Response to cP on comprehensive ITS for financial institutions public disclosure

Go back

Disclosure of key metrics and overview of risk-weighted exposure amounts

Disclosure of key metrics and overview of risk-weighted exposure amounts
Please refer to questions 2 and 3.

Disclosure of risk management objectives and policies

Disclosure of risk management objectives and policies
They are.
No discrepancies have been identified.
We agree.

Disclosure of the scope of application

Disclosure of the scope of application
Template LI2 – Column “a Total”. Instructions for completing column “a Total” would be useful for preparers. Indeed, there are instructions for columns “b” to “e” and for rows 1 to 12, but none for column “a”. For example, the instructions should specify if the total in column “a” for each row is equal to the sum of columns “b” to “e”.

Template LI2- Columns “d Counterparty Credit Risk framework” and “e Market risk framework”: Market risk is a component of the counterparty credit risk (CCR). The instructions are not enough specific and clear. For column “e Market risk”: it should be added whether the amount for market risk should be included or not in the column “d Counterparty Credit Risk”. If, the amount for market risk should be included in CCR, then it might appear twice on the same row.
Template LI2 – Row 12 “Exposure amounts considered for regulatory purposes”. A mapping tool related to this row would be useful for preparers.

No discrepancies have been identified.
We agree.
We believe that there is no need for higher standardisation and that rows in template EU LI1 should remain flexible to provide relevant information.

We agree.
4 columns labelled “EU” (EU e1, EU e2, EU f1 and EU f2) have been added. They are neither recommended by the Base standard nor listed as information required in the CRR2 text. What is also of most importance is that the disclosure of this very sensitive information will put European banks at competitive disadvantage in comparison with non-EU peers. To avoid such European gold plating, we strongly suggest deleting these four columns.

Disclosure of own funds

Disclosure of own funds
They are.
We question the relevance of Template EU CC2 on reconciliation of regulatory own funds with audited balance sheet as similar information related to reconciliation between amounts used in the financial statements and amounts used for regulatory purposes is provided by Templates EU LI1 and EU LI2, including own funds elements.

Moreover, we do not believe that Template EU CC2 would - in a more appropriate manner than Templates EU LI1 and EU LI2 - identify the differences related to own funds between the scope of accounting consolidation and the scope of regulatory consolidation.

Therefore, we would suggest deleting Template EU CC2 to avoid any duplication of similar information provided in other templates and, as a consequence, to avoid confusion for users of Pillar 3 disclosures (specific information related own funds shall be requested in EU LI1).
As far as Template CC2 is concerned and following comments on question 15, we do not believe that the template fits with the requirements of article 437 (a).

For EU CCA table of “Own funds instruments and eligible liabilities instruments”, we would like to emphasize that information related to private placements should remain confidential (rows 2a and 37a). In addition, it would be more interesting for investors to select and prioritize the most valuable information by limiting the signposting (row 37a) to the main public placements above a size threshold.
Please refer to question 15.

Disclosure of countercyclical capital buffers

Disclosure of countercyclical capital buffers
They are.
No discrepancies have been identified.
We agree.

Disclosure of the leverage ratio

Disclosure of the leverage ratio
They are.

No discrepancies have been identified.
We agree.

Disclosure of liquidity requirements

Disclosure of liquidity requirements
They are
No discrepancies have been identified.
We agree

Disclosure of credit risk quality

Disclosure of credit risk quality
No comments
No comments
The information expected in table CR1 is described in article 442 (c). Table goes beyond requirements with column m (accumulated partial write-off). We suggest deleting it

Regarding table CQ7, the ITS specify that its legal basis is article 442.c. Nevertheless, article 442.c (and article 442 in general) does not mention the disclosure of information related to foreclosed assets. Therefore, table CQ7 can be requested on the basis of conveying properly the risk profile of institutions but it should be requested only for institutions exceeding the 5% NPL ratio threshold.

EU CR1-A Maturity of exposures goes far beyond article 442.g of CRR2 that requires the breakdown of total loans and advances by residual maturity without split by regulatory approach (IRB / SA) and exposure class. We propose aligning ITS on CRR2 removing this unrequested new split
Table CR2 is going beyond Article 442.f of CRR2.
Table CR2 is also going beyond the NPL Guidelines. Indeed, the full table CR2 seems required by the ITS for all entities whereas, according to NPL Guidelines (the whole CR2 only applies to entities with an NPL ratio above 5%, and a limited number of rows 10-20-30-40-100-110 is required for entities with an NPL ratio below 5%),

To be aligned with FINREP 24.01 and article 442.f of CRR2, the full table CR2 should be required only when exceeding the threshold of the NPL ratio of 5% whereas a version of table CR2 limited to row 10-20-30-40-100-110 should be applicable for institutions below the 5% NPL ratio threshold.

