The European Banking Authority (EBA) launched a consultation on new liquidity disclosures on 11
May. In particular, the EBA is proposing that banks disclose their
Liquidity Coverage Ratio (LCR) figures at least annually.
There is no explicit requirement in the Capital Requirements
Regulation (CRR) for banks to disclose liquidity information in
their Pillar 3. Nor is there a mandate for the EBA to produce
guidelines on liquidity disclosure. However, the Basel Committee
have called for mandatory LCR disclosure. The EBA is relying on CRR
Article 435(1)(f), which requires banks to disclose "key
ratios and figures providing external stakeholders with a
comprehensive view" of risk management. The EBA argues that
the LCR is currently the only key ratio used in current liquidity
regulations and therefore it ought to be disclosed under Article
The paper clarifies that these LCR disclosure guidelines apply
only to those firms in scope of the LCR, i.e. banks but not
investment firms. The new disclosures will also be subject to the
usual CRR Article 432 exemptions from disclosure on the grounds of
materiality or confidentiality that apply to the Pillar 3
disclosures. In practice, they are likely to form part of a
bank's Pillar 3 disclosures, rather than an entirely new and
The EBA has relied upon the LCR disclosure approach proposals
developed by the Basel Committee, but has also added in some
EU-specific elements. The line items in the proposed disclosure
template are defined in the same terms as line items used in the
COREP LCR reporting forms, in order to minimise costs of
The revelation that yet more disclosure requirements are on the
way may concern the industry. However, the EBA has sought to
minimise the additional cost involved in completing these
disclosures by aligning them with the existing data requirements in
the COREP forms. Nevertheless, some banks may be uncomfortable
about having to publish information about their exposure to
liquidity risk, particularly details of their exposure to outflows
in a stressed scenario.
As these proposals are currently open for consultation banks are
encouraged to highlight any concerns or any inadvertent risks to
market stability that they may cause by responding to the EBA's
consultation paper. The consultation closes on 11 August 2016.
The EBA is targeting an implementation date for these new
requirements of June 2017.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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