Final draft ITS on Supervisory reporting (Revised 14/11/2024 - Legal act)

General Information

This document is the final revised draft as of November 14, 2024, of the implementing technical standards (ITS) on prudential reporting of financial institutions, developed by the European Banking Authority (EBA). It is a legal act adopted by the European Commission in 2024, aiming to update and replace Implementing Regulation (EU) 2021/451 related to supervisory reporting of institutions subject to Regulation (EU) No 575/2013 (CRR). The scope covers reporting requirements on own funds, credit, market, operational risks, large exposures, leverage, liquidity, losses on mortgage loans, crypto-assets, and other prudential metrics. The document applies to all concerned European financial institutions, with monthly, quarterly, semi-annual, or annual reporting frequencies, depending on the data and defined thresholds (p. 1-20).

Executive Summary

The final ITS draft on prudential reporting aims to update and harmonize the reporting requirements of European financial institutions in accordance with the latest amendments to Regulation (EU) No 575/2013, notably those introduced by Regulation 2024/1623 which incorporates the international Basel III standards. This document is crucial as it ensures consistency, transparency, and comparability of prudential data submitted to supervisory authorities, thereby strengthening financial stability in the European Union. The main findings are: the need to replace Regulation 2021/451 with a consolidated text integrating numerous regulatory amendments; the introduction of new templates to cover requirements on the output floor, crypto-asset exposures, increased granularity of real estate exposures, and revision of credit risk exposure classification criteria; adjustment of reporting frequencies and dates to align data with accounting periods and IFRS or GAAP requirements; establishment of entry and exit thresholds for reporting obligations according to institution size and complexity; and definition of specific modalities for investment firms and G-SIIs. The conclusions emphasize the importance of a phased implementation with transitional provisions, notably a six-month delay before entry into force and postponement of the first submission date for certain reports. The recommendations are to adopt this regulation to ensure uniform and effective application of reporting rules, and to use IT solutions developed by the EBA to facilitate institution compliance (p. 1-20).

Context and Objectives

This document was drafted to respond to the regulatory evolution resulting from the update of Regulation (EU) No 575/2013, notably via Regulation 2024/1623 which transposes the international Basel III standards. The previous framework, Regulation 2021/451, no longer allowed reflecting these complex and numerous changes without generating regulatory burden. The objective is to provide a clear, coherent, and comprehensive prudential reporting framework, covering requirements on own funds, risks, liquidity, and other key indicators. The scope includes all financial institutions subject to these rules, with modalities adapted to their size and activity. The limitations concern the need for an adaptation period, the complexity of data to be collected, and coordination with IFRS and GAAP accounting standards (p. 1-5).

Summary of Key Points by Theme

Regulatory framework and objectives: The regulation replaces the previous ITS 2021/451 to incorporate amendments of the CRR, notably requirements related to the output floor, credit, market, operational risks, and crypto-assets (p. 1-4).

Own funds reporting and requirements: Institutions must report quarterly or semi-annually depending on their size and nature, detailed information on own funds, including the impact of transitional rules of the output floor, geographic distribution of exposures, and specific requirements for investment firms (p. 5-10).

IFRS and GAAP financial reporting: Institutions subject to IFRS or national frameworks must provide consolidated financial reports with variable frequencies (quarterly, semi-annual, annual) according to precise thresholds linked to asset size, revenue composition, and loan nature (p. 11-13).

Specific exposures: Annual reporting on losses related to mortgage loans, quarterly on large exposures, and detailed reporting on leverage with entry thresholds based on derivatives size and leverage ratio (p. 13-15).

Liquidity and stable funding: Monthly reporting on the liquidity coverage ratio (LCR), quarterly on the net stable funding ratio (NSFR), with distinctions according to institution complexity (p. 15-16).

Other prudential metrics: Reporting on additional liquidity metrics, asset encumbrance, and supplementary information for G-SII identification, with exposure thresholds at 125 billion euros triggering these obligations (p. 16-18).

Interest rate risk in the banking book reporting: Quarterly frequency for the majority of institutions, with complementary annual reports for certain categories (p. 18).

IT solutions and formats: The EBA is responsible for providing IT solutions, templates, and instructions, ensuring compliance with uniform formats and multilingual availability. Data must be transmitted accurately, respecting monetary formats, percentages, and LEI identifiers (p. 18-19).

Transitional provisions: The regulation provides a six-month delay before application, postponement of the first submission date for certain reports, and phased elimination of the old Regulation 2021/451 by end 2025 (p. 19-20).

Main Findings and Lessons Learned

Findings: Regulation 2024/1623 substantially modifies the European prudential framework, requiring a complete revision of ITS reporting. The new regulation unifies reporting requirements for own funds, risks, liquidity, exposures, and other key indicators, with adapted frequencies and precise thresholds. The EBA must provide compliant and updated IT tools. Assumptions: Institutions will be able to adapt their reporting systems within the six-month deadline provided. Interpretations: Consolidation of requirements into a single text facilitates understanding and compliance of institutions, while ensuring better supervision. Uncertainties: The operational impact on institutions, notably small and medium-sized, remains to be assessed, as well as the capacity to meet new frequencies and thresholds. Success will also depend on the quality of IT solutions provided by the EBA (p. 1-20).

Conclusions and Recommendations

The EBA recommends rapid adoption of this regulation to guarantee uniform application of prudential reporting rules in line with the latest international standards. The document highlights the need to provide transitional periods, notably a six-month delay before entry into force and postponement of the first submission date for certain sensitive reports. Institutions are advised to prepare for these new requirements using the IT solutions made available by the EBA. The regulation provides for phased elimination of the previous ITS 2021/451 by end 2025, ensuring an orderly transition. Effective implementation of these standards will enhance the quality and comparability of supervisory data, contributing to European financial stability (p. 19-20).