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EBA recommends change to calculation of target level for resolution financing

The European Banking Authority (EBA) has recommended using total liabilities minus covered deposits to calculate the target level for national resolution financing arrangements.02 Nov 2016

The basis of the target level should be changed to align the calculation of the target level with the way that individual contributions to national resolution financing arrangements are calculated, the EBA said in a report to the European Commission.

If the European Commission issues a legislative proposal on amending the target level basis it should consider adjusting the percentage of the target level, and whether a corresponding change to the target level basis would also be appropriate for the Single Resolution Fund, the EBA said.

The European Banking Federation (EBF) said in September that it was not in favour of changing the basis.

"Given the early stage of build up of resolution funds and further reforms in progress … we believe it is premature to consider a revision of the legal basis for the resolution financing arrangements," it said in a response to the EBA's consultation paper on the matter.

"Changing the rules in the course of this build up phase would add complexity and create confusion in a context where the industry is in dire need of stable rules and cost bases," the EBF said.

The EBA's report acknowledged that six of eight respondents to its consultation would have preferred not to change the target level basis. However, it believes it has considered all of the arguments given in favour of this and "few new arguments have been provided to influence the assessment of that option", it said.