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BIPRU 11.5 Technical criteria on disclosure: General requirements

Disclosure: Risk management objectives and policies

BIPRU 11.5.1RRP

A firm must disclose its risk management objectives and policies for each separate category of risk, including the risks referred to under BIPRU 11.5.1 R to BIPRU 11.5.17 R. These disclosures must include:

  1. (1)

    the strategies and processes to manage those risks;

  2. (2)

    the structure and organisation of the relevant risk management function or other appropriate arrangements;

  3. (3)

    the scope and nature of risk reporting and measurement systems; and

  4. (4)

    the policies for hedging and mitigating risk, and the strategies and processes for monitoring the continuing effectiveness of hedges and mitigants.

    [Note: BCD Annex XII Part 2 point 1]

Disclosure: Scope of application of directive requirements

BIPRU 11.5.2RRP

A firm must disclose the following information regarding the scope of application of the requirements of the Banking Consolidation Directive:

  1. (1)

    the name of the firm which is the subject of the disclosures;

  2. (2)

    an outline of the differences in the basis of consolidation for accounting and prudential purposes, with a brief description of the entities that are:

    1. (a)

      fully consolidated;

    2. (b)

      proportionally consolidated;

    3. (c)

      deducted from capital resources;

    4. (d)

      neither consolidated nor deducted;

  3. (3)

    any current or foreseen material practical or legal impediment to the prompt transfer of capital resources or repayment of liabilities among the parent undertaking and its subsidiary undertakings;

  4. (4)

    the aggregate amount by which the actual capital resources are less than the required minimum in all subsidiary undertakings not included in the consolidation, and the name or names of such subsidiary undertakings; and

  5. (5)

    if applicable, the circumstance of making use of the provisions laid down in BIPRU 2.1 (Solo consolidation waiver).

    [Note: BCD Annex XII Part 2 point 2]

Disclosure: Capital resources

BIPRU 11.5.3RRP

A firm must disclose the following information regarding its capital resources:

  1. (1)

    summary information on the terms and conditions of the main features of all capital resources items and components thereof;

  2. (2)

    tier one capital resources less any innovative tier one capital resources, with separate disclosure of all positive items and deductions;

  3. (3)

    the total amount (for the purposes of (3), the total amount must be stated gross of deductions) of:

    1. (a)

      tier two capital resources plus any innovative tier one capital resources; and

    2. (b)

      tier three capital resources;

  4. (4)

    deductions from tier one capital resources and tier two capital resources, with separate disclosure of items referred to in GENPRU 2.2.236 R; and

  5. (5)

    total capital resources, net of deductions in GENPRU 2.2 and limits laid down in GENPRU 2.2.25 R to GENPRU 2.2.30 R and GENPRU 2.2.42 R to GENPRU 2.2.50 R.

    [Note: BCD Annex XII Part 2 point 3]

Disclosure: Compliance with BIPRU 3, BIPRU 4, BIPRU 6, BIPRU 7, BIPRU 10 and the overall Pillar 2 rule

BIPRU 11.5.4RRP

A firm must disclose the following information regarding compliance with BIPRU 3, BIPRU 4, BIPRU 6, BIPRU 7, BIPRU 10 and the overall Pillar 2 rule:

  1. (1)

    a summary of the firm's approach to assessing the adequacy of its internal capital to support current and future activities;

  2. (2)

    for a firm calculating risk weighted exposure amounts in accordance with the standardised approach to credit risk, 8% of the risk weighted exposure amounts for each of the standardised credit risk exposure classes;

  3. (3)

    for a firm calculating risk weighted exposure amounts in accordance with the IRB approach, 8% of the risk weighted exposure amounts for each of the IRB exposure classes;

    [Note: BCD Annex XII Part 2 point 4 (part)]

  4. (4)

    the firm's minimum capital requirements for the following:

    1. (a)

      in respect of its trading-book business, its:

      1. (i)

        interest rate PRR;

      2. (ii)

        equity PRR;1

      3. (iii)

        option PRR;

      4. (iv)

        collective investment schemes PRR;

      5. (v)

        counterparty risk capital component;

      6. (vi)

        concentration risk capital component; and

    2. (b)

      in respect of all of its business activities, its:

      1. (i)

        commodity PRR; and

      2. (ii)

        foreign currency PRR;1

  5. (5)

    its operational risk capital requirement calculated in accordance with the basic indicator approach, the standardised approach and the advanced measurement approach and disclosed separately.

