Communication of 23 October 2020. EBA Guidelines on supervisory reporting and public disclosure requirements under Regulation 873/2020 (CRR Quick-fix) applicable to SIMs and SIM groups

Communication of 23 October 2020. EBA Guidelines on supervisory reporting and public disclosure requirements under Regulation 873/2020 (c.d. CRR Quick-fix) applicable to SIMs and SIM groups.

1. Preamble

With this communication, the Bank of Italy implements the Guidelines of the European Banking Authority (EBA) that provide clarifications and instructions on the completion of supervisory reporting templates and public disclosures (EBA/GL/2020/11 and EBA/GL/2020/12) in light of the changes to regulatory requirements introduced by EU Regulation No. 873/2020 in the context of the COVID-19 pandemic (c.d. Quick-fix).

In particular, the following secondary acts issued by the EBA are transposed:

1. Guidelines on supervisory reporting and disclosure requirements in compliance with CRR “Quick fix” in response to the COVID-19 pandemic (EBA/GL/2020/11);

2. Guidelines on uniform disclosures under Article 473a of Regulation (EU) No 575/2013 (CRR) on the transitional period for mitigating the impact of the introduction of IFRS 9 on own funds to ensure compliance with the CRR “quick fix” for the COVID-19 pandemic (EBA/GL/2020/12).

3. Content

The Guidelines on reporting and public disclosure requirements, referred to in point 1, provide instructions on the reporting treatment to be adopted in relation to the following regulatory changes introduced by the Quick-fix:

a) for the purpose of calculating the leverage ratio: i) the temporary exclusion of exposures to central banks from the calculation of an institution's total exposure measure (Article 500-ter CRR); ii) the early entry into force, compared to what is provided for by CRR2, of the regulatory treatment provided for purchases and sales of “standardized contracts” (c.d. “regular-way”) pending settlement (Article 500-quinquies CRR);

b) for the purpose of calculating capital requirements against credit risk, the more favorable prudential treatment provided for SMEs and infrastructure exposures, as well as loans to pensioners and employees (with permanent contracts) guaranteed by the borrower's pension or salary (Articles 123, 501 and 501-bis CRR);

c) for the purpose of reporting relating to own funds: i) the introduction of a temporary prudential filter for unrealized gains and losses on financial assets measured at fair value with impact on overall profitability towards counterparties referred to in Articles 115, paragraph 2 and 116 paragraph 4 of the CRR (Article 468 of the CRR); ii) the changes to the transitional provisions for mitigating the impact of IFRS 9 on CET1 which provide, inter alia, for an increase in the percentage of expected losses to be reintegrated into own funds and a two-year extension of the transitional period (Article 473-bis CRR).

These Guidelines also provide, in relation to the exercise of the exclusion referred to in letter a), for the integration of public disclosure with a specific disclosure on the amount of exposure to central banks subject to exclusion and its effect on the leverage ratio.

The Guidelines on public disclosure, referred to in point 2, modify EBA/GL/2018/01 to take into account the impacts on own funds of the changes referred to in letter c). The main changes concern: i) the extension of the period for disclosure due to the extension of the provisions on the transitional regime regarding IFRS 9 and the introduction of additional qualitative information requirements aimed at understanding the decisions made within the scope of the discretions provided for in Article 473-bis of the CRR, as amended by the Quick-fix; ii) the introduction of new information requirements relating to the prudential transitional treatment provided for unrealized gains and losses on exposures to certain counterparties measured at fair value with impact on overall profitability.

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Given the context of necessity and urgency and given the limited nature of the changes, the Bank of Italy (as well as the EBA, which has only notified the Banking Stakeholder Group of its intention to issue these Guidelines) has not conducted a public consultation, nor a regulatory impact analysis (1).

This communication has the nature of a binding general measure for SIMs and SIM groups and enters into force on the day of publication in the Official Gazette of the Italian Republic.

This communication was issued following the opinion of CONSOB, pursuant to Article 6, paragraph 1, of the TUF.

1 See Article 8, paragraph 1, of the Measure of 9 July 2019 “Regulation concerning the discipline for the adoption of acts of a normative or general content by the Bank of Italy in the exercise of supervisory functions, pursuant to Article 23 of Law No. 262 of 28 December 2005”.