposures secured by mortgages on immovable property with the setting of risk weights for these exposures.
  • Ensuring co-ordination between the different authorities involved in the deployment of macro-prudential measures and clarifying the hierarchy in the activation of the different macro-prudential instruments.