The Bank Statement Q1 2014 NEWSLETTER

18 Pages·2014·0.83 MB·English

EHT IFRS – Global Banking
BANK STATEMENT
1Q 2014 LSWEN RETE �
After accepting discounting EFFECTIVE DATE FOR IFRS 9 AND
using the overnight index swap CHALLENGES AHEAD IN ACCOUNTING
rate as the new normal for FOR FUNDING VALUE ADJUSTMENTS
collateralised derivatives, Welcome to the Q1 2014 issue of our quarterly banking newsletter in which
the market has shifted its we provide updates on IFRS developments that directly impact banks and
consider the potential accounting implications of regulatory requirements.
attention to uncollateralised
positions. At its heart, Highlights
funding valuation l   The IASB has tentatively decided that IFRS 9 Financial Instruments will
adjustment is an attempt be effective for annual periods beginning on or after 1 January 2018 – see
page 2.
to value a derivative
l   The IASB expects to issue the remaining chapters of IFRS 9 in Q2 2014 – see
considering all of the
page 2.
associated cash fows,
l   Market practice for pricing derivatives is evolving. We discuss some accounting
including any collateral issues related to the inclusion of funding into valuation estimates – see page 6.
requirements. l   New section on benchmarks: We have looked at the fnancial statements issued
by 10 banks reporting under IFRS to compare their new disclosure of the fair value
hierarchy of  nancial instruments carried at amortised cost , such as loans – see
Colin Martin page 8.
Head of UK Assurance l   The European Banking Authority issues proposals for disclosure of asset
Services, Banking, KPMG encumbrance. We consider some possible interactions with disclosure requirements
under IFRS – see page 10.
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IA BS AITC IV IT SE AFFITCE GN UO Y R AB KN
Mandatory The IASB has tentatively decided that IFRS 9 Financial Instruments will be effective for annual
periods beginning on or after 1 January 2018.
eef f ctive date
o f IFR S 9 Also, in fnalising IFRS 4 Insurance Contracts, the IASB will consider the need for additional
transition relief so that entities that issue insurance contracts would not be disadvantaged if they
are required to apply IFRS 9 before they apply IFRS 4.
Financial At its January 2014 meeting, the IASB discussed the following remaining aspects of the proposals
in its exposure draft ED/2012/4 Classifcation and Measurement: Limited Amendments to IFRS 9
instruments :
(the limited amendments ED):
lC assic� ation and
measurement • the interaction with the accounting for insurance contracts;
• presentation and disclosures; and
• transition.
Interaction iw th the accounting of r insurance contract liabilities
The Board noted that the proposals in the limited amendments ED that were tentatively reaffrmed
during the deliberations would result in an improved interaction with the accounting for insurance
contracts. It decided to consider, during redeliberation of exposure draft ED/2013/7 Insurance
Contracts, the feedback on the accounting model for insurance contract liabilities, and whether
that model should be modifed to refect the interaction with the classifcation and measurement
of fnancial assets.
Presentation and disclosures
The IASB tentatively decided to extend the existing requirements in IFRS 7 Financial Instruments:
Disclosures on reclassifcation of fnancial assets to include information relating to reclassifcation
into and out of fair value through other comprehensive income (FVOCI).
In addition, the judgement involved in assessing an asset’s contractual cash fow characteristics
would be added to paragraph 123 of IAS 1 Presentation of Financial Statements as an
example of a judgement that could have a signifcant effect on the amounts recognised in the
fnancial statements.
rT ansition
The Board discussed:
• the presentation of comparative information by frst-time adopters of IFRS;
• early application of IFRS 9; and
• selected requirements on transition to the completed version of IFRS 9.
First-time adopters would not be required to present comparative information that complies with
the completed version of IFRS 9 if the beginning of their frst IFRS reporting period is earlier than
the mandatory effective date of IFRS 9 plus one year.
Early application of the completed version of IFRS 9 would be permitted for both frst-time
adopters and existing IFRS reporters. Early application of previous versions would not be
permitted if the date of initial application is six months or more after the completed version of
IFRS 9 is issued in Q2 2014.
The discussion of the transition provisions included the application of certain ‘impracticable’
exemptions, and application and revocation of fair value option designations for entities that have
already applied a previous version of IFRS 9.
