Instruction No. 11/2021

Instruction No. 11/2021
BO No. 7/2021 2nd Supplement • 2021/07/28
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Topics
Supervision :: Information Disclosure
Mod. 99999940/T – 01/14
Index
Text of the Instruction
Text of the Instruction
Subject: Revocation and amendment of Bank of Portugal Instructions regarding disclosures provided for in Part VIII of Regulation No. 575/2013

Regulation (EU) No. 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No. 648/2012 (Regulation (EU) No. 575/2013), in its Part VIII, established uniform rules regarding the public disclosure of information on prudential requirements (commonly referred to as Pillar 3).

The European Banking Authority (EBA) was mandated to develop guidelines and technical standards in order to harmonize the disclosure of this information, having published a set of guidelines specifying the formats and frequency to be applied by credit institutions and investment firms.

Given that Article 16 of Regulation (EU) No. 1093/2010 of the European Parliament and of the Council of 24 November states that it is the responsibility of the Bank of Portugal, as the competent national authority, as well as of institutions, to make all efforts to ensure compliance with the guidelines and recommendations issued by the EBA, the Bank of Portugal implemented the EBA guidelines through the publication of several Instructions.

Taking into account the developments in the international standards agreed by the Basel Committee on Banking Supervision on Pillar 3, Part VIII of Regulation (EU) No. 575/2013 was recently amended by Regulation (EU) No. 2019/876 of the European Parliament and of the Council of 20 May 2019 (Regulation (EU) No. 2019/876).

These amendments, applicable from 28 June 2021, included the introduction of rules regarding the frequency and content of disclosures according to proportionality criteria based on the size and complexity of institutions.

The purpose of comparability of disclosures by institutions was further strengthened by assigning a mandate to the EBA and the European Commission for the definition and adoption of implementing technical standards directly applicable. In this sequence, Commission Implementing Regulation (EU) 2021/637 of 15 March 2021 was published, which establishes implementing technical standards regarding the public disclosure by institutions of the information referred to in Part VIII, Titles II and III, of Regulation (EU) No. 575/2013 of the European Parliament and of the Council, and which repeals Commission Implementing Regulation (EU) No. 1423/2013, Commission Delegated Regulation (EU) 2015/1555, Commission Implementing Regulation (EU) 2016/200 and Commission Delegated Regulation (EU) 2017/2295. Since this Regulation now directly establishes the models and frameworks for institutions to disclose the information referred to in Part VIII, Titles II and III, of Regulation (EU) No. 575/2013, previously provided for in EBA Guidelines, regulating the entire subject matter, the Bank of Portugal Instructions No. 28/2014, No. 5/2018 and No. 20/2019 no longer have a legal framework and must be expressly revoked.

Additionally, considering the principle of proportionality and the specificities of the activity of investment firms, namely the diversity of risks inherent in their activity, investment firms are no longer subject to the reporting obligations of Part VIII of Regulation (EU) No. 575/2013, and specific legislation has been issued for these entities, namely Regulation No. 2019/2033 and Directive 2019/2034 of the European Parliament and of the Council, both of 27 November 2019.

In this vein, it is also necessary to amend Bank of Portugal Instruction No. 1/2017, which implements the “Guidelines on materiality, ownership and confidentiality and on the frequency of disclosure under Articles 432(1), 432(2) and 433 of Regulation (EU) No. 575/2013” (EBA/GL/2014/14), eliminating some provisions related to the frequency of disclosures that are now expressly provided for in Article 433 of Regulation (EU) No. 575/2013 and excluding investment firms from its scope of application.

In these terms, the Bank of Portugal, using the competence conferred upon it by Article 17 of its Organic Law, approved by Law No. 5/98 of 31 January, in its current wording, by point (f) of paragraph 1 of Article 116 of the General Regime of Credit Institutions and Financial Companies, approved by Decree-Law No. 298/92 of 31 December, in its current wording, approves the following:

Article 1.
Object

1. This Instruction has as its object to amend Bank of Portugal Instruction No. 1/2017 of 15 February, which establishes the processes and criteria that institutions must follow when considering the use of disclosure exemptions provided for in paragraphs 1 and 2 of Article 432 of Regulation (EU) No. 575/2013 of the European Parliament and of the Council of 26 June 2013, as well as the information that institutions must disclose in the event of the use of such exemptions, and the process for assessing the need to disclose information with a frequency higher than annual, of the information required in Part VIII of said Regulation.
2. This Instruction also has as its object to revoke several Bank of Portugal Instructions.

Article 2.
Amendments to Bank of Portugal Instruction No. 1/2017 Articles 2, 3, 4 and 6 of Bank of Portugal Instruction No. 1/2017 of 15 February, in the wording given to it by Bank of Portugal Instruction No. 5/2018 of 12 March, shall have the following wording:

“Article 2.
Scope
1 – This Instruction is applicable to credit institutions that are obliged to comply with the requirements specified in Part VIII of Regulation (EU) No. 575/2013.
2 – […].”

“Article 3.
Internal processes and provisions
1 – The formal policies for assessing the adequacy of disclosure referred to in paragraph 3 of Article 431 of Regulation (EU) No. 575/2013, must include an adequate internal process that covers the use of disclosure exemptions to omit one or more disclosures under paragraphs 1 and 2 of Article 432 of the same Regulation. 2 – […].”

“Article 4.
Object of the internal process
[…] a) Identify the organizational unit or units, senior management, committees and staff responsible for the creation, implementation and review of policies on relevance, confidentiality and secrecy; b) […]; c) Ensure that senior management or relevant committees are responsible for making a final decision on the omission of an information element, under the use of a disclosure exemption, after considering the duly justified proposals presented by the relevant organizational unit or units and by those responsible for implementing policies on relevance, confidentiality and secrecy; d) Define an adequate reporting process regarding the implementation of policies on relevance, confidentiality and secrecy; e) Determine the appropriate level of transparency for each disclosure exemption under Chapter VI of this Instruction.”

“Article 6.
Optional description of the internal process
In cases where institutions have chosen to disclose information regarding their formal policy intended to comply with the disclosure requirements specified in Part VIII of Regulation (EU) No. 575/2013, institutions may include, in these disclosures, a description of the internal process described in this chapter, as well as indicate the policies adopted on relevance, confidentiality and secrecy under the provisions of Chapters III and IV of this Instruction.”

Article 3.
Repealing Norm

1. Point (b) of paragraph 1 of Article 1 of Bank of Portugal Instruction No. 1/2017 of 15 February is revoked, which shall have the following wording:

“Article 1.
Object
1 – […]:
a) […]. b) [revoked].
2 – […].”

2. Articles 14 and 14-A of Bank of Portugal Instruction No. 1/2017 of 15 February are revoked.
3. The following Bank of Portugal Instructions are revoked:
   a) Bank of Portugal Instruction No. 28/2014 of 15 January, which determines compliance with guidelines published by the EBA on 27 June 2014, regarding the publication of encumbered and unencumbered assets. b) Bank of Portugal Instruction No. 5/2018 of 12 March, which implements some EBA guidelines, amends Instruction No. 1/2017 and regulates the manner of compliance with the information disclosure requirements provided for in Regulation (EU) No. 575/2013. c) Bank of Portugal Instruction No. 20/2019 of 15 November, which discloses information regarding non-performing exposures and restructured exposures that institutions must observe for the purpose of complying with the disclosure requirements established in Regulation (EU) No. 575/2013, amending Instruction No. 5/2018.

Article 4.
Entry into force
This Instruction enters into force on the day following its publication.