25 July 2016

EBF response to EBA consultation on guidelines on the LCR disclosure

The EBF supports the over-arching objective of greater transparency but wishes to work with the EBA to ensure that such disclosure provides useful information rather than over-loading market participants with too much detail.

European Banking Federation (EBF) members are concerned with the requirement to disclose LCR based on an average of daily LCR calculations. Indeed, public disclosure should be based on the best data quality possible, and data used for the daily LCR calculations would not meet this quality criterion (notably because it would not be reconciled with accounting data).

If the objective of the average daily calculation is to demonstrate that banks comply with the LCR at any time, as requested by the regulation, EBF insists that the LCR daily calculation is already performed by banks to attest that their LCR is managed in a way that is fully compliant each day. However, this calculation is not as detailed as the one required in this guidelines. Therefore, EBF suggests the LCR disclosure template to be based on averaged values over monthly observations, already reported to the supervisor.

EBF's response key points:

• The EBF supports greater transparency of banks’ liquidity risk management by disclosing useful information rather than over-loading market participants with too much detail.
• The disclosure of the Liquidity Coverage Ratio (LCR) should be based on good quality data that has been audited. The disclosure of daily LCR calculations would not fulfil this criteria and would be very burdensome and operationally complex with little added value for end users. We suggest the LCR disclosure template to be based on averaged values over monthly observations, already reported to the supervisor.
• The scope of application of these guidelines should be aligned with the way banks manage their liquidity and be consistent with any waivers for liquidity reporting.
• There should be sufficient time for the transition to the new disclosure requirements. The deadline for the application should be at minimum 6 months from the approval and publication of the final text. A start date of January 2018 coinciding with the phasing in of the full LCR would be preferred.
• The EBA should align its Guidelines with the Basel approach and allow respondents to provide their own qualitative inputs which will vary depending on their business model and degree of liquidity and funding risks to which they are exposed.
• The proposed Guidelines should only be addressed to competent authorities.

Full response

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