Response to cP on comprehensive ITS for financial institutions public disclosure

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

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

Disclosure of risk management objectives and policies

Disclosure of risk management objectives and policies
Yes.
No.
Yes.

Disclosure of the scope of application

Disclosure of the scope of application
Given the structure of our group (large listed institution with many smaller and both listed and non-listed subsidiaries), we would appreciate further specification on the application of the proportionality principle, in the light of the new differentiation criteria (small and non-complex, other, large institutions; listed and non-listed), and its impact on the scope and frequency of disclosure requirements. Furthermore, how is this principle applied to the smaller subsidiaries when they face a larger group reporting requirement?
No.
Yes.

Disclosure of own funds

Disclosure of own funds
Yes.
No.
In general, we consider the templates and instructions to be clear. However, the cross-references for a full reconciliation of accounting and regulatory own funds in column (c) of the template EU CC2 might not be meaningful for banks with a substantial minority interest as IPS adjustments and regulatory adjustments apply. Those adjustments are already dis-closed in the Template for Total Equity (based on CRR Art. 436 b) in order to ensure a comprehensive reconciliation of IFRS equity to CRR own funds. Consequently, the increase in transparency is likely to mislead investors/external parties, and additional clarifications have to be included to fully justify those differences. In this context, we would suggest the EBA to reconsider this additional column, and avoid additional disclosure requirements which will not be beneficial to third parties.
No.

Disclosure of countercyclical capital buffers

Disclosure of countercyclical capital buffers
Yes.
No.
Yes.

Disclosure of the leverage ratio

Disclosure of the leverage ratio
Yes.
Positions marked yellow in the Template LR2 are not correctly mapped to the leverage re-porting template C 47.00.



Yes, but on this occasion we would like to refer to our statement on the ITS on supervisory reporting requirements (question 20.3), which has a direct impact on the disclosure requirement:
The new reporting requirement is unduly burdensome and cost intensive (with system and resources constraints) and not at all proportionate to the presumed window dressing allegation without concrete evidence. Also, the simplicity of the leverage ratio as a simple non-risk-based backstop tends to disappear.
Furthermore, this new requirement is in direct contradiction with other EBA mandates (such as the cost-benefit-assessment) for small and non-complex institutions, as many savings banks within a group or IPS are indirectly affected.
In addition, we would like to point out that ESMA has introduced a transaction based reporting for SFTs, where detailed information on many attributes (such as type, date, amount and rate) of SFT must be reported. Based on the information received, competent authorities and the EBA should be able to investigate whether an institution may be involved in window dressing related activities. If this data shows a strong indication of activities related to window dressing, ESMA may forward the information to other authorities (such as the competent authorities or the EBA) for further investigation.

Disclosure of credit risk quality

Disclosure of credit risk quality
The consultation paper refers to EBA/GL/2018/10. The reporting template of these guidelines provide for the reporting of the “gross carrying amount”, whereas the draft ITS on reporting refers to the “accounting value”. We ask for the use of uniform terms.

EU CQ5: What is the scope of the template? Reference is given against F06.01, which contains non-trading loans and advances to non-financial corporations only, however instructions for CQ5 do not specify limitation to non-financials only. Please clarify the scope of the template.
EU CQ6:
- Row 070 – Accumulated impairment for secured assets – what is the treatment of accumulated impairment for partially secured instruments?
- Row 020 – of which: secured – please confirm that this row should include secured amount of gross carrying amount (including secured part of partially secured deals). Please explain the treatment of overcollateralization – should these cases be capped at gross carrying amount, having in mind it is “of which” position?
- Row 110 – “of which value above the cap” – please provide further details what is value above the cap? Is it the difference between row 090 and 020 (which would assume potential capping to Gross Carrying Amount in case of collateralization), or is it the difference between row 090 and market value of collaterals used. If it’s the lat-ter, please take into consideration that column split request presentation of collateral per categories which are related to exposure only (performing/non performing and days past due bucket), so in order to present collateral in such a way, some allocation has to be assumed, at lease to Gross Carrying Amount (like requested in row 020).
- Rows 040-060: Does LtV ratio calculation assume collateral allocation to deals? Please provide further details on how to treat cases when one collateral covers 2 different loans (or possible m:n relationships). Please give further instructions on how a potential off balance (not yet disbursed part of the loan) should be treated in LtV calculation?
Yes. Template for NPLs (e.g. EU-CR2) requires disclosure even if the NPL-Ratio is < 5 % (though a reporting is not required). This represents a tightening of existing regulations. We ask for requiring a disclosure of NPLs only if the NPL-ratio is above 5 %. The disclosure template EU CR2 e.g. refers to FINREP template 24.1. This template is part of the reporting requirements only if the NPL-ratio is above 5 %. Template EU CR2-B of EBA/GL/2016/11 corresponds to the requirements of Art. 442 (f) CRR II.
Yes.
Yes.

