Disclosure of encumbered and unencumbered assets

We have exercised the discretion that allows firms not to disclose Template B on collateral received, provided they meet one of the 3 conditions listed.

Covert central bank liquidity assistance through collateral swaps could hypothetically become detectable in Template B of the European Banking Authority’s Guidelines on disclosure of encumbered and unencumbered assets (the Guidelines).

As such, we decided to exercise the discretion in paragraph 4, Title II of the Guidelines. We will continue this approach post-Brexit. It allows firms not to disclose Template B on collateral received, provided firms meet any one of the 3 conditions below.

  1. Both conditions in Article 94(1) of the UK CRR are met relating to the size of on and off balance sheet trading book business.
  2. The fair value of collateral received by the firm in the form of debt securities (including both encumbered and unencumbered amounts) – as reported by the firm in accordance with UK CRR Article 100 – has not exceeded £100 billion for any single reporting reference date under UK CRR Article 100 over the last 12 months preceding the Pillar 3 disclosure reference date under these Guidelines. If the firm has yet to submit a report under UK CRR Article 100 at the first Pillar 3 disclosure date under these Guidelines, then the amount at the first reporting reference date under UK CRR Article 100 should be used instead.
  3. The arithmetic mean of the fair value of collateral received by the firm in the form of debt securities (including encumbered and unencumbered amounts) – calculated using monthly data on a rolling basis over the last 12 months preceding the Pillar 3 disclosure reference date under these Guidelines – is less than £100 billion. The monthly data should be calculated in a manner that is consistent with the data reported under UK CRR Article 100. For calculating monthly data, firms are expected to use data that is readily available. It is acceptable to interpolate between quarterly data reported under UK CRR Article 100 — or other sources — when there is no reason to believe that it would not result in reasonable approximations of the monthly data. For the first calculation, firms may use 

Paragraph 7, Title II of the Guidelines suggests disclosing information based on median values of at least quarterly data on a rolling basis over the last 12 months preceding the Pillar 3 disclosure reference date under these Guidelines.

Firms are hereby given the option to consider median values of monthly (instead of quarterly) data when, in their judgement, that would provide a better/smoother picture of their encumbrance numbers.

In all other aspects, UK CRR Part Eight is applicable to these disclosures, including the provision in UK CRR Article 432, where firms are permitted to omit certain disclosure items where these are non-material, proprietary or confidential.