Public disclosures - Pillar 3
paragrafo pillar 3
The new harmonised rules for banks and investment companies contained in EU Regulation no. 575/2013 (Capital Requirements Regulation or CRR) and EU Directive 2013/36/UE (Capital Requirements Directive or CRD IV) entered into force on 1 January 2014. This transposed into European Union law the standards set by the Basel Committee on Banking Supervision (the so-called Basel 3 framework).
The regulatory framework is completed by the execution measures contained in Regulatory or Implementation Technical Standards (RTS and ITS) adopted by the European Commission on the proposal of the European Supervisory Authorities (ESAs).
The new harmonised legislation has been transposed into national law by the Bank of Italy through:
- Circular no. 285 dated 17 December 2013 and subsequent updates entitled “Supervisory Instructions for Banks”;
- Circular no. 286 dated 17 December 2013 and subsequent updates entitled “Instructions for banks and securities firms on the preparation of supervisory reports”;
- Circular no. 154 dated 22 November 1991 and subsequent updates entitled “Supervisory reports by banks and financial institutions. Data collection schemes and instructions for submitting information flows”.
The new regulatory framework is designed to strengthen the capacity of banks to absorb shocks resulting from financial and economic tensions, regardless of their origin, to improve risk management and governance, and to strengthen transparency and disclosure on the part of banks.
The purpose of Pillar 3 (market discipline) is to combine Pillar 1 (minimum capital requirements) and Pillar 2 (supervisory review). It aims to encourage market discipline by identifying a series of disclosure requirements that make available to market participants fundamental information on Own Funds, the field of application, risk exposures, risk assessment processes and, as a result, on the capital adequacy of intermediaries. These requirements take on particular importance in the present context where current rules place considerable reliance on internal methodologies, when adequate and allowed, and therefore give banks considerable discretion when determining their own capital requirements.