General Inspectorate of Banking Supervision

Transcription

1 NATIONAL BANK OF POLAND COMMISSION FOR BANKING SUPERVISION General Inspectorate of Banking Supervision Resolution no. 6/2007 of the Commission for Banking Supervision of 13 March 2007 on detailed principles related to and the manner of publishing disclosures by banks with regard to qualitative and quantitative information regarding capital adequacy and the scope of information subject to disclosure Warsaw, 2007

2 From the editors All effort has been taken to ensure the accuracy of this translation based on the official Polish text. Nevertheless, all translations of this kind may be subject to a certain degree of linguistic discord. Should you have any uncertainties regarding the translation reproduced in this publication, please submit your questions to the editors. The official language of the documents translated herein is Polish. In case of any doubt or misunderstanding, the Polish version should therefore be considered final. National Bank of Poland General Inspectorate of Banking Supervision ul. Świętokrzyska 11/ Warsaw Poland dz.sekretariat@nbp.pl nbpginbzs@nbp.pl 2

3 Resolution no. 6/2007 of the Commission for Banking Supervision of 13 March 2007 on detailed principles related to and the manner of publishing disclosures by banks with regard to qualitative and quantitative information regarding capital adequacy and the scope of information subject to disclosure Pursuant to art. 111 para 4of the Banking Act of 29 August 1997 (Journal of Laws of 2002, no. 72, item 665 as amended 1 ), the following is resolved: 1. The terms used in this resolution shall mean the following: 1) resolution on capital adequacy resolution no. 1 of the Commission for Banking Supervision of 13 March 2007 on the scope of the capital requirements for particular risks and detailed principles to be applied in determining those requirements, including but not limited to the scope and conditions of applying statistical methods and the scope of information attached to an application for the authorization to apply them, principles and conditions of accounting for contracts on debt assignment, subparticipation, credit derivative and contracts other than those on debt assignment, subparticipation, for the purpose of calculating capital requirements, terms and conditions, scope and manner of making use of the ratings assigned by external credit assessment institutions and the export credit agencies, manner and specific principles of calculating the solvency ratio of a bank, the scope and manner of accounting for banks conducting their activities in groups in calculating their capital requirements and solvency ratio as well as determining additional items of the bank s balance sheets included together with their own funds in the capital adequacy calculation, the amount, manner and conditions thereof (NBP Official Journal no. 2 item 3). 2) resolution on bank s own funds - resolution no. 2 of the Commission for Banking Supervision of 13 March 2007 on other deductions from a bank's core capital, amount thereof, scope and conditions of such deductions from the core capital of a bank, other balance sheet items included in the supplementary capital, the amount and scope thereof, and the conditions of including them in a bank s supplementary capital, deductions from a bank's supplementary capital, the amount and scope thereof and conditions of performing such deductions from the banks supplementary capital, the scope and manner of taking account of the business of banks conducting their activities in groups in calculating their own funds (NBP Official Journal No. 3, item 4). 1 The amendments to the consolidated text of the Act have been published in Journal of Laws [Dz. U.] of 2002: no. 126, item 1070, No. 141, item 1178, No.144, item 1208, No.153, item 1271, No. 169, item 1385 and 1387 and No. 241, item 2074, of 2003: No. 50, item 424, No. 60, item 535, No. 65, item 594, No. 228, item 2260 and No. 229, item 2276, of 2004: No. 64, item 594, No. 68, item 623, No. 91, item 870, No. 96, item 959, No. 121, item 1264, No. 146, item 1546 and No. 173, item 1808, of 2005: No. 83, item 719, No. 85, item 727, No. 167, item 1398 and No. 183, item 1538, of 2006: No. 104, item 708, No. 157, item1119, No. 190, item 1401 and No. 245 item 1775, and of 2007:. No. 42, item