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Financial In aJ nuary 2014, the oB ard discussed the presentation and disclosure proposals in epx osure dratf
2/DE 01 3/3 Financial Instruments: Expected Credit Losses t( he impairment )DE and tentatively
instruments:
decided to retain the maoj rity o f the proposed disclosures. oS me o f the ek y changes included:
Impairment
• clariyf ing that the obej ctive o f the reconciliation betew en the gross opening and closing balance
o f n� ancial assets is to provide inof rmation about ek y drivers of r change;
• clariyf ing that uq antitative inof rmation about the etx ent to hw ich collateral or other credit
enhancements aef f ct the epx ected credit loss alloaw nce o( r provision ) does not reuq ire
providing inof rmation about the af ir value o f collateral;
• reuq iring disclosure o f the gross carrying amount o f modie� d n� ancial assets of r hw ich the
measurement o f the credit loss alloaw nce has changed rf om lief time epx ected credit losses to
12m- onth epx ected credit losses only in the period o f change ;
• reuq iring disclosure o f the nominal amount o f assets rw itten o f f but subej ct to enof rcement
activity only of r n� ancial assets that have been rw itten o f f during the period;
• modiyf ing the reuq irement in paragraph 44 o f the impairment DE to allo w the use o f an ageing
analysis to assess signic� ant increases in credit ris k of r n� ancial assets of r hw ich delinuq ency
inof rmation is the only borroew rs- pecic� inof rmation available ; and
• removing the reuq irement in paragraph 44 o f the impairment DE that an entity disaggregate
its n� ancial instruments across at least three credit grades ; instead, reuq iring credit ris k
disaggregation to be aligned iw th the aw y credit ris k is managed internally and reuq iring a
consistent approach to be applied over time.
hT e oB ard also tentatively agreed that the transition provisions on the initial application o f the
epx ected credit loss model of r eix sting IFR S preparers s( ee the 4Q 201 3 issue o f The Bank
Statement ) ow uld also be reuq ired of r r� stt- ime adopters.
Next steps
hT e sta f f iw ll proceed to dratf and ballot both the limited amendments to the classic� ation and
measurement reuq irements and the n� al reuq irements of r impairment to be incorporated into
IFR.9 �S hT e IA BS epx ects to issue the remaining chapters o f IFR S 9 in 2Q 2014.
Narrow-scope In March 2014, the IA BS discussed proposed amendments to IFR S 10 Consolidated Financial
Statements that had been discussed by the IFR S Interpretations oC mmittee in aJ nuary 2014 and
amendments to
oN vember 201 3 s( ee the 4Q 201 3 issue o f The Bank Statement.) hT ese proposals relate to the
IFRS 10
of lloiw ng :
• an investment entity subsidiary that also provides investmentr- elated services to third parties ;
and
• the applicability o f the eex mption rf om preparing consolidated n� ancial statements in IFR S 10.
An investment entity subsidiary that also provides investment-related services
to third parties
hT e IA BS discussed hw ether an investment entity parent should account of r an investment entity
subsidiary at af ir value, hw en that investment entity subsidiary provides investmentr- elated
services to third parties. hT e IA BS tentatively decided to continue to develop an amendment to
IFR S 10 to conr� m that all investment entity subsidiaries should be measured at af ir value through
prot� or loss.
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Applicability of the exemption from preparing consolidated  nancial
statements in IFRS 10
hT e IA BS tentatively decided to amend IFR S 10 to conr� m that the eex mption rf om preparing
consolidated n� ancial statements set out in paragraph 4a( ) o f IFR S 10 should be available to an
intermediate parent entity that is a subsidiary o f an investment entity but that is not an investment
entity itsel.f
Financial In aJ nuary 2014, the IFR S Interpretations oC mmittee discussed ho w an issuer should classiyf
in accordance iw th IA S 23 Financial Instruments: Presentation a particular n� ancial instrument
instrument that
that did not have a stated maturity date but aw s mandatorily convertible into a variable number o f
is mandatorily
the issuers’ onw euq ity instruments i f the issuer breached the iT er 1 capital ratio – described as
convertible into a
a c‘ ontingent nonv- iability event.’ Interest payments on the instrument ew re at the discretion o f
variable number the issuer. hT is aw s an issue originally discussed by the oC mmittee in its uJ ly 201 3 meeting s( ee
of shares on a the 3Q 201 3 issue o f The Bank Statement,) of lloiw ng hw ich the oC mmittee published a tentative
contingent ‘non- agenda decision.
viability’ event pS ecic� ally, the issues discussed ew re :
• hw ether the n� ancial instrument meets the den� ition o f a n� ancial liability in its entirety or has
to be classie� d as a compound instrument comprised o f a liability component and an euq ity
component – and, in the latter case, hw at those components ree� ct ; and
• ho w the n� ancial liability – or liability component – identie� d above ow uld be measured.
hT e oC mmittee noted that the scope o f the issue is too broad of r it to address in an ec� f ient
manner and thereof re decided not to add this issue to its agenda.
