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ANNEXURE 11: Document Addressed: Basel III Pillar 3 – Package of Disclosure Requirements and Guidance Notes

الرقم: 351000123076 التاريخ (م): 2014/7/21 | التاريخ (هـ): 1435/9/24 الحالة: Modified
Pillar 3 requirements have been updated by SAMA's pillar 3 disclosure requirements Framework, issued by SAMA circular No (44047144), dated 04/06/1444 H, Corresponding To 27/12/2022 G.
Basel III Pillar 3 - Package of Disclosure Requirements and Guidance Notes Page No. 14, Frequency and Location of Disclosure 
 
Original paragraph was as follows: 
 
7.Frequency and Location of Disclosure
 
Frequency 
 
Banks are expected to comply with the Basel III enhanced requirements from 1 Jan 2013. 
 
All disclosures will be made semi-annually with the exception of the following: 
 
Table and 2b, 2c and 2d 3f will be disclosed quarterly.
 
All Qualitative Disclosure Requirements will be reported annually.
 
Location of Disclosures 
 
All quarterly disclosures will be in the regular quarterly financial statements.
 
All semi-annual disclosures will be made on a bank's websites.
 
All annual disclosures will be in the annual reports of banks and web sites.
 
A reporting bank shall provide in its Annual Report and Periodic Financial Statements the location of all disclosures required under Pillar
 
A reporting bank may exercise its discretion in determining the form of the disclosure required and may choose to use graphical and other representations where appropriate.
 
The frequency and location of reporting has been specified in each Disclosure Template. The following are the abbreviations on the top right hand side of each template: 
 
LocationFrequency
Annual Financial Statement Report (AR)Annual: A
Quarterly Financial Statement Report (QR)Quarterly: Q
Website (W)Semi-Annually: SA

The following is considered added to the above paragraph: 
 
Under Pillar 3, large banks are required to make certain minimum disclosures with respect to certain defined key capital ratios and elements on a quarterly basis, regardless of the frequency of financial statement publication. 2 The disclosure of key capital ratios/elements for these banks will continue to be required under Basel III. 
 
Banks must also make available on their websites, or through publicly available regulatory reports, an archive (for a suitable retention period determined by the relevant national authority) of all templates relating to prior reporting periods. 
 
Irrespective of the location of the disclosure (published financial reports, bank websites or publicly available regulatory reports), all disclosures must be in the format required by this document 
 
For the relevant Pillar 3 disclosure requirements see paragraph 818 of the Basel II Framework: International Convergence of Capital Measurement and Capital Standards – A Revised Framework – Comprehensive Version (June 2006). 
 
(Refer to Paragraphs 5-7: Implementation date and frequency of reporting, Composition of capital disclosure requirements - Rules text (June 2012) 
 
Basel III Pillar 3 - Package of Disclosure Requirements and Guidance Notes Page 16, 3.1 Reconciliation requirements 
 
Original paragraphs were as follows: 
 
3.1Reconciliation requirements
 
There is a three step approach to be undertaken in preparing the enhanced P3 disclosures to show the link between the bank's published financial statements and the numbers that are used in the composition of capital disclosures set out in Section 1 (post 2018) and Section 5 (transition). 
 
3.1.1Step 1: Disclose the reported balance sheet under the regulatory scope of consolidation Table (2b).
 
In this step, banks are required to take their published balance sheet and report the numbers when the regulatory scope of consolidation is applied. 
 
Banks must list which legal entities (along with disclosure of such entities balance sheet assets, balance sheet equity and principal activities) are included within one scope of consolidation that do not appear in the other scope. 
 
If some entities are included in both the regulatory scope of consolidation and accounting scope of consolidation, but the method of consolidation differs between these two scopes, banks are required to list these legal entities separately and explain the differences in consolidation. 
 
If the scopes of consolidation are identical, then banks can skip this step by noting that there is no difference and move onto step 2. 
 
Table 2b will be used for this step with the balance sheet under the accounting scope of consolidation and regulatory scope of consolidation updated in columns C and E respectively. 
 
An example of where the basis of consolidation for regulatory purposes differs from that used for the financial consolidation is where holdings in insurance and financial entities are excluded from regulatory capital if they qualify as significant minority investments. Column D in table 2b will be used for such a purpose. 
 
On this note, where the two scopes of consolidation differ, the totals of the balance sheet (i.e: total assets, total shareholders equity) in the published financial statements will not be the same as the totals of the balance sheet under the regulatory scope of consolidation. 
 
