EBA欧洲银行-2004_10_30-IASBED7-Financial-Instruments2C20Disclosures-_annex__6页_102kb

CEBS Comment Letter on ED 7 Summary

Core Content

CEBS has provided detailed comments on the Exposure Draft (ED) 7 regarding financial instrument disclosures. The letter emphasizes the importance of transparency and market discipline in banking activities, aligning with Basel II and Pillar 3 requirements. CEBS supports the consolidation of disclosure provisions from IAS 30 and IAS 32 into a single standard and appreciates the flexibility it offers to entities. However, they also highlight the need for more precise and comprehensive disclosure requirements, especially for banking institutions, to ensure reliable and meaningful information for users of financial statements.

Main Views

• Scope and Detail: CEBS supports the broader scope of the proposed standard, which includes SMEs, and advocates for clearer definitions of "classes" of financial instruments. They also suggest that entities should disclose how and why they classify financial instruments differently.

• Pillar 2 Capital Requirements: CEBS commends the IASB for excluding 'pillar 2' capital requirements from disclosure, as these are typically confidential and not relevant for comparability. They recommend clarifying that paragraphs 47(d) and 47(e) do not apply to such requirements.

• Structure of Disclosures: While CEBS supports the portfolio approach for risk disclosure, they suggest additional guidance on how this aligns with IAS 1’s liquidity requirements. They also recommend including disclosures on liquidity risks for both assets and liabilities.

• Fair Value Option: CEBS urges more detailed disclosures on the use of the fair value option, especially regarding the impact on credit risk. They propose that the disclosure should include the cumulative effect and the relevant amount for the period.

• Other Fair Value Requirements: CEBS recommends disclosing the percentage of financial assets and liabilities whose fair value is based on published price quotations or valuation techniques. They also call for clarification on the term "in full or in part" in the context of fair value.

• Sensitivity Analysis: CEBS supports the inclusion of sensitivity analysis in the proposed standard but suggests that it should be treated as a minimum requirement. They recommend additional examples, particularly distinguishing between different operating strategies in banking institutions.

• Capital Disclosures: CEBS’ response to this question is detailed in the general comments section.

• Implementation Guidance: CEBS appreciates the guidance but requests clarifications on specific examples, especially regarding entity-specific capital requirements and the presentation of liabilities.

• Differences from US FASB: CEBS agrees with the ED7 disclosure of fair value usage, except for instruments designated at fair value through profit or loss on initial recognition. They reinforce the need for quantitative fair value requirements.

Key Information

• Support for Consolidation: CEBS supports the consolidation of IAS 30 and IAS 32 into a single standard, which would improve clarity and reduce reporting burdens for SMEs.

• Confidentiality of Pillar 2: CEBS recommends that Pillar 2 capital requirements remain confidential and not disclosed, to avoid misleading information.

• Disclosure Enhancements: CEBS calls for more detailed and structured disclosures, particularly on credit risk, liquidity risk, and fair value usage, to ensure comparability and reliability.

• Implementation Guidance Improvements: CEBS suggests clarifying certain examples and improving the presentation of liabilities and loan commitments to avoid misleading interpretations.

• Alignment with Basel II: The proposed standard is seen as aligned with Basel II and Pillar 3, but CEBS emphasizes the need for consistency and clarity in the implementation.

• Voluntary vs. Mandatory Disclosures: CEBS notes that some disclosures may be voluntary, which could affect the comprehensiveness of audits and the reliability of the information provided.

Conclusion

CEBS overall supports the development of a more risk-focused and comprehensive disclosure standard for financial instruments. They highlight the importance of maintaining confidentiality for certain regulatory data and recommend clearer definitions, more detailed requirements, and improved implementation guidance to ensure that disclosures are both meaningful and manageable for entities.