    [Note: BCD Annex XII Part 2 point 4(part)]

BIPRU 11.5.5RRP

For retail exposures, the requirement under BIPRU 11.5.4 R (3) applies to each of the following categories:

  1. (1)

    exposures to retail SMEs;

  2. (2)

    retail exposures secured by real estate collateral;

  3. (3)

    qualifying revolving retail exposures; and

  4. (4)

    other retail exposures.

    [Note: BCD Annex XII Part 2 point 4(part)]

BIPRU 11.5.6RRP

For equity exposures, the requirement under BIPRU 11.5.4 R (3) applies to:

  1. (1)

    each of the approaches ( the simple risk weight approach, the PD/LGD approach and the internal models approach) provided for in BIPRU 4.7.5 R to BIPRU 4.7.6 R, BIPRU 4.7.9 R to BIPRU 4.7.11 R, BIPRU 4.7.14 R to BIPRU 4.7.16 R, BIPRU 4.7.24 R to BIPRU 4.7.25 R;

  2. (2)

    exchange traded exposures, private equity exposures in sufficiently diversified portfolios, and other exposures;

  3. (3)

    exposures subject to supervisory transition regarding capital requirements; and

  4. (4)

    exposures subject to grandfathering provisions regarding capital requirements.

    [Note: BCD Annex XII Part 2 point 4(part)]

BIPRU 11.5.7RRP

A firm must disclose the following information regarding its exposure to counterparty credit risk:

  1. (1)

    a discussion of the methodology used to assign internal capital and credit limits for counterparty credit exposures;

  2. (2)

    a discussion of policies for securing collateral and establishing credit reserves;

  3. (3)

    a discussion of policies with respect to wrong-way risk exposures;

  4. (4)

    a discussion of the impact of the amount of collateral the firm would have to provide given a downgrade in its credit rating;

  5. (5)

    gross positive fair value of contracts, netting benefits, netted current credit exposure, collateral held and 'net derivatives credit exposure', where 'net derivatives credit exposure' is the credit exposure on derivatives transactions after considering both the benefits from legally enforceable netting agreements and collateral arrangements;

  6. (6)

    measures for exposure value under the CCR mark to market method, the CCR standardised method or the CCR internal model method, whichever is applicable;

  7. (7)

    the notional value of credit derivative hedges, and the distribution of current credit exposure by types of credit exposure;

  8. (8)

    credit derivative transactions (notional), segregated between use for the firm's own credit portfolio, as well as in its intermediation activities, including the distribution of the credit derivatives products used, broken down further by protection bought and sold within each product group; and

  9. (9)

    the estimate of alpha (α) if the firm's CCR internal model method permission permits it to estimate α.

    [Note: BCD Annex XII Part 2 point 5]

Disclosure: Credit risk and dilution risk

BIPRU 11.5.8RRP

A firm must disclose the following information regarding its exposure to credit risk and dilution risk:

  1. (1)

    the definitions for accounting purposes of past due and impaired;

  2. (2)

    a description of the approaches and methods adopted for determining value adjustments and provisions;

  3. (3)

    the total amount of exposures after accounting offsets and without taking into account the effects of credit risk mitigation, and the average amount of the exposures over the period broken down by different types of exposure classes;

  4. (4)

    the geographic distribution of the exposures, broken down in significant areas by material exposure classes, and further detailed if appropriate;

  5. (5)

    the distribution of the exposures by industry or counterparty type, broken down by exposure classes, and further detailed if appropriate;

  6. (6)

    the residual maturity breakdown of all the exposures, broken down by exposure classes, and further detailed if appropriate;

  7. (7)

    by significant industry or counterparty type, the amount of:

    1. (a)

      impaired exposures and past due exposures, provided separately;

    2. (b)

      value adjustments and provisions; and

    3. (c)

      charges for value adjustments during the period;

  8. (8)

    the amount of the impaired exposures and past due exposures, provided separately, broken down by the significant geographical areas including, if practical, the amounts of value adjustments and provisions related to each geographical area;

  9. (9)

    the reconciliation of changes in the value adjustments and provisions for impaired exposures, shown separately; and

  10. (10)

    value adjustments and recoveries recorded directly to the income statement must be disclosed separately.

