The members of the EACB welcome the opportunity to comment on the EBA draft Guidelines (GL) on disclosure requirements under Part Eight CRR.
While we appreciate this transparency effort, we are concerned that such an own initiative to impose Pillar 3 disclosure requirements exceeds the mandate of level 1 legislation, where such requirements are fixed.
In addition, some definitions leave room for ambiguity and are difficult to implement. Also, the appropriateness of certain disclosure requirements and their usefulness to the public seem questionable. In many instances the requirements go beyond a feasible and practical level of detail and would not be useful to market participants.
It is our understanding that the draft GL are not meant to directly implement the first stage of the Basel Pillar 3 Review (BCBS 309) in the EU, but rather to provide EU banks with the possibility to reconcile existing CRR requirements with the revised Basel recommendations. This would allow to meet “market expectations” without having to provide two sets of templates, i.e. CRR compliant and BCBS 309 compliant templates.
In light of this, we ask for an appropriate degree of flexibility in applying the GL. In order to allow a proportionate approach it should be up to each individual institution to decide if, and to what extent, abiding to them. This is especially the case so that the draft GL do not go beyond existing legislation. To make the requirements legally binding on all European institutions a CRR amendment would be necessary. Issuing guidelines at this stage would needlessly pre-empt the requisite Level 1 legislation.
The scale and amount of disclosures is continuing to increase significantly. We have serious concerns that the sheer amount of information may be more likely to overwhelm users rather than enabling them to better assess the risks carried by the disclosing bank. Some proposals of the EBA to bring the Basel requirements in line with the CRR, are very demanding (e.g. exposure classes in template EU OV1-B, EU CRB-B).
We would rather encourage EBA to develop the GL with a view to require relevant information only. Furthermore, some of the fixed templates in the GL have such dimensions that they are not fit to be published in common paper or pdf formats (e.g. EU CR1-A or EU CR1-B). Especially these types of templates containing huge amount of information should adhere to principles of proportionality and relevance and also ensure flexibility in format of information.
The principle of proportionality should play a key role in the context of pillar 3 requirements, and while these GL are focussed on G-SII and O-SII in recent years this principle has not been adequately applied to smaller banks. For less complex regionally active banks, in particular, the costs generated by growing disclosure and reporting requirements represents a substantial burden.
For less complex banks that have low-risk business models, the disclosure requirements constitute an especially onerous burden. This burden is not proportionate to the benefit which can be derived from the requirements.
Also timing of disclosure is a critical issue. While the BCBS proposes that prudential data is disclosed at the same time as annual financial statements, the CRR requires the publication of a separate disclosure report soon after the release of the annual accounts. We consider this arrangement sensible and sufficient and we welcome the EBA stance indicating that the publication can occur within reasonable delay (page 21).