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August 30, 2018

BCBS released a technical amendment on additional Pillar 3 disclosure requirements for the jurisdictions implementing an expected credit loss (ECL) accounting model as well as for the jurisdictions adopting transitional arrangements for the regulatory treatment of accounting provisions. The application of ECL accounting models and introduction of any transitional arrangements took effect from January 01, 2018. The additional amendments to the Pillar 3 standard will, therefore, come into effect from January 01, 2019 and are applicable for banks using an ECL accounting model after this date as well as for the banks using transitional arrangements for the regulatory treatment of accounting provisions.

The amendment is intended to provide users with disclosures that fully reflect any transitional effects for the impact of ECL accounting on regulatory capital as well as to provide further information on the allocation of accounting provisions in the regulatory categories of general and specific provisions for standardized exposures during the interim period. The following disclosures in the Pillar 3 standard will apply: 

  • Template KM2 (Key metrics—Total Loss-Absorbing Capacity (TLAC) requirements at resolution group level). Additional disclosures require banks to disclose the “fully loaded” impact of ECL transitional arrangements used in TLAC resources and ratios.
  • Template CR1 (Credit quality of assets). Given that the existing regulatory distinction between general provisions and special provisions does not directly correspond to how provisions would be measured under the new ECL accounting standards, additional disclosures are required on the allocation between general and specific provisions for standardized approach exposures.
  • Table CRB (Additional disclosures related to credit quality of assets). This amendment accompanies those related to CR1. Banks are required to disclose the rationale for their categorization of ECL accounting provisions in general and specific categories for standardized approach exposures. The revised templates are in Annex 1.

Annex 1 to the technical amendment contains revised Template KM2, Template CR1, and Table CRB. Technical amendments are defined as changes in standards that are not substantial in nature but that cannot be unambiguously resolved based on the current text.

 

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Effective Date: January 01, 2019

Keywords: International, Accounting, Banking, Pillar 3, Disclosures, ECL, IFRS 9, Basel III, BCBS

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