Pillar 3 embedded waivers
Pillar 3 waivers are available to firms which have a non EEA parent and can demonstrate that disclosures made by their parent are comparable to FSA disclosure requirements. Under our rules, these firms do not have to make their own disclosures (see BIPRU 11.2.2R-11.2.5R and BIPRU 11.2.6G & 11.2.7G). It will be up to firms to demonstrate that these disclosures are comparable.
Frequently asked questions
When should we apply for Pillar 3 waiver and what is the expected turn round time for decisions?
For firms who need to make disclosures in 2007, we have been ready to receive applications from 1 August 2007. Our service standard on waivers is 20 days from when we receive a complete application. However, we anticipate it will take longer for the first few waivers applications we receive.
If you require a decision on your application by 31 December 2007, please note that this is our Waivers Team's busiest period so we would need your application no later than 1 October 2007. We cannot guarantee to reach a decision on any year-end critical waiver application we receive after this date.
To apply for a waiver, please follow the standard FSA waiver procedure: Applying for a Waiver.
When will we need to make disclosures?
Disclosure requirements do not apply until you have calculated your firm's capital requirements as described in the Capital Requirements Directive (CRD). The following table sets out when we expect firms to apply:
| Firms Approach | Standardised and Foundation Internal Ratings Based (IRB) | Advanced IRB |
|---|---|---|
| Date from which disclosures are applicable | 2007 or 2008 | 2008 |
How frequently would Pillar 3 disclosures be required?
You should disclose Pillar 3 disclosures that are readily available (not based on accounting year-end data) during the calendar year either 2007 or 2008 depending on when your firm moves to the full set of CRD rules. For example, if you receive authorisation to use an advanced prudential approach during 2008, but your firm's accounting year end is on 31 December 2008, then you should publish these Pillar 3 disclosures (not based on accounting year-end data) during 2008.
Pillar 3 disclosures that are not readily available to the firms and are based on accounting year-end data must be published as soon as practicable after the year-end. For example, if your firm receives authorisation to use an advanced prudential approach during 2008, but your accounting year end is on 31 December 2008, then you may publish the section of Pillar 3 disclosures that are linked to the accounting year-end data in early 2009.
Can we apply for a waiver if our parent group uses different prudential calculation methodologies to the UK?
If the UK entity and parent company are using different methodologies – e.g. the UK entity is on standardised credit risk and the parent group on an advanced approach – the UK entity will have to demonstrate to us that the disclosures by the parent group are comparable.
This means that the starting point for the UK and parent group entities could be different as they are subject to different disclosure requirements although some disclosure requirements could be the same. Firms may want to provide some explanatory note in their annual reports/websites that explain the context of the sub-group level disclosures.
Where disclosures are not clearly comparable, we expect firms to bridge the gap by first doing a gap analysis and then demonstrate to us which disclosures they think are comparable and why.
We will review Pillar 3 disclosures using a risk-based approach.
Can we get a waiver for some of the disclosure requirements as stated in BIPRU 11?
Yes. We have the discretion to grant one or more waivers from the relevant disclosure provisions in BIPRU.
What information will we need to provide in the waiver application?
You must specify which particular rules you are applying to waive.
Firms will need to demonstrate how they meet the statutory tests of 'rule being unduly burdensome' or 'rule not achieving purpose' in addition to 'no undue risk'. As part of these arguments we would expect to see details of a gap analysis to demonstrate that the disclosures the firm's parent group have made would be comparable.
Where can I get more information on Pillar 3 disclosures?
Yes, we have put together some practical information for firms in the CRD/Basel 2 section of our website.
