As part of its drive for more proportionate regulatory and supervisory framework, the European Banking Authority (EBA) has finalised its comprehensive study of the cost of compliance of European Economic Area (EEA) banks with the supervisory reporting requirements.
In the summary report published today, the EBA has identified numerous recommendations collectively leading to a potential reduction of the banks’ reporting costs by up to 15-24%. Most of the recommendations will be implemented by the EBA as part of its ongoing policy work on developing and enhancing the common EU supervisory reporting framework.
The cost of compliance study focuses on three main aspects. First, it tries to understand the actual reporting costs incurred by the EEA banks in relation to supervisory reporting, and in particular in relation to the EBA implementing technical standards (ITS) on Supervisory Reporting. Second, it assesses the effects of a reduction of some specific reporting requirements on reporting costs and supervisory effectiveness. Third, it assesses whether the reporting costs were proportionate with regard to the benefits delivered. In the report the EBA also looked at the classification of the EEA banks into various proportionality categories introduced in the Capital Requirements Regulation (CRR).
In the report the EBA identifies 25 recommendations aimed at reducing the costs of compliance with supervisory reporting requirements focusing primarily on small and non-complex institutions. However, the recommendations will improve reporting requirements and processes for all institutions whilst retaining the end-user benefits of the single supervisory framework. The recommendations address four broad areas:
changes to the development process for the EBA reporting framework;
changes to the design of EBA supervisory reporting requirements and reporting content;
coordination and integration of data requests and reporting requirements;
changes to the reporting process, including the wider use of technology.
The study also identified the need to remove barrier to the wider adoption by institutions of FinTech and RegTech solutions as well as to promote better digitalisation of the institutions’ internal documents and contracts. This is particularly relevant for small and non-complex institutions.
The EBA will incorporate the recommendations into its work programme and implement them as part of the ongoing work, according to the availability of internal resources. Certain recommendations would lead to specific policy products that will follow the usual policy development process, which includes seeking industry and other stakeholders’ views through the public consultation process.
The EBA will also continue its work on making the reporting process more efficient for all stakeholder through its work on the feasibility study of integrated reporting (more information available here).
Legal basis and background
The EBA is mandated by Article 430(8) of the CRR to measure the costs institutions incur when complying with the reporting requirements set out in the EBA’s ITS on supervisory reporting. Such reporting costs should be assessed since the introduction of the common supervisory reporting in the EU in 2013. The EBA is also asked to assess whether these reporting costs are proportionate with regard to the benefits delivered for the purposes of prudential supervision and make recommendations on how to reduce the reporting cost at least for small and non-complex institutions.
The analysis draws on significant input from and interaction with the industry. The EBA sent voluntary quantitative and qualitative questionnaires to all EEA credit institutions. The EBA interviewed various industry trade bodies and small and non-complex institutions across several Member States. The EBA also received voluntary case studies from various stakeholders that have been used in the analysis. Users of supervisory reporting, in particular supervisory authorities, also provided information to inform the analysis.
As part of the recommendations, the EBA also considered streamlining liquidity reporting (additional liquidity monitoring metrics) and exempting small and non-complex institutions from reporting certain templates, introducing changes to reporting large exposures, leverage ratio and net stable funding ratio, improving and further simplifying the reporting on asset encumbrance, better signposting of the regulatory and reporting requirements, introducing better articulation, explanation and providing examples in the ITS on supervisory reporting, and seeking greater coordination between the authorities in their ad hoc information requests.