Disclosure of the use of credit risk mitigation techniques

Disclosure of the use of credit risk mitigation techniques
EU CR3: The requirement in Annex 22 says that all CRM techniques under applicable accounting framework should be considered, regardless whether these techniques are recognized under CRR, implying that CRR/Basel collateral eligibility shouldn’t be taken into consideration (which is in line with the reference given to FINREP tables F05.01/13.01/18.00). However, the second part of the requirement “including all types of collateral, financial guarantees and credit derivatives used as credit risk mitigants to reduce capital requirements” implies that only CRR/Basel eligible collaterals should be taken into consideration, as only those are reducing capital requirement. Please consider rephrasing the second part of the definition.
No.
Yes.

Disclosure of the use of the standardised approach

Disclosure of the use of the standardised approach
EU CR5: In the definition given in Annex 24, “Institutions shall disclose the information on the allocation of risk weights within the respective exposure class according to Part three, Title II, Chapter 2, Section 2 of CRR”, implying that only the exposure that is subject to credit risk (without counterparty credit risk) should fall under the template. However, EU CR5 I referenced to C07.00, column 200, which also includes exposures subject to counterparty credit risk. Please clarify the scope of CR5.
No.
Yes.

Disclosure of the use of the IRB approach to credit risk

Disclosure of the use of the IRB approach to credit risk
EU CR6-IRB Approach: In the instructions in Annex 26, in point 2 the part “or data on equity exposures under the Simple risk weight approach” is redundant, as all equity exposures are excluded from this template. Additionally, reference to Article 167 in point 2, table item (e) should be removed.
- EU CR6-A – IRB Approach: In Annex 26, in description of column (d), part “exposures under all A-IRB approaches for equity exposures” is different than the instructions for template C08.07, where is stated: “immaterial equity exposures not included in columns 0020 or 0040”. Aligned definition needed.
No.
Yes.
Yes.
No additional drivers detected.
Yes, the standardization of PD ranges increases consistency and comparability.
The template provides appropriate relation on the external rating equivalent.

We do not find it necessary.

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
Yes.
No.
Yes.
No.

Disclosure of operational risk

Disclosure of operational risk
Yes.
No.
Yes.