4 3) important subsidiary an entity that meets at least one of the criteria specified below: a) its shares have been admitted to trading on the regulated market in the meaning of art. 15 para 1 subpara 1 of the law of 29 July Act on Trading in Financial Instruments (Journal of Laws No. 183, item 1538 as amended 2 ); b) its share in the banking sector assets is not smaller than 1%; c) its share in the banking sector deposits is not smaller than 1%; d) its share in the banking sector own funds is not smaller than 1% Banks referred to in 3 disclose information referred to in 5 para 1 and annex 1 and 2 to the resolution. 2. Information referred to in para 1 is published in Polish A bank that is neither a parent undertaking nor a subsidiary undertaking publishes disclosures on a solo basis. 2. A bank that is an EU parent undertaking institution publishes disclosures on the basis of consolidated data. 3. A bank that is a subsidiary of an EU parent undertaking in a financial group publishes disclosures on the basis of this undertaking s consolidated data. 4. A bank that is an important subsidiary of an EU parent institution or an EU parent undertaking in a financial group publishes disclosures referred to in 3 and 4 of annex 1 to the resolution on the basis of data available at the highest national level of consolidation or, in absence of such a level, on a solo basis Banks referred to in 3 disclose information referred to in annex 1 to the resolution, excluding insignificant information. 2. Banks that have been granted the authorisation to apply internal ratings-based approach referred to in Annex 5 to the resolution on banks capital adequacy or advanced measurement approach for operational risk set out in annex 14 to the resolution on banks capital adequacy or banks applying credit risk mitigating techniques laid down in annex 17 to the resolution on banks capital adequacy - additionally publish information referred to in annex 2 to the resolution Banks that are subject to the requirements of the resolution are obliged to publish information, in a generally accessible manner and in the location of their activities, about the access to the disclosure policies regulating: 2 Amendments to the Act have been published in Journal of Laws [Dz. U.] of 2006 No. 104, item. 708 and No. 157, item

5 1) the scope of public disclosures, taking into account art. 111a para 2 and 3 of the law of 29 August Banking Act 1997 (Journal of Laws of 2002, no. 72, item 665 as amended 1 ), hereinafter referred to as the Banking Act; 2) the frequency of disclosures that is adequate to the bank s scale of activity, taking into account that the bank should consider the need to publish some or all information more frequently than annually, taking into account the specificity of its activities, in particular the scale of operations, scope of activities, presence in different countries, exposures to different financial sectors as well as its participation in international financial markets and payment, clearing and settlement systems. When considering the above, account should be taken, in particular, of the need to increase the frequency of disclosures laid down in 3 and 4 para 2-5 of annex 1 to the resolution, and information related to risk profile and other positions exposed to frequent changes; 3) form and place of publishing disclosures; 4) principles for approving and verifying disclosures that are not covered by the audit of a financial report; 5) principles for the verification of disclosure policy. 2. Disclosure policy is laid down by the management board and approved by the supervisory board. 6. Banks are obliged to disclose information referred to in annex 1 and 2 to the resolution not later than within 30 days of the approval of the annual financial report by the approving authority. 7. The provisions of the resolution do not apply to information that is disclosed by a bank in accordance with other provisions. If such information is not included in the financial report, the bank indicates the location of the disclosure in its disclosure policy. 8.1 Without prejudice to para 3, the Commission for Banking Supervision publishes, not later than by the end of the first quarter of the year when the public disclosure will be required, the list of banks subject to disclosure requirement, on the public website used to publish disclosures made by the banking supervision. 2. The list of banks referred to in para 1 is set as at 31 December of the year preceding disclosure. 3. The Commission for Banking Supervision publishes the list of banks subject to the disclosure of information referred to in 5 para 1 within 3 months from the date of the resolution entering into force. 9. Banks disclose information referred to in the resolution for the first time in 2008, publishing information as at 31 December 2007, except for the information referred to in 5 para 1 that is disclosed by a bank by 31 December The resolution enters into force on 1 April