    [Note: BCD Annex XII Part 2 point 6 (part)]

BIPRU 11.5.9RRP

The information to be disclosed under BIPRU 11.5.8 R (9) must comprise:

  1. (1)

    a description of the type of value adjustments and provisions;

  2. (2)

    the opening balances;

  3. (3)

    the amounts taken against the provisions during the period;

  4. (4)

    the amounts set aside or reversed for estimated probable losses on exposures during the period, any other adjustments including those determined by exchange rate differences, business combinations, acquisitions and disposals of subsidiary undertakings, and transfers between provisions; and

  5. (5)

    the closing balances.

    [Note: BCD Annex XII Part 2 point 6 (part)]

Disclosure: Firms calculating risk weighted exposure amounts in accordance with the standardised approach

BIPRU 11.5.10RRP

For a firm calculating risk weighted exposure amounts in accordance with the standardised approach to credit risk, the following information must be disclosed for each of the standardised credit risk exposure classes;

  1. (1)

    the names of the nominated ECAIs and export credit agencies and the reasons for any changes;

  2. (2)

    the standardised credit risk exposure classes for which each ECAI or export credit agency is used;

  3. (3)

    a description of the process used to transfer the issuer and issue credit assessments onto items not included in the trading book;

  4. (4)

    the association of the external rating of each nominated ECAI or export credit agency with the credit quality steps prescribed in BIPRU 3, taking into account that this information need not be disclosed if the firm complies with the credit quality assessment scale; and

  5. (5)

    the exposure values and the exposure values after credit risk mitigation associated with each credit quality step prescribed in BIPRU 3, as well as those deducted from capital resources.

    [Note: BCD Annex XII Part 2 point 7]

Disclosure: Firms calculating risk weighted exposure amounts using the IRB approach

BIPRU 11.5.11RRP

A firm calculating risk weighted exposure amounts for specialised lending exposures in accordance with BIPRU 4.5.8 R to BIPRU 4.5.10 R or equity exposures in accordance with BIPRU 4.7.9 R to BIPRU 4.7.10 R (the simple risk weight approach) must disclose the exposures assigned:

  1. (1)

    to each category of the table in BIPRU 4.5.9 R; or

  2. (2)

    to each risk weight mentioned in BIPRU 4.7.9 R to BIPRU 4.7.10 R.

    [Note: BCD Annex XII Part 2 point 8]

Disclosure: Market risk

BIPRU 11.5.12RRP

A firm must disclose its capital resources requirements separately for each risk referred to in (1) and (2).

  1. (1)

    in respect of its trading-book business, its:

    1. (a)

      interest rate PRR;

    2. (b)

      equity PRR;1

    3. (c)

      option PRR;

    4. (d)

      collective investment schemes PRR;

    5. (e)

      counterparty risk capital component; and

    6. (f)

      concentration risk capital component; and

  2. (2)

    in respect of all of its business activities, its:

    1. (a)

      commodity PRR; and

    2. (b)

      foreign currency PRR1

    [Note: BCD Annex XII Part 2 point 9]

Disclosure: Use of VaR model for calculation of market risk capital requirement

BIPRU 11.5.13RRP

The following information must be disclosed by a firm which calculates its market risk capital requirement using a VaR model:

  1. (1)

    for each sub-portfolio covered:

    1. (a)

      the characteristics of the models used;

    2. (b)

      a description of stress testing applied to the sub-portfolio;

    3. (c)

      a description of the approaches used for backtesting and validating the accuracy and consistency of the internal models and modelling processes;

  2. (2)

    the scope of the firm's VaR model permission; and

  3. (3)

    a description of the extent and methodologies for compliance with the requirements set out in GENPRU 1.3.13 R (2) and GENPRU 1.3.13 R (3) and GENPRU 1.3.14 R to GENPRU 1.3.34 R.

