Pillar 3 framework

Summary

    The Pillar 3 framework is a set of public disclosure requirements that seek to provide market participants with sufficient information to assess a bank’s risk profile and financial health. The Pillar 3 requirements apply to institutions and class 1 investment firms (“Systemic and bank-like” investment firms).

    A comprehensive package on Pillar 3 prudential disclosures

    The Pillar 3 framework provides a comprehensive package of all disclosure requirements set out in Part Eight of the Capital Requirements Regulation (EU) No 575/2013 (CRR).

    General principles

    Scope

    Unless otherwise specified, the framework applies to all active banks at the top consolidated level:

    • No institution which is either a parent undertaking or a subsidiary, and no institution included in the consolidation, shall be required to comply with the obligations laid down in Part Eight on an individual basis (CRR Article 6(3));
    • EU parent institutions shall comply with Part Eight on the basis of their consolidated situation (CRR II Article 13(1), subparagraph 1)
    • Large subsidiaries of EU parent institutions shall disclose the information specified in Articles 437, 438, 440, 442, 450, 451, 451a and 453 on an individual basis or, where applicable in accordance with this Regulation and Directive 2013/36/EU, on a sub-consolidated basis (CRR II Article 13(1), subparagraph 2);
    • CRR II Article 13(1) shall not apply to EU parent institutions, EU parent financial holding companies, EU parent mixed financial holding companies or resolution entities where they are included in equivalent disclosures on a consolidated basis provided by a parent undertaking established in a third country (CRR II Article 13(3)).

    Proportionality

    The CRR II introduces definitions for ‘small and less complex institutions’ and ‘large institutions’ for enhanced proportionality. The Pillar 3 framework defines which disclosures are applicable to the different institutions, depending on their size, complexity and on whether they are listed or non-listed institutions. Small and non-complex institutions’ disclosures will focus on key metrics while large and listed institutions will disclose more detailed information. Proportionality is also reflected in the frequency of disclosures as well as in disclosure formats to ensure that the information provided is sufficient to enable market participants to assess the risk profile of different institutions.

    Disclosure policies/management attestation

    The management shall attest in writing that the relevant institution has made the Pillar 3 disclosures required in accordance with the formal policies and internal processes, systems, and controls. The written attestation shall be included in the institution’s disclosures. Pillar 3 information shall be subject to the same level of internal verification as that applicable to the management report included in the institution’s financial report (CRR II Article 431(3)).

    Means of disclosures/publication deadlines

    Institutions shall disclose the Pillar 3 information in electronic format and in a single medium or location. Institutions shall make available on their website or, in the absence of a website, in any other appropriate location an archive of the Pillar 3 reports (CRR II Article 434).

    Pillar 3 disclosures shall be published on the same date as the date on which the institutions publish their financial reports for the corresponding period where applicable or as soon as possible thereafter (CRR II Article 433).

    Laws, regulations and directives

    New banking package (CRR III and CRD VI) applicable from 1 January 2025

    The CRR III will introduce changes to Pillar 3 disclosures in the following areas:

    • Frequency of disclosure
    • Disclosure of own funds requirements and risk-weighted exposure amounts
    • Disclosure of exposures to market risk under the standardised approach
    • Disclosure of CVA risk
    • Disclosure of operational risk
    • Disclosure of key metrics
    • Disclosure of environmental, social and governance risks (ESG risks)
    • Use of internal models for market risks
    • NEW: Disclosure of aggregate exposure to shadow banking entities
    • NEW: Pillar 3 DataHub

    By way of derogation, the new disclosure of exposures to crypto-assets and related activities (CRR III Article 451b) shall apply from 30 June 2024.

    This new disclosure requires banks to publish detailed qualitative information regarding their crypto-asset activities and related risk management practices as well as quantitative information regarding their crypto-asset risk exposures.

    EBA Pillar 3 Implementing Technical Standards (ITS)

    The European Banking Authority (EBA) has developed guidelines and standards to ensure a consistent and harmonised implementation of Pillar 3 requirements. These guidelines provide detailed instructions on the disclosure of information and set mandatory standards for the content, format, and frequency of disclosures.

    EBA ITS on Pillar 3 disclosures: Implementing Technical Standards on institutions’ public disclosures of the information referred to in Titles II and III of Part Eight of Regulation (EU) No 575/2013

    These comprehensive Implementing Technical Standards (EBA/ITS/2020/04) for financial institutions’ public disclosure provide a complete Pillar 3 disclosure framework (comprising templates, instructions, mapping with the regulatory reporting and frequencies of disclosures) that seek to facilitate its implementation by institutions and to improve clarity for users of this information. The Standards include regulatory changes introduced by the CRR II and align the disclosure framework with international standards.

