EBA issues requirements on institutions’ Pillar 3 disclosure of interest rate risk exposures

• The harmonised disclosures provide stakeholders with information on institutions’ exposures to interest rate risks in their non-trading books.
• The final draft technical standards put forward comparable disclosures that help institutions comply with the requirements laid down in the revised Capital Requirements Regulation (CRR).

The European Banking Authority (EBA) published today its first draft implementing technical standards (ITS) on Pillar 3 disclosure of institutions’ exposures to interest rate risk on positions not held in the trading book (IRRBB). The final draft ITS put forward comparable disclosures that will help stakeholders assess institutions’ IRRBB risk management framework as well as the sensitivity of institutions’ economic value of equity and net interest income to changes in interest rates. The standards will amend the comprehensive ITS on institutions’ public disclosures, in line with the strategic objective of developing a single and comprehensive Pillar 3 package that should facilitate implementation by institutions and further promote market discipline.

The ITS put forward templates for the disclosure of information on institutions’ IRRBB risk management objective and policy, institutions’ internal assumptions for the calculation of their IRRBB exposure values, and the impact of changes in interest rates on institutions’ economic value of equity and net interest income, with the objective to implement the disclosure requirements of Article 448 of the CRR.

In addition, given the ongoing EBA work on the policy framework for IRRBB, the standards also include transitional provisions that should facilitate institutions’ disclosures while the policy framework is being finalised.

These disclosure requirements apply to large institutions and to other institutions except those that are not listed, in accordance with the provisions of Articles 433a and 433c of the CRR.

Legal basis and next steps

Article 448 of Regulation (EU) No 575/2013 (‘CRR’) requires institutions to disclose, as from 28 June 2021, quantitative and qualitative information on the risks arising from potential changes in interest rates that affect both the economic value of equity and the net interest income of their non-trading book activities referred to in Article 84 and Article 98(5) of the Directive 2013/36/EU (Capital requirements directive- CRD).

The EBA has developed these draft ITS following the mandate in Article 434a of Regulation (EU) No 575/2013. The ITS will complement the comprehensive Pillar 3 standards by amending the Implementing Regulation (EU) No 637/2021 of 15 March 2021 with the objective to facilitate the institutions’ compliance to the disclosure requirements of Article 448 of the CRR. The standards are also fully in line with the Pillar 3 disclosure framework of the Basel Committee on Banking Supervision (BCBS).

These final draft ITS were submitted to the European Commission for adoption.