9 April 2020
The UK’s Prudential Regulation Authority (PRA) has issued a statement outlining their approach to Pillar 3 disclosure for UK banks, building societies, designated investment firms and credit unions in response to COVID-19. This statement follows an earlier statement from the European Banking Authority (EBA) in which the EBA encouraged flexibility from national regulators, including when assessing deadlines for Pillar 3 disclosures.
- The PRA will be flexible in its expectation of firms’ publication timelines for Pillar 3 disclosures and will take a flexible approach to assessing the reasonableness of any delay to a disclosure that would otherwise be published in connection with quarterly, half-yearly or annual financial disclosures that firms would normally expect to disclose on or before 31 May 2020.
- The PRA does not currently set a deadline for the publication of Pillar 3 disclosures but expects the Pillar 3 disclosure to be made within a reasonable amount of time following the publication of financial reports.
- The European Securities and Markets Authority recently recommended that regulators allow firms with securities traded in a regulated market an additional two months to publish their annual financial report and an additional month to publish their half-yearly financial report. National regulators have started to permit such delays, including the FCA.
- The PRA understands there may be a lag time between the publication of financial reports and Pillar 3 disclosures and, as Pillar 3 disclosures need to be made within a reasonable time following the publication of financial reports, the PRA recognises that Pillar 3 disclosures will also be delayed significantly compared to the usual publication date.
- Where firms reasonably anticipate that publication of the Pillar 3 disclosure will be delayed, the PRA expects that firms will inform supervisors and market participants of the delay, the reasons for such delay and, to the extent possible, the estimated publication date.
It is encouraging that European and UK regulators recognise the operational difficulties caused by COVID-19 and are taking a flexible approach to try and mitigate those difficulties. Although Pillar 3 disclosures cover a broad range of topics, the disclosures also include remuneration disclosures. Impacted firms that have delayed the publication of their financial statements will, therefore, have more time to prepare the connected Pillar 3 remuneration disclosures. Firms should keep an eye out for further developments from the PRA, which can be accessed here.
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