We agree that it is important to have a frame for waiver and frequency policies in order to ensure transparency and uniformity in application of the policies and in order to provide consistent and comparable information to stakeholders.
Although banks already have defined process and documentation to assess the policies referred to in the consultation paper, the proposed formal technical guidelines are welcomed as a frame for a constructive dialogue with supervisors.
However we do not believe that a dedicated process should be framed for Pillar 3. Article 431 does not mention such a process. Existing procedures within banks could also include process and criteria for Pillar 3 disclosures.
Assessing all potential disclosures for materiality or proprietary or confidentiality would be unduly burdensome. A more pragmatic approach should be retained such as assessing previous years’ disclosures and changes occurred in the current year.
We question the weight given to the Internal Audit to review the implementation of the waiver and the frequency policies. Internal Audit should be involved in identification of major material risks rather than gain burden with the detailed review of the ongoing application of the policies.
Paragraphs 12 -14 provide sufficient guidance on relevant consideration and criteria to assess information for materiality. A flexible approach is essential to enable institutions to take account of specificities within their organisation.
We agree with the criteria considered in the assessment of materiality. They are not too prescriptive and we do not believe that other principles or indicators should be added.
We agree that assessment as proprietary should be exceptional, but we find the qualifying criteria of “drastically impact” and “fundamentally negatively affect” too onerous.
Concerning the assessment of confidentiality, we agree the principle that this should be exceptional. However we question the application of the notion of “legal analysis” as it is impracticable and unnecessary. Banks are subject to the duty of confidentiality towards their customers
We believe that, a right cost – benefit balance should be assessed between the relevance and usefulness of the information for investors and the negative impact that revealing such information might have on the financial institution, and consequently, on the interests of users and the market.
The indicators in paragraphs 18 are relevant to identifying a global systematically important institution as they are consistent with European rules.
We believe that undue importance is given to the characteristic of size whereas other important factors should be taken into consideration such as a proven demand amongst users for a greater frequency of disclosure, related cost-benefit considerations, the nature and volatility of risks and their mitigation, and the extent of diversification of the organization.
Whereas we agree that an institution should clearly inform of its waiver policy, we do not believe that an institution should provide such details as prescribed in the proposed guidelines.
We appreciate that flexibility is given to institutions regarding location of not material information.
As far as an institution has clearly informed of its waiver policy due to not material information, we believe that the information listed in paragraph 19 should be provided only when relevant from a stakeholder point of view.
Besides we believe that clearly stating and reasoning which information is not disclosed is part of the internal process disclosing information and would not be meaningful for investors. Investors and users of information need a relevant picture of financial institutions.
The use of other techniques highly depends on the nature of the information to be disclosed. Therefore some flexibility should be given to institutions to use appropriate techniques to clarify figures and to accompany disclosures with narrative explanations.
A list of information that might be disclosed more than annually is helpful to serve as a reference and a common basis across banks.
However the frequency to be applied should be in adequacy with the level of granularity of data to be provided. Significant changes in information on risk profile between quarters should be also considered when envisaging the frequency of the disclosures. Except for extraordinary, material changes, quarterly reporting should not be required where financial statements are provided semi-annually or annually. Regulatory disclosures published on a quarterly basis should not be disproportionate to the existing financial information published.
Disclosures on quantitive information on internal models should remain annually.
In particular, in the case of detailed disclosures that generate limited interest from stakeholders (as measured by the number of queries to our investor relations department, for instance) a statement that the risk position has not changed materially from the year-end position should be sufficient.
Finally we question how the EBA guidelines and the Basel Committee review of Pillar 3 disclosures would interact. EBA’s guidelines should not pre-empt the outcome of the Basel Committee consultation.
We do not believe that frequency should be solely based on the indicators specified in paragraph 18. As described in question 10, other factors should be taken into consideration.
We believe time is needed for implementation. Indeed, the final version of the guidelines will not be available before the end of 2014. Moreover, institutions could not start the implementation process as long as competent authorities do not confirm within a delay of 2 months whether or not they intend to comply with the EBA guidelines.
We suggest that the implementation date would be linked to the end of the financial year starting in 01/2015 (i.e. 31 December 2015), meaning that the Guidelines would apply to disclosures published at the beginning of 2016.
When assessing the impact of the proposals, we believe that more focus should be put on the operational issues. Additional investment will be required to generate additional disclosures within a shorter timeline at quarter-end, i.e. IT system developments and development of process of data controls to ensure quality of the data published.
In terms of frequency, the prudential disclosure to be published should be proportional to the existing financial information published on a quarterly basis.