    Laws, regulations and directives

    New banking package (CRR III and CRD VI) applicable from 1 January 2025

    The EBA ITS on Pillar 3 disclosures will be updated in the course of 2024 to take account of the changes provided for in the CRR III (Disclosures with first reference date as of June 2025).

    Mapping between the ITS on Pillar 3 disclosures and the ITS on supervisory reporting (v3.0)

    The EBA has provided a mapping tool to foster alignment between supervisory reporting and Pillar 3 requirements, improve quality of disclosures and support all institutions in the preparation of their required disclosures. The tool specifies the mapping between quantitative Pillar 3 disclosure data points and the relevant supervisory reporting data points.

    New banking package (CRR III and CRD VI) applicable from 1 January 2025

    Under the CRR III, the EBA shall prepare and keep up to date a tool specifying the mapping of the templates and tables for disclosures with those on supervisory reporting.

    Implementing Technical Standards (ITS) on prudential disclosures on ESG risks in accordance with CRR Article 449a

    According to CRR II Article 449a and as from 28 June 2022, listed large institutions shall disclose information on ESG risks, including physical risks and transition risks on a semi-annually basis.

    As CRR II Article 13 contains no reference to Article 449a, large subsidiaries of EU parent institutions are excluded from the scope of the information required under Article 449a until CRR III enters into force.

    The Implementing Technical Standards (EBA/ITS/2022/01) on Pillar 3 disclosures on ESG risks include quantitative disclosures on institutions’ mitigating actions supporting their counterparties in the transition to a carbon-neutral economy and in the adaptation to climate change. In addition, they include a Green Asset Ratio (GAR) which identifies the institutions’ assets financing activities that are environmentally sustainable according to the EU taxonomy, such as those consistent with the European Green Deal and the Paris agreement goals.

    Laws, regulations and directives

    New banking package (CRR III and CRD VI) applicable from 1 January 2025

    The CRR III amends Article 449a to extend the requirements related to the disclosures of ESG risks to all institutions (i.e. including small and non-complex institutions and other institutions in addition to large institutions) while respecting the proportionality principle.

    The EBA ITS 2022/01 on prudential disclosures on ESG risks in accordance with Article 449a will be updated in the course of 2024 to take account of the changes provided for in the CRR III (Disclosures with first reference date as of June 2025).

    EBA Q&A on Pillar 3

    The European Banking Authority (EBA) has a Single Rulebook Q&A process that allows stakeholders to submit questions on the practical application or implementation of the banking legislation that falls within the EBA’s remit. This includes the associated delegated and implementing acts, RTS, ITS, guidelines and recommendations.

    The “Search for Q&As” function can be used to filter questions relating to Pillar 3.

    Circular CSSF 15/618: Transposition of Guidelines EBA/GL/2014/14 on materiality, proprietary and confidentiality and on disclosure frequency under Articles 432(1), 432(2) and 433 of Regulation (EU) No. 575/2013

    The Guidelines EBA/GL/2014/14 specify how institutions have to apply materiality, proprietary and confidentiality in relation to the disclosure requirements set out in Part 8 of CRR (Article 432).

    Laws, regulations and directives

    Circular CSSF 20/751 as amended by Circular CSSF 23/830: Guidelines on disclosure of non-performing and forborne exposures

    The EBA ITS 2020/04 on Pillar 3 disclosures specify disclosure requirements on non-performing and forborne exposures that are applicable only to large and other listed institutions, in line with Article 442 of Regulation (EU) No 575/2013 (CRR II).

    However, the EBA pointed out that external stakeholders’ access to relevant information on non-performing and forborne exposures of all types of institutions, except for small and non-complex institutions that are non-listed, should be maintained.

    Therefore, the amending Guidelines EBA/GL/2022/13 adjust the scope of application of the Guidelines EBA/GL/2018/10 to clarify that:

    1. the Guidelines will not apply to large (listed or not) and other listed institutions that are covered by the disclosure requirements under the ITS on Pillar 3 disclosures, but
    2. the Guidelines will continue to apply only to listed small and non-complex institutions and to other institutions that are non-listed.

    The Guidelines specify the information related to non-performing (NPE) and forborne exposures and foreclosed assets that banks should disclose and provide in uniform disclosure formats.

