Statement by the PRA on EBA Guidelines on reporting and disclosure of exposures subject to measures applied in response to the Covid-19 outbreak

This statement provides guidance to all PRA-regulated firms on the EBA Guidelines on Covid-19 disclosures and publishes PRA disclosure templates.
Published on 28 July 2020

On Tuesday 2 June 2020 the European Banking Authority (EBA) published its Guidelines on reporting and disclosure of exposures subject to measure applied in response to the COVID-19 crisis (‘the EBA Guidelines’), intended to address gaps in reporting data and public information by credit institutions in the context of Covid-19. This statement sets out the PRA’s overall expectations on how the EBA Guidelines are to be applied, taking into account the previous ‘Statement by the PRA on implementation of the EBA Guidelines to address gaps in reporting data and public information in the context of Covid-19’  published on Wednesday 24 June 2020, and the subsequent update on Friday 10 July 2020. 

As stated previously, on Wednesday 24 June, the PRA does not consider it necessary to extend the supervisory reporting elements of the Guidelines to UK credit institutions, therefore UK credit institutions are not expected to prepare or transmit to the PRA the reporting templates contained within the Guidelines on Covid-19 reporting and disclosure.

The PRA considers that there is substantial benefit to its objectives through market discipline and disclosure-users from public information on the effects of the measures that UK firms have taken in response to Covid-19. The PRA is exercising the options available in the EBA Guidelines to ensure that the disclosures are implemented in a proportionate manner, including by (i) waiving the application of the disclosure templates for firms that are not identified as global systemically important institutions (G-SIIs) or other systemically important institutions (O-SIIs), and (ii) applying the disclosure templates at the highest level of consolidation in their jurisdiction.  

As confirmed in the update on Friday 10 July 2020, the PRA expects that UK banks and building societies which (i) are, or are controlled by, G-SIIs or O-SIIs designated by the PRA in the most recent list and (ii) have retail deposits equal to or greater than £50 billion on an individual or consolidated basis, should make disclosures similar to those prescribed by the EBA Guidelines, but incorporating the modifications set out below. The PRA expects such firms to make these disclosures for the highest level of consolidation in the UK.

Disclosure templates

The EBA Guidelines require firms to make disclosures in three templates. Templates one and two relate to moratoria, while Template three relates to public guarantee schemes. The templates issued by the EBA ask firms to disclose in Templates 1 and 2 the loans and advances that were subject to moratoria on loan repayments applied in the light of the Covid-19 crisis and in accordance with: (i) criteria set out in earlier EBA Guidelines on legislative; and (ii) non-legislative moratoria on loan repayments applied in light of the Covid-19 crisis (EBA/GL/2020/02). 

The PRA’s letters dated Thursday 26 March 2020 Letter from Sam Woods ‘Covid-19: IFRS 9, Capital requirements and loan covenants’ and Thursday 4 June 2020 Letter from Sam Woods ‘Covid-19: IFRS 9 and capital requirements – Further guidance on initial and further payment deferrals’ set out guidance designed to promote consistent and robust application of the definition of default in the Capital Requirements Regulation, specifically in the context of Covid-19 payment holidays, moratoria or deferrals (payment deferrals). The PRA’s guidance took into account the separate guidance to firms issued by the Financial Conduct Authority (FCA) in relation to payment deferrals. A consequence of this guidance is that the form of payment moratoria or similar measures available in the UK may be broader than those specified in EBA/GL/2020/02. With this in mind the PRA considers that it would be appropriate for firms to make disclosures that reflect the UK approach to payment deferrals. The PRA has produced amended versions of the instructions and definitions.  

Timing of disclosures

As highlighted in its previous statement on Friday 10 July 2020, the PRA realises there may be practical difficulties caused by the publication of the EBA Guidelines and templates close to the Tuesday 30 June 2020 disclosure reference date. With this in mind, the PRA confirmed in its update on Friday 10 July 2020 that it does not expect that firms include these disclosures in the main disclosures made for the Tuesday 30 June 2020 reporting period, and accepts that firms may need to make disclosures for the Tuesday 30 June 2020 reference date at a later time. This may involve firms making these additional disclosures separately to the main Pillar 3 report for the Tuesday 30 June 2020 reference date, however any such delay to the publication of these additional disclosures should be no longer than necessary. The PRA realises that producing these disclosures to a high standard will take some time and so it will exercise some flexibility in its assessment of the timeliness of the disclosures. Disclosures made for subsequent reference dates including Thursday 31 December 2020 should be made as part of the Pillar 3 report.

Relevant firms should make disclosures in accordance with this letter on a biannual basis. Firms may disclose as at Tuesday 30 June and Thursday 31 December, or may disclose at the half-year and year-end dates for their financial year if they have an accounting reference date other than Thursday 31 December. The PRA expects firms to continue making disclosures for reporting periods ending on dates up to and including Thursday 31 December 2020. The PRA will keep its approach to these disclosures under review for disclosure reference dates after Thursday 31 December 2020.