Reporting & disclosure
Reporting
The changes to the calculation of risk weighted assets in the CRR III also affect the regulatory reporting requirements via the ITS on Reporting. While this is true for all the changed approaches, three topics stand out in which banks face tougher reporting requirements:
- ESG (Environmental, Social, and Governance) risks will be included in regulatory reporting, also to provide the EBA with the necessary data for the development and calibration of future pillar 1 measures
- Market risk reporting: institutions must differentiate between trading and non-trading book positions exposed to foreign exchange and commodity risks, including separate reporting for positions managed by trading desks using alternative internal models
- Crypto assets: new reporting requirement for positions in crypto assets
Implementing these new requirements, particularly ESG reporting, is challenging. Adequate preparation time is essential, given the detailed collection and supplementation of data needed to meet ESG reporting standards. Institutions must define data requirements, address technical aspects, and identify and address gaps in data budgets due to the new reporting and disclosure mandates. A comprehensive approach is vital to ensure seamless implementation of CRR III and adherence to reporting standards.
Disclosure
CRR III brings significant revisions to both, the content and the means of pillar 3 disclosures. While the first part includes the changes to pillar 1 RWA calculation in the disclosure framework and aligns the existing requirements with the new approaches, the second part seeks to increase the usefulness of disclosed information for users while at the same time decreasing the administrative burden for (smaller) banks:
Changes to the means and methods of disclosures
In order to increase the usefulness of disclosed information while decreasing the administrative burden for banks, two measures are introduced:
- Collection of all disclosure reports in a publicly accessible homepage run by the EBA: In order to achieve this goals, both large and other institutions are mandated to electronically submit their disclosure reports to the EBA no later than the date of publishing their financial statements or reports for the corresponding period. Only information related to remuneration may be submitted separately, with a deadline of no later than two months after the publication of financial statements. EBA ensures that disclosures on its website match the information submitted by institutions. However, the responsibility for accuracy remains with the institutions. This increased transparency is expected to enhance data comparability, encourage market discipline, and reduce costs for market participants seeking prudential information.
- Disclose information on small and non-complex institutions, based on their regulatory reporting: EBA is mandated with preparing a report on the feasibility of using the information reported by institutions to competent authorities (in particular COREP, FINREP) to produce the information to be disclosed itself. The aim is to publish this information on the EBA website, thereby reducing the disclosure burden for SNCIs. Small and non-complex institutions are only required to submit essential reporting information to their supervisory authority, without the obligation to publish related disclosures. The supervisory authority will then forward this information to EBA, reducing administrative costs associated with public disclosure.
New or revised disclosure requirements:
Under CRR III there are new and revised disclosure requirements for banks. For instance, all institutions, excluding small and non-complex ones not publicly listed, must disclose information on ESG risks. Additionally, institutions must disclose information regarding their collective exposure to shadow banking entities or their exposure to crypto assets and related activities.The summary below outlines the disclosure requirements and their frequency, segmented by the size of the institution.
