Risk Weighted Capital Adequacy Framework (Basel II) – Disclosure Requirements (Pillar 3)

This guideline forms part of the Risk Weighted Capital Adequacy Framework (RWCAF) that specifies the disclosure requirements for:
(i) credit risk under the standardised and internal rating based (IRB) approach;
(ii) market risk under the standardised and internal models approach; and
(iii) operational risk under the basic indicator or standardised approach.

Improved transparency in the financial markets, underpinned by high quality and timely market disclosures, will enhance market discipline, market efficiency and confidence. The Pillar 3 disclosure requirements aim to enhance transparency by setting the minimum requirements for market disclosures of information on the risk management practices and capital adequacy of banking institutions (BI). This will enable market participants to obtain key information on risk exposures, risk assessment processes, the capital structure and capital adequacy of BIs.

The enhanced disclosures will also contribute to Bank Negara Malaysia’s (the Bank) supervisory monitoring efforts while strengthening incentives for BIs to implement robust risk management systems to identify, measure, monitor and control risks. This is achieved by requiring BIs to provide detailed information on their risk exposures and how these risks relate to capital.

This document belongs to Bank Negara Malaysia (BNM). Full access to the original source is available here: https://www.bnm.gov.my/banking-islamic-banking