In aJ nuary 2014, the IFR S Interpretations oC mmittee also discussed ho w an issuer ow uld
Financial
assess the substance o f a particular early settlement option included in a n� ancial instrument in
instr ument that
accordance iw th IA S 23 .
is mandatorily
hT e instrument has a stated maturity date, and at maturity the issuer has to deliver a variable
convertible into a
number o f its onw euq ity instruments to euq al a ex� d cash amount, subej ct to a cap and a o� or.
variable number
hT e issuer is reuq ired to pay interest at a ex� d rate, and has the contractual right to settle the
of shares (subject
instrument at any time beof re maturity. I f the issuer chooses to eex rcise that early settlement
to a cap and a
option, then it has to :
foor) but gives
• deliver the maix mum number o f euq ity instruments specie� d in the contract ; and
the issuer the
• pay in cash all o f the interest that ow uld have been payable i f the instrument had remained
option to settle
outstanding until its maturity date.
by delivering the
maximum ( xed) hT e oC mmittee noted that uj dgement is reuq ired to determine hw ether the issuers’ early
settlement option is substantive. I f it is not substantive, then the term ow uld not be considered
number of shares
in determining the classic� ation o f the n� ancial instrument. hT e oC mmittee also noted that to
determine hw ether the early settlement option is substantive, the issuer iw ll need to understand
hw ether there are actual economic or other business reasons that the issuer ow uld eex rcise
the option. hT e guidance in paragraph 20b( ) o f IA S 23 is relevant because it provides an eax mple
o f a situation in hw ich one o f an instruments’ settlement alternatives is ecx luded rf om the
classic� ationa� ssessment.
In light o f the eix sting IFR S reuq irements, the oC mmittee considered that neither an interpretation
nor an amendment to a standard aw s necessary and thereof re decided not to add the issue to
itsa� genda.
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In aJ nuary 2014, the IFR S Interpretations oC mmittee discussed ho w an issuer ow uld account
Financial
of r a particular mandatorily convertible n� ancial instrument in accordance iw th IA S 23 and IA S 93
instrument that
Financial Instruments: Recognition and Measurement or IFR S .9 hT e n� ancial instrument has a
is mandatorily
stated maturity date and at maturity the issuer has to deliver a variable number o f its onw euq ity
convertible into a instruments to euq al a ex� d cash amount – subej ct to a cap and a o� or, hw ich limit and guarantee,
variable number respectively, the number o f euq ity instruments to be delivered.
of shares subject
Although the variability is limited by the cap and the o� or, the oC mmittee noted that the number
to a cap and o f euq ity instruments that the issuer is obliged to deliver is not ex� d and thereof re the instrument
affoor meets the den� ition o f a n� ancial liability in paragraph 11b( i() ) o f IA S 23 . hT e oC mmittee also noted
that IA S 23 does not permit an issuer to divide a conversion ef ature into multiple outcomes of r the
purposes o f evaluating hw ether the instrument contains a component that meets the den� ition
oe�f uq ity.
hT e oC mmittee noted that the cap and the o� or are embedded derivative ef atures. hT ereof re,
assuming that the issuer has not elected to designate the entire instrument under the af ir value
option, the issuer has to separate those embedded derivative ef atures rf om the host liability
contract and account of r them at af ir value through prot� or loss in accordance iw th IA S 93 or
IFR.9 �S
In light o f the eix sting IFR S reuq irements, the oC mmittee decided that an interpretation aw s not
necessary and didnt’ add the issue to its agenda.
