ESBG cannot support a further breakdown of categories in template A as the underlying data re-quirements are already extremely complex involving data managed in different divisions such as Risk, Accounting, ALM, Liquidity etc. Additionally, as mentioned above the information provided is extremely sensitive and more granular disclosures may have extensive unintended negative repercussions on reporting entities. ESBG also do not believe that there is any obvious added value of providing additional information.
The preparation of the disclosures would become too time and resource consuming, especially during the initial period where financial institutions need also to tackle new reporting requirements in relation to Basel III reporting requirements such as the Leverage Ratio and also FinRep, whilst working extensively on the AQR, the EBA Stress Test and various national quality review initiatives.
It is the understanding of ESBG that no uniformly defined quality indicator exists currently. Thus there is a risk of including information on the quality of the assets as users of the information would not be able to interpret the data disclosed by different entities in a comparable manner. We therefore do not believe that it would be appropriate to include this type of information in the disclosures. Should a uniformly defined quality indicator be developed in the future then information on the quality could be included if demanded by the users of the information.
ESBG believes that for financial institutions that do not have a large repo business it may be possible to extract this information by considering 040 together with the delta between line 010 and 040 in conjunction with C 040. This could result in an adverse effect on the financial institution compared to other financial institutions.
ESBG is concerned that mandatory disclosures of this information could result in misinterpretations of the data. For collateral received where encumbrance is not an option due to technical reasons a user of the disclosures may incorrectly draw the conclusion that the collateral received is classified as junk.
ESBG also questions the information-value to a user of the disclosures in obtaining information regarding collateral which cannot be used for encumbrance since this collateral cannot be realised in case of an entity’s insolvency.
ESBG supports the proposed level of granularity of Template B and is not convinced that additional granularity of the information provided in Template B would provide information that is more relevant to the reporting of encumbered and unencumbered assets. It is the understanding of the ESBG that collateral swaps with Central Banks are very rare and we do not believe that the disclosures of these would provide any added value to the disclosures.
ESBG supports a qualitative presentation of the information in Template D rather than the current proposal in Template C. These disclosures are highly sensitive and as disclosures on collateralised liabilities are already disclosed in the Annual Report ESBG is concerned that the proposed disclo-sures from the EBA could result in misinterpretations of the data provided.
As financial institutions will not have sufficient data available to calculate median values for 2014 ESBG would ask that for the purposes of the 2014 disclosures financial institutions prepare values based on point in time for the year-end reporting figures. Going forward we would favour the re-porting of median values in order to avoid introducing a volatility component to the disclosure, a median value is a more stable view of the level of encumbrance.
ESBG would ask that the EBA provides a very clear statement to the effect that non-disclosure of Emergency Liquidity Assistance by Central Banks should not be disclosed so that there is no risk of ambiguities or misinterpretations. ESBG is very concerned that entities will be required to provide highly sensitive business information as a result of the narrative disclosure requirement.
ESBG agree with a disclosure time lag of no more than six months after the publication of the fi-nancial statements.