ESMA to Promote Transparency for TLTRO III Transactions

The European Securities and Markets Authority (ESMA) issued today a public statement that promotes transparency regarding accounting for the third series of Targeted Longer-Term Refinancing Operations (TLTRO III) of the European Central Bank (ECB) in the IFRS financial statements of banks.

According to the statement, ESMA observes that banks have treated differently the accounting of the ECB's TLTRO III refinancing transactions in practice. The EU's securities markets regulator believes that this matter may substantially impact the financial statements of banks across the EU, considering the total volume of the TLTRO III operations. Therefore, the regulator stresses that ensuring transparency regarding the accounting treatment of these transactions in the financial statements of banks is of key importance.

For affected banks, ESMA gives the following recommendations:

• to offer entity-specific disclosures regarding the critical accounting policies and the key judgements and assumptions connected to the TLTRO III transactions;
• to provide an adequate level of transparency about risks of financial instruments and treatments of banks' assessment of the possible achievement of conditions or covenants attached to the TLTRO III loans; and
• to reveal the carrying amount of TLTRO III liabilities and the related interest expense at the end of the reporting period.