The European Banking Authority (EBA) published today three sets of final Guidelines related to the information that institutions in the EU banking sector should disclose under Pillar 3. These Guidelines, condensed into a single document, cover how institutions should apply the concepts of materiality, proprietary nature and confidentiality in relation to the disclosure requirements, as well as how they should assess the frequency of disclosures. These Guidelines aim at enhancing consistency in disclosure practices across the EU and are part of the EBA's work to ensure transparency in the EU banking sector.
These Guidelines provide for a common framework that promotes consistency and enhances transparency on the assessments of materiality, proprietary or confidential nature of information, as well as the frequency of disclosures. They have been finalised following a three-month consultation period that ended in September 2014. The new disclosure framework will improve market discipline and confidence, while remaining flexible enough to take into account the differences in business models of the various institutions across the EU.
More specifically, these Guidelines cover the process that institutions should follow and the criteria they should consider when assessing the use of any waiver of disclosure requirements related to materiality or to the proprietary or confidential nature of disclosures, as well as the frequency of their disclosure. These Guidelines also indicate what institutions should provide if such a disclosure waiver is used, as well as the key information that they should consider if they choose to disclose information more frequently than on an annual basis. This set of information to be disclosed was determined taking into account institutions' practices as well as the users' needs in terms of regulatory information.
The assessment of regulatory disclosures carried out by the EBA since 2009 has in fact shown that the concepts of materiality, proprietary information and confidentiality are implemented differently by institutions across the EU. While these differences may reflect normal divergences among institutions, meaningful and consistent information across the single market reinforces the confidence of stakeholders and market discipline in the EU banking sector. Similarly, a common set of more frequent information across institutions will enhance the consistency and comparability of interim regulatory information available to users.
These Guidelines are in line with the work done at the international level to review regulatory disclosures by institutions. As for materiality, confidentiality and proprietary information, these Guidelines provide additional guidance compared to the work done at the international level.
These Guidelines will apply six months after publication of the Guidelines in the official languages of the EU.
To ensure market discipline (the ability of informed stakeholders to identify risks in financial institutions and to act in a way that signals those risks to other stakeholders), Part eight of the Capital Requirements Regulation (CRR) specifies disclosure requirements that institutions have to comply with. These requirements cover all risk areas (own funds, credit risk, securitisation, market risk, operational risk) as well as information about risk management, exposures, RWA and capital requirements. Part eight of the CRR is the EU version of the Pillar 3 of the Basel II agreement, and disclosures provided in accordance with this Part (and before it in accordance with Annex XII of Directive 2006/48) are often referred to as Pillar 3 disclosures.
These Guidelines have been developed according to Articles 432 and 433 of the CRR, which mandate the EBA to develop guidelines on how institutions shall apply materiality, proprietary and confidentiality in relation to the disclosure requirements laid down in the CRR, and to develop Guidelines on institutions assessing more frequent disclosures of information required by Part Eight of the CRR.