The European Banking Authority (EBA) launched today a consultation on Draft Implementing Technical Standards (ITS) on Supervisory reporting requirements for leverage ratio. These ITS, which will be part of the EU single rulebook, intend to specify the main features (formats, frequencies, IT solutions) of prudential reporting to be applied by financial institutions in Europe. The consultation runs until 27 August 2012.
These ITS will become part of the general supervisory reporting framework. In this respect, they are an addition to the draft ITS text proposed in the Consultation Paper on supervisory reporting for institutions (CP50) published on 20 December 2011 and need to be read in conjunction with them.
The reporting of the data will allow for a comparison of the leverage ratio measure and its components across European financial institutions. In addition, it will serve for the future assessment and calibration of the leverage ratio on which the EBA shall report to the European Commission.
Main features of these ITS
These ITS aim at providing national authorities with harmonized information on the leverage ratio and its components using uniform reporting formats developed by the EBA.
The proposals put forward in this consultation will serve at least two purposes. Firstly, the leverage ratio will be part of the supervisory review by national authorities in order to assess the risk of excessive leverage in its institutions. Secondly, the reporting will give the EBA the ability to quantitatively assess the impact and effectiveness of the leverage ratio, on which the EBA is required to produce a report by 2016. Furthermore, these ITS will allow the EBA to assess any potential calibration of the leverage ratio if needed.
To take into account that the leverage ratio should apply to institutions, which differ in size, nature and complexity, it has been deemed necessary to apply the requirements for more detailed reporting of the components of the leverage ratio in a proportionate manner.
The scope and level of application of these ITS are in line with the Capital Requirements Regulation (CRR) text. The reporting frequency is therefore proposed to be on a quarterly basis, in order to be aligned with the proposed CRR requirements for calculation of the leverage ratio.
These ITS have been developed based on the template used for the Quantitative Impact Study (QIS) by the Basel Committee on Banking Supervision (BCBS) and on the COREP and FINREP guidelines. Furthermore, the proposed reporting is, as far as possible, based on existing accounting and prudential measures already used for determining own funds and minimum funds requirements.
Next steps
These draft ITS have been developed on the basis of the European Commission’s legislative proposals for the CRR/CRD IV. Following the end of the consultation period, and to the extent that the final text of the CRR changes before the adoption of the ITS, the EBA will adapt its draft ITS accordingly to reflect any developments.
A separate consultation on a data point model containing all the relevant technical specifications necessary for developing an IT reporting format will be published in the second half of 2012.
Based on the CRR proposals and these ITS, institutions are required to comply with the new reporting requirements as of 1 January 2013. In the current timeline for the implementation of the CRR/CRD IV, the first regular reporting period is expected to be for the first quarter 2013.
Consultation process
Comments on this paper can be sent to the EBA by e-mail to CP-2012-6@eba.europa.eu by 27 August 2012, indicating the reference EBA/CP/2012/06.
All contributions received will be published unless you request otherwise.
A public hearing will take place at the EBA premises on 18 July from 9.30am. To register, click here
Notes to editors
- The leverage ratio is a new monitoring tool, which is introduced in the CRR/CRD IV package. The CRD IV specifies that institutions and competent authorities shall evaluate the risk of excessive leverage and that indicators for this risk shall include the leverage ratio determined in accordance with Article 416 of the CRR. The leverage ratio is defined as Tier 1 capital divided by a measure of non risk weighted assets.
- The CRR/CRD IV package (the so-called Capital Requirements Regulation - ‘CRR’- and the so-called Capital Requirements Directive – ‘CRD’) sets out prudential requirements which are expected to be applicable as of 1 January 2013. The package translates in European law international standards on bank capital agreed at the G20 level (most commonly known as the Basel III agreement). One of the major achievements will be the creation of a Single Rule Book - a set of rules directly applicable in all EU member states - that will improve both transparency and enforcement in the EU banking sector.
- Draft ITS are produced in accordance with Article 15 of EBA regulation which provides for their adoption by means of regulations or decisions. According to EU law, EU regulations are binding in their entirety and directly applicable in all Member States. This means that, on the date of their entry into force, they become part of the national law of the Member States and their implementation into national law is not only unnecessary but also prohibited by EU law, except in so far as this is expressly required by them.