The Basel Committee on Banking Supervision has published for consultation its Review of the Pillar 3 disclosure requirements.
The proposed revisions aim to enhance comparability across banks by ensuring greater consistency in the way banks disclose information about risk exposures.
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The review was prompted by concerns that the Basel framework’s existing Pillar 3 failed to promote the early identification of a bank’s material risks and didn’t provide sufficient information to enable market participants to assess a bank’s overall capital adequacy.
The goal of the proposed revisions is to improve the transparency of the internal model-based approaches that banks use to calculate minimum regulatory capital requirements. For example, under the revised regime banks would be required to disclose the drivers of changes in risk-weighted assets and the actual versus forecast performance of certain modelling parameters.
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The Basel Committee is reviewing its disclosure requirements in two phases. The present consultative document covers the first phase and focuses on overhauling the existing disclosure requirements related to risk-weighted assets. Once finalised, the proposals will replace the existing Pillar 3 framework. The second phase will expand the scope of the review to include standards that are currently under development or being revised.
The Committee welcomes feedback from investors, analysts, rating agencies and other users of Pillar 3 data, as well as from the audit community. Comments can be uploaded here by September 26, 2014. Comments can also be sent to: Secretariat of the Basel Committee on Banking Supervision, Bank for International Settlements, CH-4002 Basel, Switzerland. All comments can be published on the website of the Bank for International Settlements, unless confidentiality is explicitly requested.