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.
Competent authorities should disclose the following information:
(1) the texts of laws, regulations and administrative rules and general guidance
adopted in their Member State in the field of prudential regulation;
(2) the manner of exercise of the options and discretions available in the
Community legislation; and
(3) the general criteria and methodologies they use in the review and evaluation
referred to in Article 124;
(4) without prejudice to the provisions laid down in Chapter 1, Section 2, of the CRD, aggregate statistical data on key aspects of the implementation of the
prudential framework in each Member State.
The disclosures provided for in the first 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. It is also 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 II)
Disclosures
This area of our website is dedicated to the information we need to disclose in accordance with the matters set out above. In keeping with the requirements of Article 144, it is structured into four sections:
1. Rules and Guidance
The Capital Requirements Directive (CRD) requires competent authorities to disclose texts of laws, regulations, administrative rules and general guidance adopted in their Member State to transpose its Basel 2-related provisions.
Transposition of the CRD into Gibraltar law was carried out by the Government of Gibraltar. The Financial Services Commission has supplemented this by issuance of various guidance notes. The Gibraltarian transposition affects all credit institutions and investment firms.
The following information is disclosed in line with (1) above:
Laws:
Financial Services (Capital Adequacy
of Credit Institutions) Regulations
2007
Financial Services (Capital Adequacy of Investment firms) Regulations
2007
These should be read concurrently.
The Financial Services Commission has
also produced guidance notes covering various areas:
Guidance Note Capital Requirements Directive - Operational Risk
Guidance Note Capital Requirements Directive - Credit Risk Standardised Approach
Guidance Note Capital Requirements Directive - Credit Risk IRB Approach
Guidance Note Capital Requirements Directive - Securitisation
Guidance Note Capital Requirements Directive - Financial Derivatives, SFTs and
Long Settlement Transactions
Guidance Note Capital Requirements Directive - Market Risk
Guidance
Note Capital Requirements Directive - ECAIs
Guidance Note Glossary
Guidance Note Basel II: Pillar 2 - the ICAAP & the SREP
Guidance Note Basel II: Pillar 3 - Disclosures
The Financial Services Commission has also produced the returns to be completed by credit institutions and investment firms and each of these are accompanied by a set of notes for completion.
Please see the relevant tables for information that has been disclosed:
For details of the External Credit Assessment Recognition process, please refer to the Guidance note on ECAIs. There are currently no recognised ECAIs. The Financial Services Commission will be allowing firms to use ECAIs recognised in other EEA jurisdictions without carrying out its own assessment.
2.Options and National Discretions
Directives 2006/48/EC and 2006/49/EC contain options and discretions that supervised institutions, supervisory authorities or national legislators can use. Implementing the Capital Requirements Directive (CRD) will therefore result in differences in supervisory approaches, national circumstances or individual strategies.
Competent authorities are required to
disclose how they will exercise the options and discretions available in the CRD.
Whilst, there is no generally accepted definition of what constitutes a
'national discretion', CEBS has provided consistent terminology to clarify what
is meant by an 'option' and a 'national discretion' in relation to the
supervisory disclosure framework. These are described below:
'Option' refers to a situation where competent authorities or Member States are given a choice on how to comply with a given provision selected from alternatives set out in the Directive. For example, national authorities have the option, in determining the risk weights for exposures to institutions, of using either the central government risk-weight method or the credit assessment based method.
'Discretion' or 'National Discretion' refers to a situation where competent authorities or Member States are given a choice as to whether to apply a given provision. For example, Member States may, at national discretion, impose sub-consolidation in cases where it is not required and, if they do so, they may set the conditions that will apply to these.
Not all options or national discretions that might fall within the scope of the framework and meet the above definition are necessarily of interest for supervisory disclosure purposes.
The supervisory disclosure framework specifically excludes supervisory actions or decisions aimed at specific institutions. Options and discretions which are exercised for individual institutions or to a given set of institutions, rather than applying generally, are not disclosed under Article 144(b). In particular, when the CRD refers to an institution needing to obtain a competent authority's approval or authorisation for various purposes, this authorisation or approval might be discretionary but it is not a 'national discretion'. Gibraltar does not make disclosures about discretions that it does not have the power to exercise.
Mutual Recognition of Options and National Discretions
Sometimes, the CRD explicitly provides for the possibility of mutually recognizing the exercise of certain national discretions in another Member State. Mutual recognition is crucial especially for cross-border groups.
Depending on the role of the respective competent authority in the cross-border approval process (home or host perspective) there are different constellations. The FSA included two tables in this section to give an overview of exercising the explicit mutual recognition clauses in the different Member States – from the point of view of FSA as home supervisor and as host supervisor.
3. Supervisory Review
Competent authorities are required to disclose the general criteria and methodologies they use in the review and evaluation referred to in Article 124 (the Supervisory Review and Evaluation Process) of the CRD.
The Supervisory Review and Evaluation Process (SREP) is part of the wider Supervisory Review Process. The competent authority conducts the SREP, which is a comprehensive process that supervisors use to review and evaluate an institution's exposure to risks. It is also used to review and evaluate the adequacy and reliability of the institution's Internal Capital Adequacy Assessment Process (ICAAP), and the adequacy of the institution's own funds and internal capital in relation to the assessment of its overall risk profile. It is used to monitor ongoing compliance with standards laid down in the CRD and to identify any weakness or inadequacies and the necessary prudential measures to address these.
The ICAAP is another element of the Supervisory Review Process, which the institution itself conducts. It is a comprehensive process including the management body and covers senior management oversight, monitoring, reporting and the internal control reviews that institutions must have to identify and measure their risks. This allows institutions to ensure they make adequate provisions for holding internal capital in relation to their risk profile.
CEBS has identified four building blocks of supervisory activity that form the core SREP. These are common to all competent authorities:
Scope of application
Individual risk assessment
Review and evaluation of ICAAP
Overall assessment and supervisory measures
The Financial Services Commission has disclosed the criteria and methods used in
the first three categories and for the overall assessments in the fourth
category. However, we have made no disclosures about decisions on individual
institutions.
Disclosures relating to the SREP employ a two-tiered architecture. First,
guidelines and explanatory notes posted on the CEBS website provide an over
understanding of the general features to be implemented by national authorities
under each category. Secondly, details of how Gibraltar implements its SREP is
integrated into the Guidance Note dealing with ICAAPs.
4. Statistical Data
Competent authorities are required to disclose aggregate statistical data on key aspects of implementation. The required disclosure includes national statistical data on the banking and investment sector, credit, operational and market risk, as well as data on supervisory actions and measures.
The 'key' aspects include information about banks
and investment firms on both the supervisory process and supervisory outcomes.
Disclosures will have both a descriptive and a quantitative component.
Aggregate statistical data on the following topics will be disclosed:
Banking and Investment sectors
Credit risk
Market risk
Supervisory actions and measures
The disclosure of statistical data will occur as from mid 2008.
The Financial Services Commission will not divulge any confidential information received in the course of its duties to any person or authority whatsoever, except in summary or collective form. If in disclosing aggregate statistical data confidentiality would be breached, the relevant data will not be disclosed.
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 centralized electronic repository and allows for quick and easy comparison of all the relevant information. This also includes more detailed information about the information the CRD requires to be disclosed on the websites of the national competent authorities. This two-level approach is intended to increase the transparency and comparability of the information and data disclosed.