Rules and Guidelines on Market Discipline Disclosure Requirements (Pillar 3)

Summary

This is CIMA's Rules and Guidelines on Market Discipline Disclosure Requirements (Pillar 3) under the Basel II framework, effective 1 September 2021. It applies to all banks incorporated in the Cayman Islands and regulated by CIMA under the Banks and Trust Companies Law (unless individually exempted by the Authority), and to a bank's holding company in respect of the Cayman banking group on a consolidated basis. The document sets out mandatory public disclosure requirements (marked with an 'R' for rule) intended to promote transparency and market discipline about a bank's capital adequacy and risk exposures, alongside guidance (recommendations) on how to prepare high-quality disclosures.

Disclosure Templates and Reporting

The rules prescribe standardised templates and tables covering multiple risk and capital areas, with reporting frequency depending on the bank's assigned group.

• Areas covered: capital, credit risk, credit risk mitigation, counterparty credit risk, leverage ratio, liquidity, securitisation, market risk, operational risk, interest rate risk in the banking book, remuneration, and asset encumbrance.
• Reporting frequency: Quarterly, semi-annual or annual, depending on the bank's assigned group: Group (a), designated by CIMA for more frequent reporting, or Group (b), the default annual reporters.

Banks must publish standalone Pillar 3 disclosure reports, at minimum on their websites, maintain an archive of past reports, notify CIMA when reports are published, and ensure disclosures are validated and reviewed by the board and senior management with internal control processes akin to financial reporting.

Guiding Principles and Confidentiality

The guidelines also require banks to have a board-approved formal disclosure policy, and to follow five guiding principles: clarity, comprehensiveness, relevance, consistency over time, and comparability. Proprietary and confidential information must be handled through limited exceptions that must be disclosed and explained, with CIMA retaining authority to require fuller disclosure. Appendices provide detailed definitions for the various templates (credit risk, counterparty credit risk, leverage, securitisation, etc.) to support consistent completion of the required disclosures.

Key obligations

• Banks must publish annual Pillar 3 disclosure reports as standalone documents, at minimum on their websites, concurrently with audited financial statements.
• For disclosures required more frequently than annually, banks must publish these within three months of the end of the relevant period.
• Banks must notify the Authority when they have published their Pillar 3 disclosure reports.
• Banks must maintain on their websites an archive of past Pillar 3 disclosure reports in line with CIMA's record retention requirements.
• Banks assigned to Group (a) by CIMA must report using the frequency (quarterly, semi-annual or annual) specified for their group; all other banks (Group (b)) must report annually unless otherwise instructed.
• Banks must have in place a formal disclosure policy approved by the board covering the disclosures to be made, internal controls, frequency and location of disclosures, quality assurance methodology, and a methodology for reviewing the policy's effectiveness.
• The board and senior management must attest to the reliability of disclosed information and subject Pillar 3 reports to the same internal review/control processes as financial reporting, including internal and external audit review.
• Where a bank omits specific proprietary or confidential information from disclosure, it must disclose more general information instead, explain in narrative commentary why the specific items were withheld, and notify the Authority when using this exception.
• If CIMA determines withheld information can be disclosed, the bank must amend its Pillar 3 report to include it and disclose it going forward.
• Disclosures must be reported at minimum in English and, where fixed templates apply, all fields must be completed in the prescribed manner; where flexible, banks must ensure information is as granular and comparable as the fixed format would require.

Applies to

banks incorporated in the Cayman Islands and regulated by CIMA under the Banks and Trust Companies Law, bank holding companies (in respect of the Cayman banking group on a consolidated basis)

Deadlines

• 1 September 2021: Effective/issue date of the Rules and Guidelines document.
• within three months of the end of the period: Deadline for publishing Pillar 3 disclosures that are required more frequently than annually.
• concurrently with audited financial statements: Timing requirement for publishing annual Pillar 3 disclosure reports.