Response to consultation on draft Implementing Technical Standards (ITS) on disclosure for leverage ratio

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Are the instructions provided in annex 2 on the breakdown of leverage ratio exposure of LRCom and LRSpl sufficiently clear? Should the instructions for some rows be clarified? Which ones in particular? Are some rows missing?

There are no rows missing in LRCom and LRSpl. In order to make the requirements clearer, in our view it would be judicious to follow the procedure already spelt out under Q01, i.e. enhancing the instructions on table LRCom by including clear references to the supervisory reporting templates for the leverage ratio; this approach was similarly adopted for the table LRSpl on an individual basis.

The benefit of additional disclosures in the area of off-balance sheet items is not immediately obvious to us; neither do the instructions provide a rationale for such an approach. At this juncture, material product types“ have to be disclosed. We recommend stipulating a sufficiently high "materiality threshold” for the latter. This materiality threshold should be based on the total exposure of the leverage ratio (e.g. similar to the derivative threshold specified under chapter 6( 3 b) ITS on Reporting, at least 2% contribution to the total exposure). From our point of view, to readers of such financial information, the disclosures of product types which contribute to less than 2% to the total exposure sum delivers no additional information benefit.

Furthermore, we object to the disclosure of the LRSplit on the following grounds: First, a disclosure without SFTs and derivatives does not differ in any significant manner from the existing EAD disclosure of credit risks. If external third parties (e.g. investors) wish to compare both ratios, a disclosure would lead to confusion. Furthermore, the break-down is unnecessary for the purposes of calculating the leverage ratio. We assume that the information shall only be used for the purposes of calibrating the leverage ratio. However, such information does not require any disclosure. Furthermore, we object to the disclosure of the year-end ratio since it might give rise to misunderstandings and confusion. The relevant ratio, on the other hand, constitutes an average ratio (sum total of the leverage ratios reported on the quarterly reporting dates divided by four). Any delta between the year-end figure and the average value which needs to be calculated would give rise to questions and leaves too much scope for misunderstandings and confusion."

Our analysis shows that no impacts incremental to those included in the text of the Level 1 text are likely to materialise. Do you agree with our assessment? If not please explain why and provide estimates of such impacts whenever possible.

We do not share this point of view.

Neither for the calculation of the leverage ratio nor for COREP reporting purposes is there a need for a detailed off-balance-sheet item break-down on the basis of material product types. This requirement creates additional costs in the absence of any apparent justification for this. First, for the purposes of a break-down on the basis of main products a dynamic calculation is necessary which requires respective templates. Second, the structure of the data supplied by banking groups is at least partly based on aggregated data. In order to obtain respective information merely for disclosure purposes, these data supplies would have to see a corresponding and costly expansion in order to facilitate an automated determination. Hence, we recommend limiting the disclosure obligation to that information which is included in the COREP templates for the purposes of calculating the leverage ratio. As far as we can see, the additional benefit of such a breakdown is rather spurious, to say the least.

Neither does the analysis apply to the qualitative requirements with regard to the description of an “excessive leverage”. The description of the approaches for monitoring the risk of excessive leverage as well as the description of the factors which had an impact on the leverage ratio during the reporting period constitute comprehensive new disclosures that have to be drawn up from scratch.

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Name of organisation

German Banking Industry Committee