30 October 2013

EBA publishes final draft ITS on asset encumbrance

These final implementing technical standards, which will be part of the EU Single Rulebook in banking, provide reporting templates and instructions with the ultimate aim of ensuring harmonised reporting of asset encumbrance across institutions.

In particular, the objective of these ITS is to provide supervisory authorities with a standardised and harmonised framework for reporting purposes on the level of asset encumbrance in institutions. These ITS on asset encumbrance complement the existing reporting framework (COREP and FINREP) submitted for endorsement to the European Commission on 26 July, 2013.

The ITS consist of three parts:

• A legal text which outlines both the frequency and the proportionality criteria in the reporting;
• A detailed definition of asset encumbrance, reporting templates, instructions and extensive information to assist institutions in the implementation of their reporting activities on asset encumbrance.
• A data point model (DPM) and validation rules providing a structured representation of the requested data. The DPM contains all of the relevant technical specifications necessary for developing information technology reporting formats, as well as common dictionaries of terms that can be used in the institutions' databases.

The development of these ITS has taken into account the proportionality principle in order to ease the reporting burden on smaller institutions which have no material levels of asset encumbrance in light of the of lower complexity of their business models.

The final standards have been sent today to the European Commission for their adoption as EU Regulations that will be directly applicable throughout the EU.

The reporting of asset encumbrance shall be implemented on 30 June 2014 by large institutions with assets above €30 billion and on 31 December 2014 by all other institutions.

Press release

Draft ITS on Assets encumbrance

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Comment from Regulatory Reform:

Although granular in its demands, in reality, asset encumbrance reporting ‘merely’ requires firms to provide a different view of the same basic information they have been handling for some time.  In one sense, asset encumbrance is merely the flip side of the coin which is asset segregation.  Certainly, significant overlap exists between asset encumbrance reporting and other regulatory requirements such as liquidity reporting and CVA requirements under Basel III, resolution planning, Dodd-Frank, EMIR and the BCBS/IOSCO margin requirements for non-centrally cleared derivatives.  However, it is the framing and the selection of existing data that is the root cause of the problem.  In reality, simply changing the view of data forces many firms back to the drawing board.

Data management is fast becoming the new competitive frontier within the banking industry.  Ultimately, the winners will be the banks with the most agile data architecture, capable of allying and enriching both structured and unstructured data and able to serve a specific view of that information to selected recipients.  In that context, asset encumbrance reporting represents nothing more than another challenge in data management. The technology already exists to effectively meet this challenge – banks just need to embrace it or lose out.

Full article, 1.11.13

© EBA