ESRB Recommendation Amending 2015 Recommendation on EU Macroprudential Policy Framework Published in OJ

On December 15, 2017, the Recommendation of the European Systemic Risk Board (“ESRB“) (ESRB/2017/4) (dated October 20, 2017) amending Recommendation ESRB/2015/2 on the assessment of cross-border effects of, and voluntary reciprocity for, macroprudential policy measures was published in the Official Journal of the EU (OJ).

The recommendation states that the framework on the voluntary reciprocity for macroprudential measures set out in the 2015 recommendation should ensure that all exposure-based macroprudential policy measures activated in one member state are reciprocated in the other member states to the greatest extent possible. Relevant authorities in member states may exempt an individual firm with nonmaterial exposure from the application of the reciprocating measures. (the “De Minimis Principle“).

The 2015 recommendation provided no guidance on the threshold to be used by relevant authorities to determine the materiality of exposure. Consequently, where a relevant authority has exempted a firm with nonmaterial exposure, the authority has been able to adopt the threshold it considers appropriate, creating potential divergences in the application of the de minimis principle.

As a result, the 2017 recommendation amends the 2015 recommendation by stating that the relevant authority should propose a maximum materiality threshold at the firm level when requesting reciprocation.