Supervisory disclosure
Requirements of the UK under Basel 2 and the Capital Requirements Directive
The increasing integration of financial markets in Europe requires consistent EU implementation and convergence of supervisory practices. The importance of supervisory transparency and accountability has been stressed by the Basel Committee on Banking Supervision and by the Capital Requirements Directive (CRD). The CRD requires supervisors to make disclosures that allow meaningful comparisons of supervisory rules and practices across Europe.
Article 144 of Directive 2006/48/EC states that:
Competent authorities shall disclose the following information:
- the texts of laws, regulations and administrative rules and general guidance adopted in their Member State in the field of prudential regulation;
- the manner of exercise of the options and discretions available in the Community legislation;
- the general criteria and methodologies they use in the review and evaluation referred to in Article 124;
- without prejudice to the provisions laid down in Chapter 1, Section 2, aggregate statistical data on key aspects of the implementation of the prudential framework in each Member State.
The disclosures provided for in the fist subparagraph shall be sufficient to enable a meaningful comparison of the approaches adopted by the competent authorities of the different Member States.
To do this, the Committee of European Banking Supervisors (CEBS) has created a framework for supervisory disclosure at both the European and national levels.
The framework is intended to increase transparency of supervisory practices by making it easier to compare national texts that implement the CRD. And it is intended to compare the ways in which Member States exercise the options and national discretions available to them in the CRD. In addition, the framework enables institutions to compare the criteria and methods that supervisors use in evaluating and reviewing them. Finally, it provides aggregate statistical data on key aspects of implementation of the CRD.
The scope of the framework devised by CEBS is limited to the provisions of the CRD that reflect the revised Basel Framework (Basel 2).
UK disclosures
We have an area on our website dedicated to the information we need to disclose. In keeping with the requirements of Article 144, it is structured in four sections:
1. Rules and Guidance
This section on Rules and Guidance includes texts of laws and regulations within Directives 2006/48/EC and 2006/49/EC in the UK, administrative rules and general guidance.
2. Options and National Discretions
The Directives 2006/48/EC and 2006/49/EC contain a number of legal options and national discretions which may be used partly by the supervised institutions and partly by the national legislator or the supervisory authorities. This inevitably creates differences in supervisory practices, national circumstances or individual strategies. The list of options and national discretions contained in this section of our website indicates whether the UK has implemented those discretions in the course of its CRD implementation.
3. Supervisory Review
This section on Supervisory Review describes the UK's Pillar II approach, including the general criteria and methodologies of the Supervisory Review and Evaluation Process (SREP) and minimum requirements for institutions' own Capital Adequacy Assessment Process (ICAAP).
4. Statistical Data
This section on Statistical Data will include aggregate statistical data on key aspects of implementing the CRD in the UK. The disclosures will include national statistical data on the banking sector, credit risk, operational risk, market risk, and supervisory actions and measures. Please note that we will not disclose any confidential information received, except in summary or collective form.
The tables of information you will find in this section are implemented in a similar manner on the homepages of all the competent authorities of the EU member states. The CEBS website serves as a centralised electronic repository and allows for quick and easy comparison of all the relevant information. You can find more detailed information about the information the CRD requires to be disclosed on the websites of the national competent authorities. This two-level approach increases the transparency and comparability of the information and data disclosed.