Response to consultation on guidelines on disclosure of encumbered and unencumbered assets
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The guidance should not, or not for long, exempt ELA. Please see our covering letter in this regard.
Should the disclosure information on encumbered and unencumbered assets, in particular on debt securities, be more granular and include information on, for example, sovereigns and covered bonds? Please explain how sensitive the disclosure of this information is.
The information should be granular, include government and covered bonds, and distinguish between the types of securities and their currencies as risk profiles are different.Should the disclosure information on encumbered and unencumbered assets also include information on the quality of these assets? What would be a suitable indicator of asset quality? Please explain how sensitive the disclosure of this information is.
There should be information on asset quality. Some firms will have their own modus operandi, which may not mean anything to an external party, but, perhaps, reference to a specified pool of credit ratings agencies (CRAs), for example those CRAs that are part of the ECAI rules, should be considered.Do you think that the disclosure required in Template A could lead to detection of the level and evolution of assets of an institution encumbered with a central bank, given that the information should be disclosed based on median values (see paragraph 7 of Title II) and the lag for disclosure is 6 months (see paragraph 10 of Title II)?
Disclosure on the basis of median values and after six months is sufficient to avoid the detection of encumbrance at central banks and central bank support. Banks and securities firms should be weaned off such support, so this protection should not be permanent.Should the disclosure of information relating to the ‘nominal amount of collateral received or own debt issued not available for encumbrance’ on unencumbered collateral be requested? Please explain the relevance of this information for market participants and the sensitivity of the disclosure of this information.
Yes, there should be disclosure as this will aid market discipline and risk management.Do you agree with the proposed granularity of Template B given that collateral swaps with central banks will not be disclosed? Please explain how sensitive the disclosure of this information is.
Such swaps should be disclosed, or be eventually disclosed, so that market participants are aware of the risk profiles of others.Do you think that the information on the sources of encumbrance in Template C is too sensitive to be disclosed? Should this information be disclosed in Template D instead (as narrative information)? Please explain the relevance of this information for market participants and the sensitivity of the disclosure of this information.
The sources of encumbrance should be disclosed. A full picture is essential for risk mitigation.Should the information be disclosed as a point in time (e.g. as of 31 December 2014) instead of median values? Please explain why.
Point in time is preferable in terms of accuracy, matching other disclosures, and (provides) the ability for counterparties and other assessors to build up their data, e.g. patterns.Do you agree with the proposed list of disclosures under narrative information in Template D? Should the guidelines explicitly state that emergency liquidity assistance by central banks (ELA) should not be disclosed?
We agree with the list in Template D.The guidance should not, or not for long, exempt ELA. Please see our covering letter in this regard.