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SOMETHING OLD, SOMETHING NEW: ACCOUNTING
FOR FUNDING VALUATION ADJUSTMENTS
Editorial by Colin Martin, Head of UK Assurance Services, Banking, KPMG

With the ink
“Each frm must adjust the value of its book to refect its access to and cost of funds (investing/
barely dry on
funding rate) in various markets and currencies. Adjustments to mid-market for cost of funding
IFRSf13 and the
should be dynamic, refecting changes in the magnitude of expected investing/funding
desire of standard requirement and in each frm’s cost of funds.”
setters to see a
You could be forgiven for thinking that this quotation comes from a current issue of Risk
single derivative
magazine, so relevant is it to the latest hot topic in derivative fair value calculations. In fact, the
price, along recommendation comes from Derivatives: Practice and Principles by the Group of Thirty’s Global
comes FVA with Derivatives Study and dates back to 1993. Adjusting derivatives valuations for the cost of funding
an apparently in a bank is clearly not a new phenomenon. However, to show that history has a sense of irony,
this adjustment was rarely seen in the days when the recommendation was frst made. The
unsolvable
entities that had the most sophisticated infrastructure and models were the same entities that
conundrum. funded themselves at or close to LIBOR, reducing the need for an adjustment. For entities that
funded themselves well away from LIBOR, there were no models to determine what adjustment
might have been made. So there it sat, the forgotten man of derivative fair value adjustments,
either too complex to do, or not that signifcant when it wasn’t.
So what has changed?
The recent announcement by JP Morgan of a USD 1.5 billion debit to the income statement in
respect of a funding valuation adjustment (FVA) associated with its uncollateralised derivative
portfolio might be the tipping point that sees this adjustment enter the mainstream of derivatives
valuation. So what has changed? The simplest answer is that the rate at which banks fund
themselves hasn’t been LIBOR fat for a while now, and this has focused the minds of bank staff
everywhere on the issue of whether this change has an impact on the fair value of derivatives and,
if so, on how to refect this impact in the pricing. Although the concept of FVA brings out passionate
debate on whether FVA is part of a derivative fair value, this article is not going to consider those
arguments. Instead, it will focus on the IFRS challenges that making such an adjustment brings.
The market has accepted the new normal for collateralised derivatives in the form of discounting
using the overnight index swap (OIS) rate such that most major banks have now moved their
infrastructure to refect this. It was only a matter of time before attention shifted to uncollateralised
positions. At its heart, FVA is an attempt to value a derivative considering all of the associated
cash fows, including any collateral requirements that may arise indirectly. Take a typical bank
transacting a swap with a typical corporate. The corporate trade is uncollateralised and the
derivative moves into the money for the bank. The bank will have hedged that transaction in the
interbank market, which normally requires counterparties to provide collateral based on the market
value of a trade. As a result, the bank will have an offsetting liability with a counterparty in the
interbank market and will be required to post collateral against it. Any cash collateral will only earn
the OIS rate, but the bank will have to bear the cost of funding that cash at its incremental funding
rate – a rate that may be higher than LIBOR fat. That spread between the cost of funding and the
return at OIS on its posted collateral is a real cost to the bank.
Uncollateralised
derivative
Funding Bank 1 Corporate
Collateralised
derivative
Bank 2
(Interbank market)

The result is that when transacting with a corporate, the bank factors in the potential extra
funding spread that might arise. If this potential extra funding spread were not factored into the
valuation of a derivative, then it would pop out of the valuation as an apparent day one gain.
62 © 2014 KPMG IFRG Limited, a UK company, limited by guarantee. All rights reserved.
Some of the challenges
So now to the part that will most challenge accountants. Clearly, if a bank incorporates its funding
spread in the values of its derivatives, then that spread will be idiosyncratic to the institution itself.
Not only that, but another bank with an identical contract with the same counterparty is likely to
have a different funding spread, creating a different valuation for an almost identical contract. The
same is true, of course, for so-called debit valuation adjustments (DVAs) in respect of own credit
risk. However, in the case of DVA, standard setters came up with a neat solution to try and maintain
the law of one price. IFRS 13 Fair Value Measurement requires an entity, in the absence of an
observable price for transferring a liability, effectively to default to valuing its derivative liability in the
way in which the counterparty values the corresponding asset. With the ink barely dry on IFRS 13
and the desire of standard setters to see a single derivative price (one entity’s credit valuation
adjustment (CVA) is another’s DVA), along comes FVA with an apparently unsolvable conundrum.
IFRS 13 requires a contract to be recorded at the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market participants at the
measurement date. If different counterparties to a contract would value it at different prices
because of their different incremental funding rates, then what is the exit price of the contract?
Which counterparty do I assume that I will sell it to? Ignoring for a moment the huge technical
challenges of which funding rate to use – incremental? based on a term structure? using a
behaviouralised derivative life? – there seem to be two main schools of thought on this matter.
