17 October 2011
The European Banking Authority (EBA), taking up a work carried by its predecessor CEBS, publishes today its follow-up review of bank's transparency in their 2010 Pillar 3 reports. The review welcomes the efforts made by banks to improve their disclosures and to convey their risk profile in a comprehensive way to market participants. However, the EBA calls for further improvements and the need for greater harmonisation of the disclosures provided.
The main conclusions of the analysis confirmed that banks have made efforts to improve their disclosures and to convey their risk profile in a comprehensive way to market participants. In all areas under review, best practice disclosures have been identified, and the EBA encourages credit institutions to follow them.
In addition, the analysis states that some of the findings included in the 2010 report calling for further improvements remain valid although they apply to a reduced number of banks or concern specific requirements of the CRD (eg. quantitative back-testing information for credit risk, information on counterparty credit risk covering the issue of wrong-way risk, etc.).
Finally, the EBA calls for further efforts to be made for a greater harmonisation of the disclosures provided by the firms, in terms of both timeline and standardisation in the presentation of public data. This would benefit both supervisors and market participants.
This report is a continuation of the work carried by the Committee of European Banking Supervisors (CEBS), the predecessor of the EBA, since 2008. It is important to note that the assessment of the 2010 Pillar 3 disclosures differs from the previous two reviews. First, the scope of the EBA's review was limited in order to focus on areas where the previous review showed that improvements were necessary. Second, in addition to the findings of the EBA's analysis, the current report also includes some observations on how banks dealt with the interactions between International Financial Reporting Standards (IFRS) and Pillar 3 requirements in the specific disclosure areas considered.
The EBA will continue its efforts in assessing banks' Pillar 3 disclosures in the future.