Disclosure of remuneration policy

Disclosure of remuneration policy
The requirements set out in the instructions and tables are completely overshooting the objectives set out in the EBA Guidelines on sound remuneration policies under Articles 74(3) and 75(2) of Directive 2013/36/EU and disclosures under Article 450 of Regulation (EU) No 575/2013.
Proposed questions do not require disclosure of “sufficient general information” as set out in mentioned regulation, but require detailed information not necessary to have in such detail, in the Remuneration Policy. They require a disclosure of names, mandates, and a detailed description of performance management linked to variable remuneration, bonus pool guidelines, explanations on internal rules, internal governance, and the entire cycle of HR policies and practices, as mentioned, not only required by the Remuneration Policy.
Proposed tables and templates do not provide a clear distinction between management levels. As credit-institutions’ internal organization consists of multi-level hierarchies, a clear terminology needs to be used (e.g. instead of “management function”-“management board”, etc.). It is not clear how tables are connected to each other, in order to first of all under-stand the requirements and secondly provide consistent reporting (e.g. some tables have totals, some don’t).
Throughout all the tables it is not clear whether there is request for a Headcount or FTE number, when it comes to the employees. The terminology used will cause misunderstanding of requirements (e.g. guaranteed variable remuneration is not allowed, only in the form of a first year sign-on bonus), therefore more to the point and clear terminology would be necessary. Following this terminology, the disclosure tables should be understood as trick questions, and would lead to incorrect reporting. The questionnaires need to take into account that the tables need to be filled in by more than 100 entities, and therefore very simple, clear terminology is paramount. A clear distinction needs to be made between the number of staff and amount of payment, when it comes to special payments. Preferably changing the structure of the sentence in a way that it is very obvious.
Throughout all the tables it is not clear whether the historical payments are necessary, or the payout year, it needs to be kept in mind when variable remuneration can be paid out for a performance year. The timeline of the requirements needs to be more clearly specified.
In the table: Remuneration awarded for the financial year – the requirements with regards to separation of deferred parts per type, are structured in an unnecessarily complicated way (e.g. instead of asking for a deferral after each type, we would propose – amount of deferral – of which cash, or instruments, etc.)
Template REM 3: Deferred remuneration – is completely misleading and unclear. It is not clear whether outstanding payments are required from previous years, payout in the reporting year or future payments. The timeline for reporting is completely unclear. We would recommend moving the types of employees to the columns and requirements and types of payments to rows, for more clear understanding of requirements.
Two tables Rem1 and Rem5 have overlapping requirements for MRT’s, but are not keeping the consistency of reporting (e.g. what is the point of reporting identified staff per business areas and then in the other table asking to classify them in one column as “other identified staff”, when a simple sum formula can be added to the first table to provide this figure). Overall the amount of information requested in the tables, as well as the lack of consistency between the tables will just overcomplicate the entire process and lead to incorrect reporting.
REM4: Remuneration of 1 million EUR or more per year – again no clarification of what value needs to be entered (Headcount or FTE).
Recommendation: if additional reporting requirements are needed, we recommend the use of old tables which would be amended accordingly. The process of disclosure requires a very complicated coordination on a group level, instruction and guidance for the consolidated subsidiaries, etc. Therefore, sticking to “old” (from previous years) templates which would be only supplemented by necessary requirements by new regulation would be more user friendly and would enable institutions to successfully reach the objectives of the disclosure on remuneration policy.
For REM3: deferred remuneration – it would be beneficial and very helpful if we could be provided with an example of what needs to be reported in which column, as the table is very hard to read.
Marking remuneration in a graphic and linking to the specific cell in the table, as well as giving an example of years (timeline) would provide much needed clarity.
In order to compose mentioned templates, one must have a detailed understanding of the payroll systems, calculations and administration. Please, refer to the answer above for more details.
No, we do not agree. As already mentioned, the requirements set out in the instructions and tables are completely overshooting the objectives set out in EBA Guidelines on sound remuneration policies under Articles 74(3) and 75(2) of Directive 2013/36/EU and disclosures under Article 450 of Regulation (EU) No 575/2013.

Disclosure of encumbered and unencumbered assets

Disclosure of encumbered and unencumbered assets
Yes.
No.
No.

Other questions

Other questions
EU CR 5 – please revise reference to COREP (see response to question 34).
EU LR2 - please revise reference to COREP (see response to question 22).
In order to avoid misunderstanding between COREP templates name and scope, please con-sider adjusting titles of templates C08.03, C08.04, C08.05, C08.05b to exclude wording “counterparty credit risk and free deliveries”, as this type of risk is out of the scope of the mentioned templates.
A statement in the same location as the disclosure, and/or an additional page in the disclosure report, describing the nature of the change and the effects.

 

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