6 Annex no. 1 to resolution no. 6/2007 of the Commission for Banking Supervision of 13 March 2007 (item 8) General Information 1. A bank shall disclose the following information regarding the objectives and policies for risks management: 1) strategies and processes to manage those risks; 2) structure and organisation of a unit managing a particular risk or other appropriate organisational arrangements; 3) scope and nature of risk reporting and measurement systems; 4) the policies for hedging and mitigating risk, and strategies and processes for monitoring the effectiveness of hedges and mitigants; 2. A bank shall disclose the following information related to the use of prudential norms: 1) name of the bank; 2) short description of units that: a) are fully consolidated, b) are proportionally consolidated, c) are deducted from own funds, d) are neither consolidated nor deducted; 3) any current or foreseen material legal or practical impediment in the prompt transfer of own funds or repayment of liabilities among the parent undertaking and its subsidiaries; 4) the aggregate amount by which the actual own funds are less than the required minimum requirement in all subsidiaries and a list of the subsidiaries including their names. 3. A bank shall disclose the following information regarding its own funds: 1) summary information on the key terms and conditions of the features of all own funds items and components thereof; 2) the amount of own funds and the value of their individual components and deductions from core capital and supplementary capital set out in art. 127 of the Banking Act and the resolution on banks own funds; 6

7 3) the amount of short-term capital and components included in short-term capital in accordance with 5 para 1 of the resolution on bank s capital adequacy; 4) positions specified in 2 para 1 subpara 3 and 4 of the resolution on banks own funds; 5) for banks referred to in 5 para 4 of the resolution on banks capital adequacy the sum of own funds and short-term capital. 4. A bank shall disclose the following information regarding the compliance with capital requirements referred to in art. 128 of the Banking Act: 1) the description of the bank s approach to assessing the adequacy of its internal capital to support current and future activities; 2) for a bank applying the standardised approach to calculate risk-weighted exposures in accordance with annex 4 to the resolution on banks capital adequacy - amounts representing 8% of the risk-weighted exposure amounts, separately for each exposure class specified in 20 para 1 of annex 4 to the resolution on bank s capital adequacy; 3) for a bank applying internal ratings-based approach to calculate risk-weighted exposures in accordance with annex 5 to the resolution on bank s capital adequacy - 8% of the riskweighted exposure, separately for each exposure class specified in 6 para 1 of annex 5 to the resolution on bank s capital adequacy, but: a) for the exposure class of retail claims or contingent retail claims the requirement applies to each exposure class to which the correlations correspond in accordance with of annex 5 to the resolution on bank s capital adequacy; b) for equity exposure class this requirement applies to: - each of the approaches provided in of annex 5 to the resolution on bank s capital adequacy, separately, - exchange traded equity exposures, equity exposures not admitted to trading in the regulated equity market in sufficiently diversified portfolios and other exposures, - exposures subject to supervisory transition regarding capital requirements, - exposures subject to grandfathering provisions regarding capital requirements; 4) the amount of minimum capital requirements referred to in 6 para 1 subpara 2-5 of the resolution on banks capital adequacy, disclosed jointly or separately for each risk type; 5) the amount of minimum capital requirements for operational risk set out in annex 14 to the resolution on bank s capital adequacy disclosed separately for each of the applied approaches. 5. The following information shall be disclosed regarding the bank s exposure to credit risk and dilution risk: 1) the definitions of past due and impaired - for accounting purposes; 7

8 2) a description of the approaches and methods adopted for determining value adjustments and provisions; 3) the total amount of exposures according to balance-sheet valuation (after accounting offsets) and without taking into account the effects of credit risk mitigation, and the average amount of the exposures over the period broken down by different types of exposure classes; 4) the geographic distribution of the exposures, broken down into significant areas by material exposure classes, and further detailed if appropriate; 5) the distribution of the exposures by industry or counterparty type, broken down by exposure classes, and further detailed if appropriate; 6) the residual maturity breakdown of all the exposures, broken down by exposure classes, and further detailed if appropriate; 7) by significant industry or counterparty type, the amount of: a) impaired exposures and past due exposures, provided separately; b) balance of value adjustments and provisions; c) charges for value adjustments and provisions during the period; 8) the amount of the impaired exposures and past due exposures, provided separately, broken down by significant geographic areas including, if practical, the amounts of value adjustments and provisions related to each geographic area; 9) the reconciliation of changes in the value adjustments and provisions for impaired exposures, including: a) a description of the type of value adjustments and provisions, b) the opening balances, c) the amounts taken against the provisions during the period; d) the amounts set aside or reversed for estimated probable losses on exposures during the period, any other adjustments including those determined by exchange rate differences, business combinations, acquisitions and disposals of subsidiaries, and transfers between groups of amounts set aside and provisions, e) the closing balances; Value adjustments and recoveries recorded directly to the income statement shall be disclosed separately. 6. The following information shall be disclosed regarding the bank s exposure to counterparty credit risk referred to in 1 of annex 16 to the resolution on banks capital adequacy: 8

