Basel Committee Publishes Proposed Revisions to Pillar 3 Disclosure Requirements

The Basel Committee on Banking Supervision (BCBS) has published for consultation its ‘Review of the Pillar 3 disclosure requirements’.

It said that the proposed revisions aim to enhance comparability across banks by ensuring greater consistency in the way they disclose information about risk exposures. The review was prompted by concerns that the Basel framework’s existing Pillar 3 disclosure regime failed to promote the early identification of a bank’s material risks and did not provide sufficient information to enable market participants to assess a bank’s overall capital adequacy.

A particular goal of the proposed revisions is to improve the transparency of the internal model-based approaches that banks use to calculate minimum regulatory capital requirements. Under the revised regime, for example, banks would be required to disclose the drivers of changes in risk-weighted assets and the actual versus forecast performance of certain modelling parameters.

The Basel Committee is reviewing its disclosure requirements in two phases. The present consultative document covers the first phase and focuses on overhauling the existing disclosure requirements related to risk-weighted assets. Once finalised, the just-published proposals will replace the existing Pillar 3 framework. The second phase will expand the scope of the review to include standards that are currently under development or being revised, together with additional disclosure requirements to further improve the comparability of banks’ risk profiles.

The Committee welcomes comments on this consultative document. An important aim of the review is to improve market discipline, so it particularly welcomes feedback from investors, analysts, rating agencies and other users of Pillar 3 data, as well as from the audit community.

Comments on the proposals should be uploaded by Friday 26 September 2014 to: www.bis.org/bcbs/commentupload.htm. Alternatively, comments may be sent by post to: Secretariat of the Basel Committee on Banking Supervision, Bank for International Settlements, CH-4002 Basel, Switzerland.

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