We also would like to alert about a major risk of misunderstanding by investors of templates EU CQ4 and EU CQ5.
Indeed, as required by article 442.e of CRR2, EU CQ4 table on defaulted exposures and provisions by geography encompasses all the exposures, whereas EU CQ5 (table for defaulted exposures and provisions by industry) is restricted to L&A non- financial corporations. Therefore, totals in EU CQ5 are very significantly different in comparison with EU CQ4.
For consistency and clarity sake, we propose to adapt EU CQ5 scope and EU CQ4 with the full scope of FINREP (FIN18), by for instance, adding some additional rows.

Disclosure of the use of credit risk mitigation techniques

Disclosure of the use of credit risk mitigation techniques
They are
No discrepancies have been identified.
We agree

Disclosure of the use of the standardised approach

Disclosure of the use of the standardised approach
They are.
They are.
No discrepancies have been identified.
We agree.

Disclosure of the use of the IRB approach to credit risk

Disclosure of the use of the IRB approach to credit risk
In general, they are. Please refer to the answers below.
In general, no discrepancies have been identified. Please refer to the answers below.
Template CR6 is based on article 452 (g) of the CRR. However, the ITS goes beyond CRR as the CRR article requires to disclose across a sufficient number of obligor grades (including default), but not by PD range. This gold plating applies also to template CCR4
Concerning the Template CR6-A “Scope of the use of IRB and SA approaches”, we welcome the initiative from EBA to include a synthesis template in these ITS presenting the same exposures amount (leverage) with the same exposure classification (IRBA asset classes).

However, the multiplication of amount definition within the Pillar 3 is also a source of complexity for investors (different totals between templates) and burdensome for banks (harder reconciliation exercises). Indeed, Pillar 3 templates uses FINREP (accounting) amounts, COREP (risk) amounts and Leverage Ratio amounts, sometimes gross of provisions and sometimes net of provisions that may lead to significant gaps.

Moreover, in the same context of multiplication of the source (COREP, FINREP, Leverage ratio, etc) in the Pillar 3, we would like to point out that exposures are classified differently in the various ITS templates, leading to confusion and complexity for investors and banks:
• Indeed investors must face complexity of the various definition:
• in CR6-A, all exposures will be split by COREP IRBA asset classes
• in CQ3, all exposures will be split by FINREP asset classes
• in CR4/5 standard exposures will be split by COREP STD asset classes
• These COREP/ FINREP asset classifications have sometimes the same/close name (ex. “Institutions”) but have significant differences in definition leading to significant differences in amounts between 2 templates with the close/same title. This complexity is harmful for a large part of investors not familiar with all the EU regulations.
• These differences in asset classification bring also complexity for banks to understand and implement these regulations, in a context where supervisors are constantly requiring reconciliation exercises to banks (stress tests, loan tapes etc.)
We invite the EBA to harmonise asset classification as much as possible.
We agree.
However, we believe that the detailed level of information related to funded credit protection is too granular with no added value for market participants. Therefore, columns D, E, F and H, I, J, of template EU CR7-a should be deleted for a more readable template.
We believe that the information in this template should be presented in accordance with the classification of exposures before the substitution effect to be aligned with COREP templates.

We agree
ITS is going beyond Article 452.h of the CRR as it does not require columns g “Average margin of conservatism”.

In addition, the granularity of the PD ranges is uselessly excessive.

To be in tune with the CRR (see answer 40) and the data feed mode by the majority of banks, it would be preferable to choose for the use of internal PD ranges. To ensure comparability, it is possible to add a table showing the average PD of each internal scale. In addition, if we had to apply standard ranges, some ranges will be empty due to the feeding method made by the main banks and this would bring misunderstanding and misinterpretation for stakeholders. In fact, the majority of banks would be forced to set up a mapping between the average PD of an internal scale to be linked to standard ranges. Consequently, some ranges of standardised PDs will be empty.
Please refer to question 44.
We do not believe that additional templated on equity exposures and on specialised lending under the slotting approach should be added. Indeed, similar information is already available under existing templates. Moreover, as there is a need to prioritise Pillar 3 disclosures, the scope of equity exposures and specialised lending under the slotting approach is too narrow to develop additional information that would be meaningful for market participants.

Disclosure of specialised lending and equity exposures under the simple risk weight approach

Disclosure of specialised lending and equity exposures under the simple risk weight approach
They are.
No discrepancies have been identified.
Templates CR 10.x meets the requirement based on article 438 (e) of CRR. To be in phase with this requirement, column f (EL amount) should be deleted because it is not requested.
We do not believe that adding a template for equity exposures under internal models approach would be useful to users.

Given the relative low weight of specialised lending exposure, it does not appear relevant to ask such an important granularity with 5 templates (CR10.1 to CR10.5) instead of a single template in the EBA guidelines (GL / 2016/11). Specialised lending weighs less than 0.2% of the RWA on credit risk and counterparty (and 0.1% of the EAD) of French banks.