[Note: BCD Annex XII Part 2 point 10]

Disclosure: Operational risk

BIPRU 11.5.14R

The following information must be disclosed by a firm on operational risk:

  1. (1)

    the approaches for the assessment of the operational risk capital requirement1 that the firm qualifies for; and

  2. (2)

    if the firm uses the advanced measurement approach:

    1. (a)

      a description of the methodology used in the advanced measurement approach, including a discussion of relevant internal and external factors considered in the firm's measurement approach; and

    2. (b)

      in the case of partial use, the scope and coverage of the different methodologies used.

    [Note: BCD Annex XII Part 2 point 11]

Disclosure: Non-trading book exposures in equities

BIPRU 11.5.15RRP

A firm must disclose the following information regarding the exposures in equities not included in the trading book:

  1. (1)

    the differentiation between exposures based on their objectives, including for capital gains relationship and strategic reasons, and an overview of the accounting techniques and valuation methodologies used, including key assumptions and practices affecting valuation and any significant changes in these practices;

  2. (2)

    the balance sheet value, the fair value and, for those exchange-traded, a comparison to the market price where it is materially different from the fair value;

  3. (3)

    the types, nature and amounts of exchange-traded exposures, private equity exposures in sufficiently diversified portfolios, and other exposures;

  4. (4)

    the cumulative realised gains or losses arising from sales and liquidations in the period; and

  5. (5)

    the total unrealised gains or losses, the total latent revaluation gains or losses, and any of these amounts included in tier one, tier two or tier three capital resources.

    [Note: BCD Annex XII Part 2 point 12]

Disclosures: Exposures to interest rate risk in the non-trading book

BIPRU 11.5.16RRP

A firm must disclose the following information on its exposure to interest rate risk on positions not included in the trading book:

  1. (1)

    the nature of the interest rate risk and the key assumptions (including assumptions regarding loan prepayments and behaviour of non-maturity deposits), and frequency of measurement of the interest rate risk; and

  2. (2)

    the variation in earnings, economic value or other relevant measure used by the management for upward and downward rate shocks according to management's method for measuring the interest rate risk, broken down by currency.

    [Note: BCD Annex XII Part 2 point 13]

Disclosures: Securitisation

BIPRU 11.5.17RRP

A firm calculating risk weighted exposure amounts in accordance with BIPRU 9 must disclose the following information:

  1. (1)

    a description of the firm's objectives in relation to securitisation activity;

  2. (2)

    the roles played by the firm in the securitisation process;

  3. (3)

    an indication of the extent of the firm's involvement in each of them;

  4. (4)

    the approaches to calculating risk weighted exposure amounts that the firm follows for its securitisation activities;

  5. (5)

    a summary of the firm's accounting policies for securitisation activities, including:

    1. (a)

      whether the transactions are treated as sales or financings;

    2. (b)

      the recognition of gains on sales;

    3. (c)

      the key assumptions for valuing retained interests; and

    4. (d)

      the treatment of synthetic securitisations if this is not covered by other accounting policies;

  6. (6)

    the names of the ECAIs used for securitisations and the types of exposure for which each agency is used;

  7. (7)

    the total outstanding amount of exposures securitised by the firm and subject to the securitisation framework (broken down into traditional and synthetic), by exposure type;

  8. (8)

    for exposures securitised by the firmand subject to the securitisation framework, a breakdown by exposure type of the amount of impaired and past due exposures securitised, and the losses recognised by the firm during the period;

  9. (9)

    the aggregate amount of securitisation positions retained or purchased, broken down by exposure type;

  10. (10)

    the aggregate amount of securitisation positions retained or purchased:

    1. (a)

      broken down into a meaningful number of risk weight bands; and

    2. (b)

      with separate disclosure of positions that have been risk weighted at 1250% or deducted;

  11. (11)

    the aggregate outstanding amount of securitisated revolving exposures segregated by the originator's interest and the investors' interest; and

  12. (12)

    a summary of the securitisation activity in the period, including the amount of exposures securitised (by exposure type), and recognised gain or loss on sale by exposure type.

[Note: BCD Annex XII Part 2 point 14]