Some entities argue that as a major and typical component of the market, their own funding
spread is typical of other market participants. They would argue that using their own funding
spread as a proxy for the market has merit. Others would argue that a market average should be
taken to estimate the funding cost of the market as a whole. Neither option is perfect. The frst
technique uses what is an entity-specifc input that might be dominated by entity-specifc factors
as a proxy for a market price. The second technique is akin to using a consensus price. Although
it is an estimate, a value based on an average market rate would not be refective of a sale of a
contract to a market participant who isn’t funding at the average market rate. The issue is further
complicated by the fact that banks usually value derivatives on a portfolio basis, with FVA, DVA
and CVA all potentially included in the mix and inter-related.
Furthermore, to increase complexity, the inclusion of FVA in the valuation of derivative instruments
is likely to have an impact on hedging relationships and in particular on effectiveness testing and
ineffectiveness measurement. This is because changes in the bank’s funding spread would impact
the measurement of changes in the fair value of a derivative hedging instrument and these changes
may have no offsetting effect on the measurement of the changes in the value or cash fows of the
hedged item attributable to the hedged risk. In addition, because a bank would probably make its FVA
adjustments at a portfolio level for assessing hedge effectiveness and recognising ineffectiveness,
it will have to allocate the adjustment to the individual hedging derivatives, or group of derivatives,
that have been designated as the hedging instrument. In this respect, the bank will need to adopt a
reasonable and consistent methodology for allocating FVA to individual derivative instruments.
Change gathers momentum?
Considering the ongoing debate surrounding whether and how FVA should be calculated for
accounting purposes, few fnancial institutions have so far decided to incorporate FVA into
valuation estimates. However, the tide may be turning as new voices emerge in the debate.
For example, the International Valuation Standards Council (IVSC), in its exposure draft Credit
and Debit Valuation Adjustments issued on 3 December 2013, discusses FVA in the context
1
of fair value. Furthermore, the new Draft Regulatory Technical Standards on Prudent Valuation
published by the European Banking Authority (EBA) on 31 March 2014 requires banks to
calculate a funding adjustment for regulatory purposes to refect the valuation uncertainty
when assessing the exit price according to the applicable accounting framework. Although
the concepts of fair value and prudent valuation are different, these voices may drive the
development and acceptance of methodologies for calculating FVA.
With some larger n� ancial institutions and regulators beginning to recognise the aduj stment, it
may be that the tipping point of r this particular marek t issue is already iw th us.
1 ABE R/ 2/ST 0140/ .6
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HOW DO OY U COMPARE ? FAIR VALUE OF LOANS
Banks classi ed Many bansk iw th 13 eD cember year ends have no w made the ne w af ir value hierarchy disclosure
o f n� ancial instruments carried at amortised cost, such as loans. eW have looek d att� en n� ancial
most loans and
statements issued by bansk reporting under IFR S to compare their disclosure in this area.
advances to
customers into What’s the issue?
Level 3 of the fair
Under IFR S 1,3 bansk need to disclose the af ir value o f n� ancial assets and n� ancial liabilities
value hierarchy
measured on the balance sheet at amortised cost and the level in the af ir value hierarchy iw thin
hw ich such af ir value measurements are categorised in their entirety For Level 2 and 3 valuations,
bansk have to provide a description o f the valuation techniuq es( ) and the inputs used in the af ir
value measurement as ew ll as any changes in valuation techniuq es and reasons of r maik ngt� hem.
IFR S 1 3 den� es the levels in the af ir value hierarchy as of llosw :
• Level 1 inputs : uq oted prices u( naduj sted ) in active marek ts of r identical assets or liabilities;
• Level 2 inputs : inputs other than uq oted prices included iw thin Level 1 that are observable of r
the asset or liability, either directly or indirectly ; and
• Level 3 inputs : unobservable inputs.
hT e af ir value measurement o f a n� ancial instrument is classie� d into Level 3 i f any unobservable
inputs are signic� ant.
hT e lac k o f an actively traded marek t of r the vast maoj rity o f loans and advances means that they
are rarely categorised as Level 1. Also, uj dgement is otf en needed to determine the signic� ance o f
unobservable inputs used in the valuation techniuq e.
What conclusions did banks reach?
hT e bansk in our sample categorised most o f their loans and advances to customers into Level 3 �
s( ee Figure 1.) oH ew ver, there aw s greater variation in the categorisation o f loans and advances to
bansk s( ee Figure 2.)
In general of r loans not measured at af ir value, bansk in our sample did not provide a detailed
epx lanation o f the criteria used of r determining the signic� ance o f unobservable inputs.
