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    EBA Issues Requirements on Pillar 3 Disclosures for IRRBB

    November 10, 2021

    The European Banking Authority (EBA) published the first draft implementing technical standards on Pillar 3 disclosure of institutions’ exposures to interest rate risk on positions not held in the trading book (IRRBB). EBA has also published the disclosure templates and the associated instructions for IRRBB activities. These final draft implementing technical standards put forward comparable disclosures that help institutions comply with the requirements laid down in the revised Capital Requirements Regulation (CRR) and were submitted to the European Commission for adoption.

    These comparable disclosures will help stakeholders assess the IRRBB risk management framework of institutions as well as the sensitivity of the economic value of equity and net interest income to changes in interest rates.  The disclosure templates cover information on IRRBB risk management objective and policy, internal assumptions for the calculation of their IRRBB exposure values, and the impact of changes in interest rates on economic value of equity and net interest income of institutions, with the objective to implement the disclosure requirements of Article 448 of the CRR. In addition, given the ongoing EBA work on the policy framework for IRRBB, the standards also include transitional provisions that should facilitate institutions’ disclosures while the policy framework is being finalized. These disclosure requirements apply to large institutions and to other institutions, except those that are not listed, in accordance with the provisions of Articles 433a and 433c of the CRR. The implementing technical standards will complement the comprehensive Pillar 3 standards by amending the Implementing Regulation 637/2021 of March 15, 2021, with the objective to facilitate the institutions’ compliance to the disclosure requirements of Article 448 of CRR.

    The standards will amend the comprehensive implementing technical standards on public disclosures of institutions, in line with the strategic objective of developing a single and comprehensive Pillar 3 package to facilitate implementation by institutions and further promote market discipline. Given that Article 448 of CRR becomes applicable from June 2021, EBA has decided to develop these draft standards amending the comprehensive implementing technical standards on institutions’ public disclosure, taking into account the current regulatory framework. In future, when the new regulatory framework on the management of IRRBB exposures is completed, these draft standards could be reviewed. Given the application of the disclosure requirements of Article 448 of CRR from June 2021, this paper also provides clarity on what institutions should disclose until the regulatory technical standards provided by Article 84 and Article 98(5a) CRD start to apply. The standards are also fully in line with the Pillar 3 disclosure framework of the Basel Committee on Banking Supervision. 

     

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    Keywords: Europe, EU, Banking, Pillar 3, Interest Rate Risk, IRRBB, Implementing Technical Standards, CRR, CRD, Disclosures, Basel, EBA

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