Disclosure of exposures to counterparty credit risk

Disclosure of exposures to counterparty credit risk
They are
Please refer to the question 53
Template CCR5 does not fully meet the requirements defined in the CRR. Indeed, article 439 (e) specifies "the amount of segregated and unsegregated collateral received and posted per type of collateral […]". It is not asked to distinguish between segregated and non-segregated. The breakdown relates to type of collateral, the use of collateral (SFT or derivatives). So, the template should consist of 4 columns instead of 8
No comments
We believe that to be consistent, it can be important to work on the same basis between template CR8 and CCR7. This means that the approach should be to take into account all of the operations subject to an RWA calculation in IRB approach.
With regard to the central counterparties, the exclusion will allow the reader to have a crossover with some Pillar 3 templates like CCR4.

Disclosure of exposures to securitisation positions

Disclosure of exposures to securitisation positions
They are
No discrepancies have been identified.
We agree.

However, we believe the presentation of exposure amounts in EU SEC1 –securitization exposures in the banking book - could be misleading for investors. We would prefer to disclose non SRT exposures in a separate template, while keeping only SRT amounts in EU SEC1 (we remind that the RWA of non SRT operations (ie. underlying assets) are already considered in Credit risk templates).

Disclosure of use of standardized approach and internal model for market risk

Disclosure of use of standardized approach and internal model for market risk
They are.

However, on EU MR2-A, we strongly question the row 5 ‘Other’. We interpret that this row would include the capital add-ons related required by the supervisor to banks in relation with their internal models. From our perspective, this row should be removed because (i) it is not a CRR2 requirement and (ii) the supervisory reporting (COREP C24 template) does not include this information.
No discrepancies have been identified.
We agree.
We agree.

Disclosure of operational risk

Disclosure of operational risk
They are
No discrepancies have been identified.
We agree.

Disclosure of remuneration policy

Disclosure of remuneration policy
They are
No discrepancies have been identified.
We agree.

Disclosure of encumbered and unencumbered assets

Disclosure of encumbered and unencumbered assets
As a general comment, we would be grateful if:
• The wording could be aligned on the LCR Delegated Regulation (ex: Liquid assets rather than HQLA / EHQLA) and
• The switch from “ABS” to “securitisations” could be done exhaustively (ex: also, on the disclosure templates, as well as in ITS - F3602).
No discrepancies have been identified.
We agree

Other questions

Other questions
We have identified the following issues:

Inconsistencies have been identified between the labels (columns & rows) of the mapping tool file and the annexes (excel template) published on the EBA website.
EU-CR6: In the annexes, column "i" of Table A-IRB (first table) requires the average maturity of weighted exposures in "years", where the same column of the mapping tool requires this data in "days".
EU-CR6: In the annexes, column "j" of table F-IRB (second table) indicates: "Risk weighted exposure amount after supporting factors", where the mapping tool indicates: "Risk weighted exposure amount after SME supporting factor".
EU-CC1: In lines 16, 37, 52, 54, 55 of the annexes, the term "synthetic" has been added to the corresponding wording in the mapping tool with a potential impact on the formula. For example, online 16: "Direct, indirect and synthetic holdings by an institution of own CET1 instruments (negative amount)".
EU-CC1: On line 60, the wording of the appendix indicates "Total Risk exposure amount", where the MT indicates "total risk weighted assets".
EU-LR1: In line 11, the wording is different:
• (Adjustment for prudent valuation adjustments and general provisions which have reduced Tier 1 capital)" in the annexe,
• vs. (Adjustment for prudent valuation adjustments and general credit risk adjustments which have reduced Tier 1 capital) in Mapping Tool.

Inconsistencies in the mapping tool:
EU MR3: Lines 4, 8, 12 and 16 are mapped with COREP template C24 that can include additional capital charge. This would create a discrepancy with table EU MR3 that discloses IMA values, excluding potential add-ons.
EU CR5: the mapping refers to column 200 of COREP template C07 whereas it shoud refers to the difference of column 200 and column 210 (cell a1 should be defined as {C 07.00, r140, c200, s002}-{C 07.00, r140, c210, s002})
EU KM1: line 12 is defined as % in ITS Pillar 3 vs as an absolute amount in ITS COREP C03

Regulatory references: in the draft ITS, some references to CRR / CRR2 are not accurate.
CC1: the ITS (3.5.5.5, § 31) indicate that "line 22 has been modified to reflect the 17.65% threshold, and not the 15% threshold of the existing model, in accordance with Article 48(2)(b) of the CRR2". In fact, it is only a correction of the initial template that was not correct and that is now aligned with the Regulation.

In some instances, instructions would need further clarification.
CC1: the first lines mention "of which: instruments of type 1, 2 or 3". However, the instructions only provide guidance on the first line "Capital instruments and the related share premium accounts". Clarification would be needed on these 3 types of instruments.
Currently, Pillar 3 disclosures are an integral part of the reference document that presents the organisation, the activity, the financial performance and perspectives of an entity. The reference document is publicly issued and posted on the entity’s website. So, provided that the update or correction is significant and will contribute to increase transparency for investors, any update or correction of the information disclosed should follow the same way, i.e. posted on the entity’s website.

Upload files

Name of organisation

FEDERATION BANCAIRE FRANCAISE