Regulatory Reporting: Market Risk Requirements
AFME and ISDA critiqued a proposal for market risk reporting, calling it operationally burdensome and not cost-effective. They suggested aligning these rules with CRR3 FRTB requirements and criticized the overcomplexity of proposed reporting templates, urging EBA reevaluation.
AFME and ISDA on Regulatory Reporting Requirements for Market Risk
The Association for Financial Markets in Europe (AFME) and the International Swaps and Derivatives Association (ISDA) have responded to a consultation paper on amending the specific reporting requirements for market risk. The industry acknowledges the significant effort required to produce reporting standards that provide supervisors with sufficient insight into banks' trading books while maintaining proportionality. However, AFME and ISDA believe that the current draft ITS may impose a significant operational burden that is not justified from a cost-benefit viewpoint. They suggest aligning the reporting requirements with the calculation requirements and the implementation of CRR3 FRTB requirements. The industry also highlights that the number of reporting templates proposed represents a disproportionate increase in existing requirements and urges the EBA to reevaluate the need for such granularity and complexity.
Streamlining Market Risk Reporting: Industry's Response and Implications
The Association for Financial Markets in Europe (AFME) and the International Swaps and Derivatives Association (ISDA) have responded to a consultation paper on amending the specific reporting requirements for market risk. Their input highlights key implications for financial institutions and regulatory frameworks.
The industry recognizes the importance of producing reporting standards that provide supervisors with sufficient insight into banks' trading books while maintaining proportionality. However, AFME and ISDA express concerns about the operational burden imposed by the current draft Implementing Technical Standards (ITS) and its lack of cost-benefit justification.
In their response, AFME and ISDA propose aligning the reporting requirements with the calculation requirements and the implementation of CRR3 FRTB (Capital Requirements Regulation 3 Fundamental Review of the Trading Book) requirements. This alignment would result in more streamlined compliance processes for banks, reducing operational burden and associated costs. It would also ensure that the reporting standards are more closely linked to the actual risks faced by banks, enabling supervisors to gain meaningful insights.
Another issue highlighted by the industry is the significant increase in reporting templates proposed in the current draft ITS. The industry argues that this represents a disproportionate augmentation of existing requirements. AFME and ISDA urge the European Banking Authority (EBA) to reevaluate the need for such granularity and complexity. By advocating for a reduction in the number of reporting templates and the granularity of information required, the industry seeks to enhance reporting efficiency. This would allow banks to focus more on their core business activities and risk management, while still meeting regulatory obligations.
Furthermore, the industry's call for proportionality in reporting requirements is crucial for achieving a balanced regulatory framework. By ensuring that the burden of compliance is commensurate with the benefits of increased oversight, financial institutions can operate more effectively and efficiently. This approach would support risk-sensitive regulations and contribute to a stable and transparent financial system.
Clear and consistent regulatory guidance is essential to facilitate compliance for financial institutions. As the regulators continue to update and refine reporting requirements, it is imperative for them to provide banks with unambiguous instructions and explanations. By doing so, regulators can assist financial institutions in implementing the necessary changes in a timely and accurate manner.
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