9 1) a description of the methodology used to assign internal capital and credit limits for counterparty credit exposures; 2) a description of policies for securing collateral and establishing credit reserves; 3) a description of policies with respect to specific wrong-way risk exposures; 4) a description of the impact of the amount of collateral the bank would have to provide given a downgrade in its credit rating; 5) gross positive fair value of contracts, netting benefits, netted current credit exposure, collateral held and net derivatives credit exposure. Net derivatives credit exposure is the credit exposure on derivatives transactions after considering both the benefits from legally enforceable netting agreements and collateral arrangements; 6) measures for exposure value under the adopted methods whichever method is applicable; 7) the notional value of credit derivative hedges, and the distribution of current credit exposure by types of credit exposure; 8) credit derivative transactions (notional), segregated between use for the bank s own credit portfolio, including unfunded credit protection, as well as in its intermediation activities and speculative transactions, broken down further by protection bought and sold within each product group; 9) the estimate of α if the bank has received the approval of the supervisory authorities to estimate α. 7. The bank applying the standardised approach to calculate the risk-weighted exposure amounts in accordance with annex 4 to the resolution on banks capital adequacy discloses the following information for each of the exposure classes specified in 20 para 1 of annex 4 to the resolution on banks capital adequacy: 1) the names of External Credit Assessment Institutions (ECAIs) and Export Credit Agencies (ECAs) whose credit assessments are used by the bank and the reasons for any changes in this respect; 2) the exposure classes for which each ECAI or ECA is used; 3) a description of the process used to transfer the issuer and issue credit assessments onto items not included in the trading book; 4) the association of the external rating of each ECAI and ECA with the credit quality steps prescribed in annex 4 to the resolution on banks capital adequacy, taking into account that this information needs not be disclosed, if the bank complies with the standard association set out in annex 4 to the resolution on banks capital adequacy and the resolution of the Commission for Banking Supervision issued pursuant to art. 128 para 6 subpara 6 of the Banking Act; 5) the exposure values before and after credit risk mitigation associated with each credit quality step as set for the standardized approach as well as items deducted from own funds. 9

10 8. The bank calculating the risk-weighted exposure amounts using internal ratings-based approach in accordance with annex 5 to the resolution on bank s capital adequacy shall disclose the following information: 1) the exposures assigned to each category in the table in 25 of annex 5 to the resolution on bank s capital adequacy regarding specialized lending exposures; 2) the exposures assigned to each risk weight in of annex 5 to the resolution on bank s capital adequacy when simple risk weight approach is applied. 9. The following information shall be disclosed by the bank applying value-at-risk approach in accordance with annex 19 to the resolution on banks' capital adequacy to calculate the capital requirements: 1) for each sub-portfolio covered: a) the characteristics of the models used, b) a description of stress testing applied to the sub-portfolio, c) a description of the approaches used for back-testing and validating the accuracy and consistency of the internal models and modelling processes, 2) the scope of acceptance by the Commission for Banking Supervision to apply the value-atrisk approach; 3) a description of control systems and mechanisms in accordance with the requirements set out in 7-13 of annex 3 to the resolution on banks' capital adequacy. 10. The following information shall be disclosed by the bank on operational risk: 1) the approaches to the calculation of capital requirement for operational risk; 2) in the case of applying advanced measurement approach in accordance with of annex 14 to the resolution on bank's capital adequacy - a description of the methodology, including a discussion of relevant internal and external factors considered in the measurement approach. In the case of partial use, a discussion and scope of the different methodologies used. 11. The following information shall be disclosed by the bank regarding the exposures in equities not included in the trading book: 1) the differentiation between exposures based on their objectives (capital gains relationship and strategic reasons), and an overview of the accounting techniques and valuation methodologies used, including key assumptions and practices affecting valuation and any significant changes in these practices; 2) the balance sheet value, the fair value and, for those exchange-traded, a comparison to the market price where it is materially different from the fair value; 10

