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    EBA Guidance on Impact of CRR Quick-Fix on Reporting and Disclosures

    EBA revised the draft implementing technical standards on supervisory reporting as part of the reporting framework 3.0. Along with this, EBA published the guidelines on supervisory reporting and disclosure requirements and an amendment to the guideline (EBA/GL/2018/01) on uniform disclosures under the Capital Requirements Regulation (CRR). These publications provide clarifications on the application of certain "quick fix" adjustments, to disclosures and supervisory reporting by institutions, that were introduced in CRR in response to the COVID-19 pandemic.

    EBA is amending the technical standards on supervisory reporting to accommodate minor technical changes on own funds, non-performing exposure (NPE) backstop, and leverage ratio. The guidelines on supervisory reporting and disclosure requirements clarify how to report for the CRR "quick fix" amendments that have an impact on templates related to the leverage ratio, own funds, and credit risk. EBA is amending guidelines on uniform disclosures regarding the transitional period for mitigating the impact of the introduction of IFRS 9 on own funds, to provide clarity to institutions and users of information on implementation of a part of the disclosure requirements included in the CRR "quick fix." The CRR "quick fix" Regulation 2020/873, which amends CRR and CRR2 regarding certain adjustments in response to the COVID-19 pandemic, was published in the Official Journal of the European Union in June 2020. The CRR "quick fix" is part of a series of measures taken to mitigate the impact of the COVID-19 pandemic on institutions across EU member states. In addition to the flexibility already provided in the existing rules, the CRR "quick fix" introduces certain adjustments to CRR, including temporary measures, intended to enhance credit flow to companies and households, thus supporting the economy of EU.

    Revised Draft Technical Standards on Supervisory Reporting

    The CRR "quick fix" introduces amendments to regulatory requirements that have an impact on the supervisory reporting framework version 3.0. Many amendments of the CRR "quick fix" are reflected in the new technical standards for supervisory reporting under CRR (EBA/ITS/2020/05), but there is a need to further amend the technical standards to accommodate minor technical changes on own funds, NPE backstop, and leverage ratio. The amendments include the following:

    • Own funds (including NPE backstop)—Two rows were added to template C 05.01 to capture the overall effect of the application of Article 468 of CRR as well as to isolate the (net) amount of unrealized gains and losses removed from the common equity tier 1 (CET1) in accordance with this article. Three rows were added to template C 05.01 to isolate the effect of the transitional provision on the recognition of expected credit losses in the CET1. In relation to the NPE backstop, the instructions in Annex II to the technical standards were revised to include the part of NPEs benefiting from public guarantees granted in the context of the COVID-19 pandemic in accordance with Article 47c(4) of the CRR as amended by Regulation 2020/873 in rows 0050 and 0100 of template C 35.02.
    • Credit risk—Minor amendments to the instructions of template C 07.00 for column 0010 clarify that where institutions make use of the derogation of Article 473a(7a) of CRR, they shall report the amount ABSA that is risk-weighted at 100% in the exposure class "other items" in that column.
    • Market risk—Minor amendments to the instructions clarify that the values to be reported in template C 24.00 of Annex I to the technical standards shall take the effects of Article 500c of CRR into consideration. The institutions that benefit from the exclusion of certain overshootings from the calculation of the addend should disregard those excluded overshootings when they report the number of overshootings, the applicable multiplication factors, and consequently also the components of the own funds requirements.
    • Leverage ratio—The instructions for row 0280 of template C 47.00 have been updated to indicate that the amounts to be added back to the leverage ratio exposure measure in accordance with Article 473a(7a) of CRR "quick fix" should be reported there. In accordance with Article 473a(8) of CRR quick fix, a new row 0480 has been included in template C 47.00 in order to require institutions that have decided to apply the transitional arrangements set out in Article 473a of CRR to report the leverage ratio they would have if they were not to apply these transitional arrangements. In order to be able to map reporting to disclosure requirements, a new row 0490 has been added in template C 47.00 to report leverage ratio. Rows 0370 and 0450 of template C 47.00 have been deleted, as they are now redundant, and instructions for the old row 0490 have been updated.

    The amendments have an impact on the Annexes on own funds (Annex I and II) and leverage ratio (Annexes X and XI). EBA intends to resubmit to EC the complete technical standards on supervisory reporting framework version 3.0, including all its annexes, with the necessary amendments in instructions and templates.

    Guidelines on Supervisory Reporting and Disclosure Requirements

    The CRR "quick fix" introduces amendments to regulatory requirements that have an impact on supervisory reporting, mainly on the supervisory reporting frameworks versions 2.9 and 2.10. The objective of these guidelines is to provide institutions with the necessary clarifications on how to apply the Regulation No 680/2014 in its current reporting framework Versions 2.9 and 2.10 to report elements of credit risk, own funds, and leverage ratio set out in the CRR "quick fix," as well as on how to apply the Regulation 2016/2005 to disclose elements of the leverage ratio set out in the CRR "quick fix." The guidelines comprise a set of instructions covering the impact of the CRR "quick fix" on the reporting of credit risk, market risk, and own funds and on reporting and disclosure of leverage ratio. The reporting requirements clarified by these guidelines will apply until the reporting reference date of May 31, 2021. The disclosure requirements clarified by these guidelines will apply until, and including the last disclosure reference date prior to the the disclosure reference date of, June 28, 2021.

    Amendments to Guidelines on Uniform Disclosures Under CRR

    The CRR "quick fix" introduces transparency requirements for institutions that decide to apply the temporary measures introduced by the Regulation. The purpose of these amending guidelines is to cover the disclosures required in new Article 468 and amended Article 473a of the CRR "quick fix" with respect to the temporary treatment of unrealized gains and losses measured at fair value through other comprehensive income and IFRS 9 transitional arrangements, respectively. The amending guidelines include the following changes to the EBA guideline GL/2018/01:

    • Adjustments have been made to reflect the revised disclosure requirements included in Article 473a of CRR. These changes are mainly related to the extension of the transitional period, and therefore the disclosure period, and to the revision of the accompanying narrative of the disclosure template, to properly reflect all the information that institutions have to disclose regarding their choices. The quantitative information on the fully loaded capital, capital ratios, and leverage ratio, as implemented in the current guidelines, is still valid and does not need to be amended.
    • The scope of the guidelines is extended to cover the new disclosure requirement regarding the temporary treatment of unrealized gains and losses measured at fair value through other comprehensive income, in accordance with Article 468.

    These guidelines apply from August 11, 2020 until the end of the transitional periods referred to in paragraph 1 of Article 468 and in paragraphs 6 and 6a of Article 473a of CRR.

     

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    Keywords: Europe, EU, Banking, COVID-19, Reporting, Disclosures, CRR, Framework 3.0, Framework 2.10, Framework 2.9, Leverage Ratio, Credit Risk, Market Risk, IFRS 9, ECL, Implementing Technical Standards, Basel, Regulatory Capital, EBA

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