    EBA Guidelines on disclosure of non-performing and forborne exposures (EBA/GL/2018/10) Implementing Regulation (EU) 2021/637

     

    Amended EBA Guidelines on disclosure of non-performing and forborne exposures (EBA/GL/2022/13)
         
    Circular CSSF 20/751 EBA Pillar 3 ITS

    EBA/ITS/2020/04

    Circular CSSF 20/751 as amended by Circular CSSF 23/830
    Listed large institutions Yes Yes Not applicable
    Non-listed large institutions Yes Yes Not applicable
    Listed other institutions (institutions that are neither large nor small and non-complex) Yes Yes Not applicable
    Non-listed other institutions (institutions that are neither large nor small and non-complex) Yes Not applicable Yes
    Listed small and non- complex institutions Yes Not applicable Yes
    Non-listed small and non- complex institutions Not applicable Not applicable Not applicable

    Laws, regulations and directives

    Circular CSSF 20/755: Guidelines on disclosure requirements on IFRS 9 transitional arrangements

    • Adoption of the Guidelines EBA/GL/2020/11 on supervisory reporting and disclosure requirements in compliance with the CRR ‘quick fix’ in response to the COVID‐19 pandemic;
    • Adoption of the Guidelines EBA/GL/2020/12 amending Guidelines EBA/GL/2018/01 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’ in response to the COVID-19 pandemic;
    • Amendment of Circular CSSF 18/687.

    The Guidelines EBA/GL/2020/11 and EBA/GL/2020/12 aim to increase consistency and comparability of the information on own funds and capital and leverage ratios disclosed by institutions during the transition to the full implementation of IFRS 9, and to ensure market discipline.

    The CRR ‘quick fix’ disclosure requirements in the Pillar 3 report are no longer applicable after the following dates:

    • Information with regard to the leverage ratio: 28 June 2021;
    • Information with regard to the application of CRR Article 468: 31 December 2022;
    • Information with regard to the IFRS 9 transitional arrangements shall be provided by using the template in Annex 1 of the amending Guidelines EBA/GL/2020/12 until the end of the transitional period referred to in paragraphs 6 and 6a of CRR Article 473a: 31 December 2024.

    Circulars

    Ad-hoc XBRL data collection of Pillar 3 disclosures on ESG risks pursuant to EBA Decision EBA/DC/498 (EBA reporting framework 3.3.)

    The EBA has decided to collect ad-hoc ESG data from large, listed institutions based on their Pillar 3 quantitative disclosures on ESG risks (Decision EBA/DC/498).

    According to Article 1 of the EBA Decision, institutions subject to CRR Article 449a are requested to report to the CSSF quantitative ESG Pillar 3 data on a semi-annual basis (with reference dates 31/12 and 30/06).

    This ad-hoc data collection will provide the CSSF and the EBA with the necessary data and tools to fulfil monitoring functions and ESG-related mandates.

    Information on the applicable reference and remittance dates is available in Chapter 2, Part 2, Section 5 of the CSSF Reporting requirements for credit institutions (see Guidance section below).

    The approach for the EBA to collect the quantitative ESG risks data from the CSSF is temporary and will be discontinued once ESG data will be available under the ITS on supervisory reporting.

    New banking package (CRR III and CRD VI) applicable from 1 January 2025

    This collection of ESG Pillar 3 data is an interim solution pending the development of the supervisory reporting on ESG risks, as provided in the CRR III.

    As per CRR III, all institutions will be required to report information on their exposures to ESG risks as part of the supervisory reporting framework.

    Pillar 3 Data Hub project (P3DH)

    New banking package (CRR III and CRD VI) applicable from 1 January 2025

    The CRR III introduces new mandates for the EBA (Articles 433, 434 and 434a) to centralise institutions’ prudential disclosures and make prudential information readily available through a single electronic access point on the EBA website, the Pillar 3 Data Hub (P3DH).

    The P3DH is a strategic project that would facilitate centralised access by all stakeholders to prudential data of all EEA institutions, promote transparency and market discipline in the EU banking sector and facilitate access, usability and comparability of prudential information by all interested users.

    As a tentative timeline, the EBA expects the P3DH to become operational in 2025, with information for “Large” and “Other institutions” being already disclosed in 2025 and for “Small and non-complex institutions” (SNCIs) in 2026 with reference date December 2025 (first disclosure reference date after the expected date of application of CRR III).

    The P3DH development will occur in parallel with the discussions on the developing of the European Single Access Point (ESAP) that will centralise disclosures for all type of financial and non-financial companies at EEA level, including Pillar 3 disclosures under the scope of the P3DH.