EBA notes enhanced consistency on institutions’ Pillar 3 disclosures but calls for improvements to reinforce market discipline

02 March 2020

  • The EBA is sharing the conclusions from its assessment of institutions’ Pillar 3 disclosures as another step to foster transparency and market discipline
  • Consistency and comparability of prudential public information by institutions has benefited from the implementation of common disclosure formats
  • The EBA encourages institutions to continue their progress by addressing the main findings and implementing the best practices identified in the Report

The European Banking Authority (EBA) published today its Report assessing institutions’ Pillar 3 disclosures, which aims atidentifying best practices and potential areas for improvement. While the EBA observes overall progress in institutions’ prudential disclosures, some practices may still impair the proper communication of their risk profile in a comparable way, compromising the ultimate objective of market discipline.

Institutions’ Pillar 3 disclosures play a key role in promoting market discipline through the public reporting of meaningful prudential information. The definition and implementation of a common Pillar 3 framework with granular and comparable prudential disclosures is a major step towards reducing asymmetry of information with users of prudential information.The aim of this Report is to assess the implementation by institutions of thePillar 3 framework as well as of identifying best practices and potential areas for improvement that should help institutions enhance their own disclosures and which will be a valid input to the EBA’s policy work on Pillar 3.

The EBA observes that institutions are on the correct path towards achieving consistency and comparability through the implementation of common disclosure formats, accompanied by qualitative explanations that help communicate meaningful prudential information. There is, nevertheless, room for improvement. In particular, the following findings may hamper the ability of users to access, understand and compare the information:

  • Omission of information without any indication of the reasons;
  • Unclear identification and location of Pillar 3 reports that hinders the ability of users to find them;
  • Lack of consistency in the structure of Pillar 3 reports and of some of the information reported, particularly qualitative information;
  • Oversimplification of interim reports compared to end-of-year reports;
  • Lack of reconciliation of quantitative information across disclosure templates or inconsistent ways to calculate quantitative flows of information.

The EBA also observes that whileenvironmental, social and governance (ESG) related information is still scarce and diffuse, institutions are starting to embed sustainability considerations in their strategic agenda and to recognise environmental and climate change risks as emerging risks.

Note to the editors

  1. The assessment covers 12 systemically important credit institutions. It is based on the end-2018disclosure reference date, with some extended and partial assessment of the disclosures as of June 2019.
  2. This Report is based on a subset of standards included in the EBA guidelineson disclosure requirements under Part Eight of Regulation(EU) No 575/2013[1].
  3. and the EBA Guidelines on liquidity coverage ratio (LCR) disclosure[2].
  4. In addition, the Report includes a high-level assessment of the information on sustainability and on ESG risks that institutions are already including in their Pillar 3 reports.

 


[1]EGA/GL/2016/11
[2]EBA/GL/2017/01

 

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