The Reserve Bank of India (RBI) on Tuesday released directions on commercial banks’ capital adequacy. RBI noted that Pillar 3 of the Basel Framework aims to promote market discipline through regulatory disclosure requirements. These requirements enable market participants to access key information relating to a bank’s regulatory capital and risk exposures in order to increase transparency and confidence about a bank’s exposure to risk and the overall adequacy of its regulatory capital.
The proposed norms said Pillar 3 should apply at the top consolidated level of the banking group to which the capital adequacy framework applies. If a bank is not the top consolidated entity in the banking group, Pillar 3 disclosures shall be required to be made by the bank on a standalone basis. This will apply to unlisted entities as well, even if they are not required to publish financial results. The norms said banks should have a formal disclosure policy for Pillar 3 data approved by the board of directors that sets out the internal controls and procedures for disclosure of such information. Banks have to publish Pillar 3 disclosures concurrently with their financial reports for the corresponding period.
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