Response to consultation on RTS on the disclosure of encumbered and unencumbered assets

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Question 1: Given the balance between transparency and the need to avoid detection of central bank liquidity assistance, do you agree with the disclosure requirements proposed in this RTS? Do you agree with the fields in the Templates that are required to be disclosed? Please provide reasons for your answer.

In our view, the disclosure requirements for small and medium-sized, non-publicly traded banks are already too detailed and too complex. Even the German supervisor has already indicated that it considers the requirements towards small institutions as clearly excessive.
Basically, disclosure requirements are meant to provide current and potential investors with information about the economic situation of the institution. This goal is actually not required for the primary banks. The investors are in fact the customers or members of the cooperative banks. We cannot detect any added value in this case and therefore we see no need for further disclosure requirements.
We demand that the principle of proportionality is also respected in the context of asset encumbrance and that the requirements for small and medium-sized institutions are therefore kept as low as possible. This means that any additional disclosure requirements, that go beyond the existing duties, should not be implemented.

Question 2: Based on your experience with providing information according to the 2014 Guidelines or with using information disclosed as per these Guidelines, do you believe that the use of median values for disclosures offers sufficient relevant information while also addressing potential financial stability concerns or would you prefer disclosure using end of period values? Is there another appropriate value for disclosure? Please provide reasons for your answer.

All the data that have to be reported by the banks are referring to end of period values. This allows for a better comparability of the data (especially on the balance sheet) and should therefore be maintained. If in the context of the disclosure of encumbered and unencumbered assets, it should be median values to be reported, they would have to be determined separately for this purpose. This would be accompanied by further increases in costs (especially for IT) and additional time and effort for the institutions. With the end of period values, however, the actual market value of the securities can be determined much easier in terms of sale etc.

Question 3: Do you agree that the ‘median of the sums’ method is the most relevant to be used in calculating a “Total” or “Sub-total” row in case the median values are used for disclosure? Please provide reasons for your answer.

As we already mentioned above, as part of our answer to question Q2, we reject the determination of median values. Instead, we advocate, for practical reasons, for end of period values.

Question 4: Do you agree with the disclosure of assets of extremely high liquidity and credit quality (EHQLA) and assets of high liquidity and credit quality (HQLA) in accordance with Commission Delegated Regulation (EU) 2015/61 as the most relevant information possible in terms of asset quality of encumbered and unencumbered assets? Please provide reasons for your answer. In case you disagree with the disclosure of the EHQLA and HQLA metrics, please indicate the most appropriate alternative metrics according to you (central bank eligibility, traditional asset quality indicator, risk-weights, internal rating/asset quality step, external rating, or another indicator) for providing relevant information on the asset quality of encumbered and unencumbered assets.

The integration of EHQLA and HQLA information would, in our view, represent a high cost factor, which is, especially for small banks, completely out of any relation compared to the benefits. Our banks would initially have to set a definition of EHQLA papers because these are not relevant for them to date. We therefore advocate that, at least for small and medium-sized banks, the requirements are to be kept to a minimum in a way that a reference to the central bank eligibility or to existing data concerning the asset quality that are already available, such as external ratings, are deemed sufficient.

Question 5: Do you agree with the qualitative disclosure requirements in Template D? In case of disagreement, please identify any requirement you disagree with or state any disclosure requirement you would like to see enhanced or included in Template D.

We do not see any additional benefits for the members of the Bavarian cooperative banks by providing the detailed qualitative information in Template D, and consequently we see no need for the detailed disclosure. The principle of proportionality must be respected in this case, too. We therefore reject these disclosure requirements.

Question 6: Does the proposed annual disclosure frequency meet the needs of users for transparency? Please provide reasons for your answer.

We are considering the annual cycle to providing the clients of the Bavarian cooperative banks with the relevant information as absolutely sufficient. Moreover, the Bavarian cooperative banks do not publish quarterly reports. The yearly rotation must therefore absolutely be maintained, in our view.

Name of organisation

Genossenschaftsverband Bayern e.V.