Solvency

Disclosure

Proper disclosure requirements are designed to enhance market discipline and induce credit institutions to improve their market strategy, risk management practices and internal risk control systems in order not to be “punished” by market participants through the disclosure of “bad news”. As early as September 1997, the Basel Committee, in its “Core Principles for Effective Banking Supervision”, formulated minimum requirements for effective banking supervision which provide for the use of market mechanisms as a complement to effective banking supervision.

Pursuant to section 26a of the Banking Act, in implementing Chapter 5 (Disclosure by credit institutions) of Directive 2006/48/EC of the European Parliament and of the Council of 14 June 2006 relating to the taking up and pursuit of the business of credit institutions, institutions must publish, at regular intervals, qualitative and quantitative information on own funds, capital adequacy, the risks they have incurred and their risk management procedures, as well as have formal procedures and rules for fulfilling disclosure requirements. Because they are closely connected to own funds rules, the details regarding the content and procedure for disclosure are regulated in Part 5 of the Solvency Regulation, with Chapter 1 containing general provisions for the scope of application, Chapter 2 general requirements for the content of the information disclosed, and Chapter 3 qualifying requirements governing the use of special instruments and methods. Pursuant to section 26a (3) of the Banking Act, supervisors can issue specific orders to remedy deficiencies in disclosure practice.

In the case of banking groups, disclosure requirements are generally applicable to the top of the group; entities belonging to a group are exempted from disclosure at subgroup or single-entity level. Disclosure is governed by the principle of materiality and is not applicable to legally protected or confidential information. However, in the two latter cases, institutions are required to publish more general information about the facts that they are not at liberty to disclose for the aforementioned reasons. The required information is to be published annually on the institution’s own website or in another suitable medium unless it has already been disclosed in the context of fulfilling other publication requirements.