11 3) the types, nature and amounts of equity exposures, broken down into: listed equity exposures, sufficiently diversified portfolios of securities not admitted to trading in the regulated equity market, and other exposures; 4) the cumulative realised gains or losses arising from sales and liquidations in the period; 5) the total unrealised gains or losses, the total latent revaluation gains or losses, and any of these amounts included in the core or supplementary funds. 12. The following information shall be disclosed by banks on their exposure to interest rate risk on positions included in the banking book: 1) the nature of the interest rate risk and the key assumptions (including assumptions regarding loan prepayments and behaviour of non-maturity deposits), and frequency of measurement of the interest rate risk; 2) the variation in earnings, discounted economic value or other relevant measure used for the assessment of upward and downward rate shocks according to the bank s method for measuring the interest rate risk, broken down by currency. 13. The bank calculating risk-weighted securitisation exposure amounts in accordance with annex 18 to the resolution on bank s capital adequacy shall disclose the following information: 1) description of the objectives in relation to securitisation activity; 2) the roles played by the bank in the securitisation process; 3) an indication of the extent of the bank s involvement in each of the roles played in the securitisation process; 4) the approaches to calculating risk-weighted exposure amounts for the bank s securitisation activities; 5) a summary of the accounting policies for securitisation activities, including: a) whether the transactions are treated as sales or financings, b) the recognition of gains on sales for accounting purposes, c) the key assumptions for valuing retained interests, d) the treatment of synthetic securitisations for accounting purposes, if this is not covered by other accounting policies; 6) the names of the ECAIs used for securitisations and the types of exposure for which the ratings of each agency is used; 7) the total outstanding amount of exposures securitised by the bank and subject to the securitisation framework (broken down into traditional and synthetic), by exposure type; 11

12 8) for exposures securitised by the bank and subject to the securitisation framework - a breakdown by exposure type of the amount of impaired and past due exposures securitised, and the losses recognised by the bank during the period; 9) the aggregate amount of securitisation positions retained or purchased, broken down by exposure type; 10) the aggregate amount of securitisation positions retained or purchased, broken down into a meaningful number of risk weight bands. Positions that have been risk weighted at 1250 % or deducted from own funds shall be disclosed separately; 11) the aggregate outstanding amount of securitised revolving exposures segregated by the originator's interest and the investors' interest; 12) a summary of the securitisation activity in the period, including the amount of exposures securitised (by exposure type), and recognised gain or loss on sale by exposure type. 12

13 Annex no. 2 to resolution no. 6/2007 of the Commission for Banking Supervision of 13 March 2007 (item 8) Qualifying requirements for the use of particular instruments or methodologies 1. The bank calculating the risk-weighted exposure amounts in accordance with annex 5 to the resolution on bank s capital adequacy shall disclose the following information: 1) the acceptance by the Commission for Banking Supervision for the application of approach or approved transition; 2) an explanation and review of: a) the structure of internal rating systems and relation between internal and external ratings, b) the use of internal estimates other than for calculating risk-weighted exposure amounts with the use of IRB approach, c) the process for managing and recognising credit risk mitigation methods, d) the control mechanisms for rating systems including a description of independence, accountability, and rating systems review; 3) a description of the internal ratings process, provided separately for the following exposure classes: a) central governments and central banks, b) institutions, c) corporate, including SMEs, specialised lending and purchased corporate receivables, d) retail, for each of the categories of exposures to which the different correlations in of annex 5 to the resolution on bank s capital adequacy correspond; e) equities; The description includes information about the types of exposures in an exposure class, definitions, approaches, data underlying assessment and internal approval of the probability of default (PD), and, where relevant, loss given default (LGD) and conversion factors, including a description of significant exceptions from the definition of default as laid down in of annex 5 to the resolution on bank s capital adequacy, together with a specification of portfolio segments to which the exceptions apply; 13

