The European Banking Authority (EBA) published today its final draft Regulatory Technical Standards (RTS) on the disclosure of encumbered and unencumbered assets for the provision of transparent and harmonised information on this topic, as laid down in the Capital Requirements Regulation (CRR). Through the disclosure of asset encumbrance based on a consistent definition and formats, these standards will enable market participants to assess the information provided by institutions in a clear and consistent manner.
In particular, these draft RTS set out the data which is required to be disclosed on encumbered and unencumbered assets and the relevant templates and substantially enhance the level of disclosure compared to the EBA Guidelines
currently in place.
These draft RTS are addressed to institutions and provide three disclosure templates to be completed and published, along with line-by-line instructions for completing them. These templates are designed to show the amounts of encumbered and unencumbered assets of an institution and differentiate between assets that are needed to support existing funding or collateral needs and those that are available for potential funding needs. Institutions will have to disclose information in accordance with these templates, and provide some additional details on the importance of encumbrance in their individual funding model.
Smaller institutions which do not have material levels of asset encumbrance, as well as investment firms, are exempt from disclosing information on the quality of encumbered and unencumbered assets, so as to avoid incurring disproportionate costs. Also, to facilitate the disclosure of the quality criteria for large institutions, these requirements only need to be implemented one year after the entry into force of this Regulation.
Legal basis and background
The proposed draft RTS have been developed according to Article 443 of Regulation 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms (CRR), which mandates the EBA to develop draft RTS on unencumbered assets taking into account the European Systemic Risk Board's (ESRB) Recommendation D (ESRB/2012/2 of 20 December 2012) on the funding of credit institutions.
When these draft RTS come into force, they will replace the current EBA Guidelines on disclosure of encumbered and unencumbered assets.