The European Union Capital Requirements Directive (“the Directive”) came into effect on 1 January 2007. It introduced consistent capital adequacy standards and an associated supervisory framework in the EU based on the Basel II rules agreed by the G-10.
Implementation of the Directive in the UK was by way of rules introduced by the then Financial Services Authority (“the FSA”). The Basel II Framework is structured around three pillars: Pillar 1 (minimum capital requirements), Pillar 2 (supervisory review) and Pillar 3 (market discipline). The disclosure requirements of Pillar 3 are designed to promote market discipline by providing market participants with key information on a Firm’s risk exposures and risk management processes. Pillar 3 disclosures aim to complement the minimum capital requirements described under Pillar 1 and the supervisory review process of Pillar 2.
ABC International Bank plc (“ABCIB” or “the Bank”) adopted the Standardised Approach to credit risk from 1 January 2008. ABCIB also became subject to Pillar 2 and 3 from that date. The EU’s Capital Requirements Regulation (“CRR”) introduced further enhancements for the Pillar 3 disclosures from 2015, these have now been included where appropriate.