S&P releases Pillar 3 guidance

Standard & Poor’s guidance aims to promote sound market discipline

Standard & Poor’s Rating Services (S&P) has published several key areas of supplementary Pillar 3 disclosure intended to "promote sound market discipline".

For credit risk, the Proposed Supplemental Disclosures (PSD) would involve banks providing, among other things, greater disclosure of exposure at default by risk bucket, and greater breakdown of exposures by geography.

For op risk, the PSD includes a breakdown of capital charges for each risk factor, and the allocation of op risk per business line while for the trading book, the PSD includes the specific risk components, the characteristics and drivers of the Value-at-Risk, model, and stress testing. The PSD also seek additional information about the fair value of illiquid assets, the bank’s securitisation framework, the interest rate risk in the banking book, the equity portfolios outside the trading book, foreign exchange risk, and Basel Pillar 2 disclosure.

S&P also noted that in connection with Basel II it would: "refine [its] own risk-adjusted capital measures and develop a comprehensive framework that will facilitate comparison of banks’ capitalisation levels, a key factor in bank ratings."