Figuurree 1 1: :LLooaanns sa nadn dad avdavnacnesc etos ctou sctuosmtoermsers2
100%
0%
A B C D E F G H I J
Banks
Level 1 Level 2 Level 3
2 aD t a in the charts is based on af ir values at year end 201.3
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Figuurree 2 2: :LLooaanns sa nadn dad avdavnacnecse tos btoa nbkasnks
100%
0%
A B C D E F G H I J
Banks
Level 1 Level 2 Level 3
What did they disclose?
iD sclosures relating to the af ir value o f loans carried at amortised cost included the of lloiw ng.
l Valuation techniques used: Principally discounted cash o� sw , present value methods, value
estimates rf om third party broek rs ree� cting overt- hec- ounter trading activity and marek t
transactions, hw ere available.
l Types of loans for which it has been assumed that carrying amount approximates fair value:
Floatingr- ate loans, lease n� ancing transactions, shortt- erm s( im�x onths to one year ) ex� dr- ate
loans.
l Inputs into valuation techniques: hT e maoj rity mentioned interest rates and credit spreads
as the main inputs ; other inputs included ew re estimated prepayment rate and dief f rentials
betew en historical and current product margins.
l Information by product type: Principally mortgages, credit cards and corporate loans.
hT e data in the bar charts above ecx ludes cash and demand balances iw th central bansk and
reverse repurchase agreements hw ere these could be identie� d rf om the available disclosures.
Generally, hw ere bansk made af ir value hierarchy disclosures in respect o f these assets, they
categorised them as of llosw :
• cash and demand balances iw th central bansk : Level 1 or Level 2 ; and
• reverse repurchase agreements : Level 2.
oN ban k in our sample dief f rentiated in its disclosures betew en impaired and unimpaired loans.
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REGULATION IN ACTION: EBA PROPOSALS FOR
DISCLOSURE OF ASSET ENCUMBRANCE
European banks What is the background to the proposals?
should consider nO 20 eD cember 201,3 the ABE issued the consultation paper Draft guidelines on disclosure of
the potential encumbered and unencumbered assets (ABE PC/ 2/ 014/3 .)8 hT e guidance is directed at institutions
impact of the to hw ich the disclosure reuq irements o f Part iE ght o f Regulation UE( ) oN . 2/575 01 3 P( illar )3 apply.
new disclosure hT e consultation paper has been prepared in response to the reuq irements o f Article 44 3 o f
requirements Regulation UE( ) oN . 2/575 01 3 mandating the ABE to develop guidance on unencumbered assets.
on asset It intends to supplement the eix sting disclosure reuq irements of r n� ancial statements prepared
encumbrance in accordance iw th IFR,S especially those in IFR S 7 on assets pledged as collateral of r liabilities,
transef rred assets and collateral held. It has been developed in coo- peration iw th the uE ropean
eS curities and Marek ts Authority MSE( A ) to provide a comprehensive vie w on asset encumbrance
and harmonise the presentation. hT e proposed disclosures ow uld be made in the same document
as the disclosures reuq ired by Part iE ght o f Regulation UE( ) oN . 2/575 01.3
What are the proposals?
hT e consultation paper den� es an e‘ ncumbered asset ’ and proposes the of lloiw ng disclosures:
• narrative inof rmation on the impact o f the institutions’ business model on the level o f
encumbrance and the importance o f encumbrance in its uf nding model ; and
• uq antitative inof rmation.
hT e ABE notes that in developing the proposals, it had regard to the reuq irements in IFR S 7 and
the recommendations o f the nE hanced iD sclosures aT s k Force FTDE( ) report Enhancing the Risk
Disclosures of Banks issued in cO tober 2012. hT e table belo w gives an overvie w o f the proposals
in the consultation paper and a highl- evel comparison iw th the reuq irements o f IFR,7 �S IA S 7
Statement of Cash Flows and the recommendations o f the FTDE report.
EBA consultation paper IFRS EDTF report
Location • In the same place as • Audited n� ancial • oN t specie� d
of the other reuq irements o f statements
disclosure Part iE ght o f Regulation
UE( ) oN . 2/575 01 3 are
disclosed ; in a single
location
De nition of • Assets pledged or • oN den� ition • Assets pledged as
encumbered subej ct to any of rm collateral or that
assets o f arrangement to the entity believes
secure, collateralise it is restricted rf om
or credite- nhance any using to secure
on - or ob-f f alance sheet uf nding, of r legal
transaction rf om hw ich or other reasons
they cannot be rf eely P( rinciple 1)9
iw thdranw p( age 11 )
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