Study on the Adequacy of the Information to be Disclosed under Article 89(1) of the Capital Requirements Directive IV

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Willem Pieter de Groen, Beatriz Pozo Pérez, Fredrik Andersson, Agustina Koremblit

Since 2014, credit institutions and investment firms subject to the Capital Requirements Regulation (EU) No 575/2013 (CRR) and Directive 2013/36/EU (CRD) are required to publish once a year specified information on a country-by-country basis. This requirement was included under Article 89(1) CRD IV at the proposal of the European Parliament, which aimed to enhance trust in the financial sector through more transparency regarding their activities

The study provides an assessment of the adequacy of the indicators covered in the current country-by-country reporting (CBCR). Member States have (almost) literally transposed Article 89(1) CRD IV in the national legislation. Nevertheless, there are significant differences in the practical implementation. Many credit institutions are not reporting at all, or are not reporting the information for each of the jurisdictions separately. Activities of branches are not always covered. Similarly, the credit institutions use different definitions for turnover, number of employees, tax on profit or loss and public subsidies.

The total administrative costs are insignificant, estimated at about EUR 2 million per annum in total for the more than 4,000 credit institutions in the EU, meaning that these costs are on average EUR 450 per credit institution every year. The incremental costs are estimated to be only about a quarter or EUR 0.5 million, due to other requirements and practices, including segment reporting and reporting to tax authorities under DAC4 (Council Directive 2016/881 amending Directive 2011/16/EU, which is the EU implementation of OECD BEPS Action 13).

CBCR is further still relevant as trust in the financial sector has still not fully recovered to the levels before the 2007-09 global financial crisis.

Willem Pieter de Groen is Advisor to CEPS. Beatriz Pozo is  Unit Coordinator at CEPS and ECMI. Fredrik Andersson and Agustina Korenblit are Researchers at CEPS. Veronique Bruggeman, Massimo Marziali and Sarah Fialon from Milieu also authored this study.