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British Bankers' Associatoin

Subject to our comments below, we agree that the provisions in the draft ITS are generally clear given that they are largely based upon the COREP templates - an approach we welcome. However the EBA should re-issue its consultation based on the revised approach to the leverage ratio framework recently agreed by the Basel Committee on Banking Supervision (‘BCBS’). and whether potential subsequent changes (e.g. to replace CEM with NIMM) need to be considered. Suggesting that the templates merely be updated for BCBS270 seems to ignore the need for at minimum a delegated act to change CRR.

Whilst we recognise the importance of completing the leverage ratio disclosure requirements soon, in order to give banks and their advisers certainty about what is required, we note that the consultation paper was issued well before the early January Governors and Heads of Supervision meeting which reached final international agreement on the design of the leverage ratio and included proposed templates to reflect the changes agreed. Furthermore it is not yet clear to us how the recent BCBS changes, as well as the replacement of CEM with NIMM, will be implemented in the CRR – presumably at a minimum via delegated act?

Consequently we believe it is rather early to reach a conclusion about the design of the European disclosure templates. So the EBA should re-issue its consultation based on the leverage ratio framework recently issued by the Basel Committee on Banking Supervision (‘BCBS’) to take account of the revisions, as well as the likely change to the methodology for capitalising counterparty credit risk exposures.
Subject to our comments below, we generally agree that the template instruction for LRSum are clear and believe that the spread sheet is complete but note a cross referencing error. Paragraph 1.3.c of the template instructions for LRSum refers to column 20 of table LRCom, to us there does not appear to be a column 20 in LRCom. Instead we believe this reference should be to column 20 of LRSum.

The heading for data field LRSum {1;010} includes a reference to collateral. The guidance for the data field does not sufficiently clarify the collateral that should be included here. We would welcome a clarification of the type of collateral that should be captured in this data field and indeed if this is a requirement to gross up for collateral amounts provided against negative derivative fair values.

In addition we are concerned that template LRSum does not fully addresses investor requests for a reconciliation of the leverage ratio exposure measure to the accounting balance sheet. This would most likely result in information being disclosed in a format that addresses investor needs as well as in the prescribed template format which would solely double up information in a less useful format. The final Basel template ‘Summary comparison of accounting assets vs. leverage ratio exposure measure’ addresses this request from investors and we ask the EBA to reconsider the proposed template in the light of the final BCBS rules.
Table LR Com requires banks to make extra disclosures about off balance sheet exposures by breaking them down by material product types. This requirement goes over and above what is required in COREP. We question the usefulness of a breakdown by product type given that other disclosures in the Annual Report and Accounts or the Pillar 3 report are not generally provided at that level of granularity. We also believe that a weakness of the proposed approach is that each bank can make its own determination about materiality and product type. This will lead to a lack of comparability which could render this additional level of disclosure relatively meaningless. We propose that in light of BCBS’s recent revisions to the leverage ratio, the EBA should re-issue its proposals - this would provide a good opportunity for the EBA to work with the industry to develop a breakdown of off-balance sheet exposures that ensures consistency of disclosure as well as providing useful information.

There is room for interpretation of data field LRSpl {EU-30}. We believe that this field relates to the prudential exposure measure. However, in our view the data field description could be clarified to confirm this reading. This could, e.g. be achieved by linking this data field to LRSum {01;20}.
We generally agree with this assessment but note that a full consideration of the incremental impact of the proposal would only be possible in the context of frequency of the proposed disclosure.
British Bankers' Associatoin