On February 14, 2020 the IIF responded to a BCBS consultation on revisions to market risk disclosure requirements. The IIF prepared a joint response with GFMA and ISDA on this consultation.
In a consultative document released in November 2019, the Basel Committee proposed a set of revised disclosure requirements related to the market risk framework that was finalized in January 2019. In addition to these changes, the Committee has proposed to enhance disclosure of the trading desk structure of banks that use the internal models approach by introducing a materiality threshold for disclosure of information pertaining to individual trading desks.
In the Joint Associations response, we express support for the policy objective of encouraging market discipline through the development of regulatory disclosure requirements that enable market participants to access key information relating to banks’ regulatory capital and risk exposures. The Joint Associations also recognize the improvement to the Market Risk disclosures incorporated in the 2017 version of the standards, and the present need to update these in light of the latest reforms to the regulatory policy framework.
However, we highlight an overarching concern that the proposed revised BCBS disclosure requirements would not align with the BCBS Guiding Principles for banks’ Pillar 3 disclosures, including those in relation to meaningfulness and usefulness, comparability and clarity. There also continues to be a significant risk that sensitive or proprietary information might be disclosed in turn creating new risks to the financial system, including for example by smaller and less sophisticated banks that have less sight of a particular market owing to the limited nature and scale of their activities. In the response letter, we also suggest that that the proposed disclosure templates are aligned with how senior management typically assess and manage the market risks and regulatory capital requirements of a bank.
In relation to the proposed application of the changes from 1 January 2022, we note the importance of aligning dates for disclosure with the timings for implementation of the Fundamental Review of the Trading Book (FRTB) standard in different jurisdictions and allowing a sufficient period of time for requirements to become established before disclosure commences.