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Yesterday, the Committee for European Banking Supervisors (CEBS) published the results of its survey on the EU’s implementation of the New Basel Accord’s Pillar 3 regulation. This survey, of CEBS members, took place late last year and the results were discussed at a workshop of European financial industry participants on December 7th. A summary of the discussions at this workshop was also released.
The overall message from the CEBS is “not to worry” and that the implementation of the Pillar 3 provisions does not give rise to major concerns. This is reported as being mainly due to supervisors and regulators not making prescriptive statements – the principles-based approach. The report says that there are a small number of areas that need further attention and proposes follow-up work in particular to the application of the disclosure requirements to (significant) subsidiaries and to devising a possible solution where limited disclosure is being provided with a subsidiary’s (individual) financial statements. Also open is the relationship between Pillar 3 and accounting disclosures; here CEBS will wait on the outcome of industry initiatives before deciding what to recommend.
The follow-up industry workshop was supportive of the CEBS findings. It focused on three areas - disclosures of significant subsidiaries, the content of the current Pillar 3 disclosures (including disclosures in the current market situation), and education of market participants and the risk of misinterpretation of Pillar 3 information – and breakouts were held on these three topics.
Both reports are short and to the point and will provide valuable guidance to participants preparing for their publication of Pillar 3-required information – the adequate disclosure of information that should be made to allow market participants to assess an entity’s capital adequacy: high level information on the scope of application, capital, risk exposures and risk assessment processes.
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