At a glance:
- New guidelines to address data gaps in FINREP (Financial Reporting) and Pillar 3 disclosures related to the new measures to mitigate the impact of the COVID-19 pandemic.
- The Prudential Regulation Authority's (PRA) further guidance on the treatment of payment deferrals under IFRS 9 and capital requirements in the context of the new regulatory reporting templates.
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The European Banking Authority (EBA) has published on 2nd June guidelines on eleven new FINREP regulatory reporting templates and three templates for Pillar 3 disclosures with a first reporting reference date of 30th June 2020.
The additional reporting requirements are expected to be required for a limited period of time, as they are introduced specifically in the context of COVID-19, but will necessitate the collection of a wide range of additional data fields for quarterly FINREP reporting, and semi-annual disclosures in Pillar 3. This will need to be supported by a robust governance and control process, including review and challenge of underlying judgements and supporting assumptions for forbearance and performing/non-performing exposures.
The new regulatory templates address data gaps in the regulatory reporting framework and public disclosures for Banks in light of the measures deployed by Member States in response to the COVID-19 pandemic. The guidelines have been developed to assess institutions’ risk profiles and asset quality, pre and post the application of a range of new support measures, including moratoria on loan repayments and public guarantees for new lending.
Overview of the new regulatory templates:
Scope of application: Institutions reporting under national accounting standards (national GAAP) or international financial reporting standards (IFRS).
|F 90.01, F 90.02, F 90.03||Overview of EBA-compliant moratoria (legislative and non-legislative), forbearance measures and new loans subject to public guarantee in the context of COVID-19.|
|F91.01, F 91.02||Information on loans and advances subject to EBA-compliant moratoria (legislative and non-legislative) and to other COVID-19-related forbearance measures.|
|F 91.03, F 91.04||Loans and advances with expired EBA-compliant moratoria (legislative and non-legislative) and with expired COVID-19-related forbearance measures.|
|F 91.05||Data on newly originated loans and advances subject to public guarantee schemes in the context of the COVID-19 pandemic.|
|F 92.01||Information related to measures applied in response to COVID-19 broken down by sector of economic activities, using NACE codes on the basis of the principal activity of the counterparty.|
|F 93.01, F 93.02||Interest income and fee and commission income from loans subject to COVID-19-related measures and prudential information (i.e. risk-weighted exposures) on loans subject to public guarantee schemes.|
Pillar 3 Disclosures
Scope of application: Institutions that are subject to all or some of the Pillar 3 disclosure requirements specified in Part Eight of Capital Requirements Regulation (CRR).
|Template 1||Overview of the credit quality of loans and advances (performing vs non-performing) and related accumulated impairment subject to moratoria on loan repayments applied in accordance with Guidelines on legislative and non-legislative moratoria on loan repayments applied in the light of the COVID-19 pandemic (EBA/GL/2020/02). Institutions are expected to explain the application of the type of eligible moratoria (e.g. postponement, etc) by sector and industry and how economic losses are calculated if any.|
|Template 2||Overview of the volume of loans and advances subject to legislative and non-legislative moratoria in accordance with EBA/GL/2020/02 by residual maturity. Institutions should also explain the length of moratoria applied and the revision in the length (e.g. extension) of the loan repayments.|
|Template 3||Overview of newly originated loans and advances subject to public guarantee schemes under COVID-19 new measures. Institutions should explain the size, length and the sectoral coverage of the public guarantees as well as the performing, forbearance and non-performing status of these newly originated loans.|
PRA’s further guidance on payment deferrals
Sam Woods (Deputy Governor and CEO of the Prudential Regulation Authority) has issued a Dear CEO letter to firms with further guidelines on the treatment of payment deferrals under IFRS 9 and capital requirements : Covid-19: IFRS 9 and capital requirements- Further guidance on initial and further payment deferrals. The objective of the guidance is to assist firms to implement regulatory and accounting requirements in a consistent and sensible way during these unprecedented times, and is aimed at avoiding the recognition of inappropriate levels of Expected Credit Losses (ECL) and capital, as well as mitigating the risk of inconsistent approaches across firms.
The PRA’s clarification on the application of the regulatory definition of default, specifically that initial or further payment deferrals do not necessarily automatically trigger arrears or unlikeliness to pay criteria under the CRR, will assist firms in classifying and reporting performing and non-performing loans in the new FINREP and Pillar 3 disclosure templates. Firms’ credit assessment frameworks in the current environment will need to identify and report the distinction between borrowers experiencing short-term liquidity problems and those in long-term financial difficulties, where exposures may need to be re-classified as non-performing or defaulted.
The PRA will introduce these new EBA templates considering the specificities of the COVID-19 measures in the UK, and the need for proportionality in terms of templates and frequency of reporting depending of the size and complexity of firms.
How Deloitte can help?
Our cross-service-line regulatory reporting specialists provide a range of advisory and assurance support to management, risk and control functions, Internal Audit and Boards/Audit Committees, to help increase confidence in the completeness and accuracy of regulatory reporting.