With respect to the above paragraphs, the content highlighted in “bold font” has been added: 
 
3.1Reconciliation requirements
 
There is a three step approach to be undertaken in preparing the enhanced P3 disclosures to show the link between the bank's published financial statements and the numbers that are used in the composition of capital disclosures set out in Section 1 (post 2018) and Section 5 (transition). 
 
3.1.1Step 1: Disclose the reported balance sheet under the regulatory scope of consolidation Table (2b).
 
In this step, banks are required to take their published balance sheet and report the numbers when the regulatory scope of consolidation is applied. 
 
Banks must list which legal entities (along with disclosure of such entities balance sheet assets, balance sheet equity and principal activities) are included within one scope of consolidation that do not appear in the other scope. Regarding each legal entity that is required to be disclosed by this paragraph, banks must also disclose its total balance sheet assets and total balance sheet equity (as stated on the accounting balance sheet of the legal entity)] and a description of the principle activities of the entity. 
 
(Refer to, Paragraphs 10-13: section 2: Reconciliation requirements, Composition of capital disclosure requirements - Rules text (June 2012)) 
 
Basel III – Pillar 3 Package of Disclosure Requirements and Guidance Notes, Page 22, Table 2 – Capital Structure "All B", Table 2 (e) – Main features template 
 
The original paragraph was as follows: 
 
Table 2 (e) – Main features template 
 
Disclose the key features of all regulatory capital instruments. In this template, banks are required to complete all of the shaded cells for each outstanding regulatory capital instrument (banks should insert "NA" if the question is not applicable).
 
The revised paragraph would read as follows: 
 
Table 2 (e) – Main features template 
 
Disclose the key features of all regulatory capital instruments. In this template, banks are required to complete all of the shaded cells for each outstanding regulatory capital instrument (banks should insert "NA" if the question is not applicable).
 
Banks are required to keep the completed main features report up-to-date, such that the report is updated and made publicly available whenever a bank issues or repays a capital instrument and whenever there is a redemption, conversion/write-down or other material change in the nature of an existing capital instrument. 
 
Given that the template includes information on the amount recognised in regulatory capital at the latest reporting date, the main features report should either be included in the bank‘s published financial reports or, at a minimum, these financial reports must provide a direct link to where the report can be found on the bank‘s website or publicly available regulatory reporting. 
 
(Refer to Paragraphs 27-31: Section 3; Main features template, Composition of capital disclosure requirements - Rules text (June 2012)) 
 
The following is inserted as Annexure A, Pillar 3 Package of Disclosure Requirements and Guidance Notes 
 
Other disclosure requirements 
 
In addition to the disclosure requirements set out in this document, and aside from the transitional disclosure requirements set out in Section 5 of Composition of Capital Disclosure Requirement, Rules Text, June 2012, the Basel III rules text makes the following requirements in respect of the composition of capital: 
 
Non-regulatory ratios: banks which disclose ratios involving components of regulatory capital (eg "Equity Tier 1", "Core Tier 1" or "Tangible Common Equity" ratios) must accompany such disclosures with a comprehensive explanation of how these ratios are calculated. 
 
Full terms and conditions: banks are required to make available on their websites the full terms and conditions of all instruments included in regulatory capital. 
 
The requirement for banks to make available the full terms and conditions of regulatory capital instruments on their websites will allow market participants and supervisors to investigate the specific features of individual capital instruments. An additional related requirement is that all banks must maintain a Regulatory Disclosures section of their websites, where all of the information relating to disclosure of regulatory capital is made available to market participants. In cases where disclosure requirements set out in this document are met via publication through publicly available regulatory reports, the regulatory disclosures section of the bank‘s website should provide specific links to the relevant regulatory reports that relate to the bank. This requirement stems from the supervisory experience that, in many cases, the benefit of Pillar 3 disclosures is severely diminished by the challenge of finding the disclosure in the first place. 
 
Ideally much of the information that would be reported in the Regulatory Disclosures section of the website would also included in the published financial reports of the bank. The Basel Committee has agreed that, at minimum, the published financial reports must direct users to the relevant section of their websites where the full set of required regulatory disclosure is provided. 
 
Refer to Paragraphs 31-33: Section 4: Other disclosure requirements, Composition of capital disclosure requirements - Rules text (June 2012)