Submission #24

Kingdom Bank

Question 4: Do respondents have any comment relative to the proposed LCR related items prone to rapid change?

For non-systemically important institutions the benefits of disclosing this information more frequently than annually are unlikely to outweigh the costs. Such disclosures would most likely require review and approval by the governing body which adds a significant burden on smaller institutions.

Question 11: Do respondents consider that the methodology proposed for the LCR disclosure template is, from a practical point of view, operationally feasible meaning that the accuracy of the daily reporting observations for the calculation of the averages can be ensured? Do respondents consider that this operational feasibility could depend on the size of the credit institution or could be different in the case of solo or consolidated data?

Although the production of the LCR is feasible from an operational point of view, the cost of doing so would be significant for many smaller institutions. In our case this has been estimated at an increase of 1% in annual operating expenditure. Whilst this would be sustainable for a short period of time (e.g. during a liquidity stress), it would add a significant and unsustainable cost burden over the long-term.

Question 13: In the elaboration of this CP, the EBA has considered several policy options under three main areas: a proportionality approach in the scope of application, items for a higher disclosure frequency and methodology for the calculation of the disclosures. Do respondents have any particular view on the assessment conducted on these policy options?

Proportionality: A simplified disclosure template would minimise the time and cost reporting burden on smaller institutions, which is already significant. The sign-off process forming part of the LCR production could then be targeted at the key components of the LCR. However, if a comprehensive template were to be required, there would be additional time required to consider whether items are material for each (daily) submission.
Frequency: For non-systemically important institutions the benefits of disclosing this information more frequently than annually are unlikely to outweigh the costs. Such disclosures would most likely require review and approval by the governing body which adds a significant burden on smaller institutions.
Methodology: Although the production of the LCR is feasible from an operational point of view, the cost of doing so would be significant for many smaller institutions. In our case this has been estimated at an increase of 1% in annual operating expenditure. Whilst this would be sustainable for a short period of time (e.g. during a liquidity stress), it would add a significant cost burden over the long-term. The benefits of this methodology would appear to be disproportionate to the associated costs for non-systemically important institutions.

Question 14: Do respondents think that the opportunity of having a simplified disclosure template for smaller credit institutions should be assessed? This simplified LCR disclosure template could comprise for example the ratio itself, the numerator and the denominator as key ratios and figures of the LCR, in the sense of Article 435 (1) (f) CRR. What arguments could respondents provide to justify that the LCR ratio itself, its numerator and its denominator are the only key ratios and figures of the LCR which are required to be disclosed by smaller credit institutions? More generally please provide any argument in favor or against a simplified template, and if you believe a simplified template for LCR disclosures is relevant, please indicate which type of information you would like to have disclosed in that template. What specific criteria would respondents suggest to identify those smaller institutions for which a simplified disclosure template could potentially be disclosed?

A simplified disclosure template would minimise the time and cost reporting burden on smaller institutions, which is already significant. The sign-off process forming part of the LCR production could then be targeted at the key components of the LCR. However, if a comprehensive template were to be required, there would be additional time required to consider whether items are material for each (daily) submission.
For non-systemically important institutions the disclosure of the key components of the LCR (LCR ratio, numerator and denominator only) based on quarter-end observed data is considered to be sufficient for external stakeholders.

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Name of organisation Kingdom Bank