14 4) the exposure values for each of the exposure classes specified in 6 para 1 of annex 5 to the resolution on bank's capital adequacy; Exposures to central governments and central banks, institutions and corporates where banks use own estimates of LGDs and conversion factors for the calculation of riskweighted exposure amounts shall be disclosed separately from exposures for which the banks do not use such estimates; 5) for each of the exposure classes central governments and central banks, institutions, corporate and equity, and across a sufficient number of obligor grades (including default) to allow for a meaningful differentiation of credit risk, the bank shall disclose: a) the total exposures (for the exposure classes central governments and central banks, institutions and corporate - the sum of outstanding loans and exposure values for undrawn off-balance sheet commitments; for equities - the balance-sheet value), b) for banks using own LGD estimates for the calculation of risk-weighted exposure amounts - the exposure-weighted average LGD in percentage, c) the exposure-weighted average risk weight d) for banks using own estimates of conversion factors for the calculation of riskweighted exposure amounts - the amount of undrawn off-balance sheet commitments and defaulted average exposure values for undrawn balance-sheet commitments; 6) for the retail exposure class and for each of the categories specified under subpara 3 letter d), the bank shall disclose information outlined either under letter a) or letter b) below: a) information listed in subpara 5 (if applicable, on a pooled basis), or b) an analysis of exposures (outstanding loans and exposure values for off-balance sheet commitments) against a sufficient number of expected loss grades to allow for a meaningful differentiation of credit risk (if applicable, on a pooled basis); 7) the actual value adjustments in the preceding period for each exposure class (for retail - for each of the categories as defined under subpara 3 letter d) and how they differ from past experience; 8) a description of the factors that impacted on the loss experience in the preceding period (for example, has the bank experienced higher than average default rates, or higher than average LGDs and conversion factors); 9) the comparison of the bank s estimates against actual outcomes over a longer period; at a minimum, this shall include information on estimates of losses against actual losses in each exposure class (for retail exposures - for each of the categories specified under subpara 3 letter d, over a period sufficient to allow for a meaningful assessment of the performance of the internal rating processes); where appropriate, the bank shall further decompose the above information to provide analysis of PD and, for the bank using own estimates of LGDs and conversion factors, LGD and conversion factor outcomes against estimates provided in the quantitative risk assessment disclosures above. 14

15 2. The bank applying credit risk mitigation techniques shall disclose the following information: 1) the policies and processes for, and an indication of the extent to which the bank makes use of, on- and off-balance sheet netting; 2) the policies and processes for collateral valuation and management; 3) a description of the main types of collateral taken by the credit institution; 4) the main types of guarantor and credit derivative counterparty and their creditworthiness; 5) information about market or credit risk concentrations within the credit mitigation taken; 6) for banks calculating risk-weighted exposure amounts on the basis of the standardised approach in accordance with annex 4 to the resolution on bank s capital adequacy or the IRB approach in accordance with annex 5 to the resolution on bank s capital adequacy, but not providing own estimates of LGDs or conversion factors in respect of the exposure class - separately for each exposure class, the total exposure value (after, where applicable, onor off-balance sheet netting) that is covered - after the application of volatility adjustments - by eligible financial collateral, and other eligible collateral; 7) for banks calculating risk-weighted exposure amounts on the basis of the standardised approach or IRB approach - separately for each exposure class - the total exposure (after, where applicable, on- or off-balance sheet netting) that is covered by guarantees or credit derivatives; for the equity exposure class, this requirement applies to each of the approaches provided in of annex 5 to the resolution on bank s capital adequacy. 3. The bank using the advanced measurement approach set out in of annex 14 to the resolution on bank s capital adequacy for the calculation of their capital requirements for operational risk shall disclose the following information: 1) a description of the use of insurance for the purpose of mitigating the operational risk; 2) the acceptance by the Commission for Banking Supervision to apply the advanced approaches. 15