IFR / IFPR K-factors, explained end to end
The requirement the disclosure reports on.
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Resource center · Prudential Reporting
Pillar 3 disclosures: what is published, and when.
Pillar 3 is the only part of the prudential regime the public reads. It draws on the same numbers as the supervisory return but answers to a different audience, and the two have to reconcile without simply being the same document.
Who discloses
Public disclosure attaches to investment firms that are not small and non-interconnected. A narrower obligation can apply to some firms, and additional items apply to larger firms — notably the disclosure of investment policy and of environmental, social and governance risks, which are scoped by criteria the Regulation sets. The classification therefore drives the disclosure set in the same way it drives the reporting set.
Where a firm discloses on a consolidated basis, the disclosure follows the prudential consolidation perimeter, which will not always match the accounting group presented in the financial statements. That mismatch is a disclosure point in itself rather than something to reconcile away silently.
What is disclosed
| Area | Content |
|---|---|
| Risk management objectives and policies | The firm’s strategies and processes for each category of risk, with a governing-body statement on the adequacy of its arrangements. |
| Governance | Composition of the management body, directorships held, diversity policy and the risk committee arrangements. |
| Own funds | Full reconciliation of regulatory own funds to the audited balance sheet, the main features of instruments issued, and applicable deductions and filters. |
| Own funds requirements | The requirement and the approach to assessing internal capital adequacy, including the K-factor position where it applies. |
| Remuneration | Policy and practices for identified staff, with quantitative information on fixed and variable pay. |
| Investment policy | Voting and engagement in respect of holdings, for firms above the applicable criteria. |
| Environmental, social and governance risks | Exposure to those risks, for firms within the defined scope. |
The own funds reconciliation is the item most often underestimated. It requires a line-by-line bridge from the audited balance sheet to regulatory own funds, and it is the disclosure an analyst will check first.
Timing and location
Disclosure is annual and published on the date the firm publishes its financial statements. It must be in a publicly accessible location, presented in one place or with clear cross-references to where each item can be found, and retained so that earlier periods remain available. Where a firm relies on a cross-reference to another document, the disclosure requirement is only satisfied if the referenced document is equivalent in substance and equally accessible.
Reconciling to the supervisory return
The disclosure and the return draw on the same underlying figures, and a supervisor comparing them expects agreement. Three differences are legitimate and should be explained rather than eliminated:
- Perimeter. Prudential consolidation for the disclosure, which may differ from the accounting consolidation in the financial statements it sits beside.
- Timing. The disclosure is made at the financial year end; supervisory returns are made at each reference date, so intermediate movements are not visible in the disclosure.
- Granularity. The return carries breakdowns that the disclosure aggregates. Aggregation is expected; a different total is not.
Build both from one dataset. Where the disclosure is prepared separately — typically in a document produced by a different team from the one filing the return — the two drift, and the drift is publicly visible.
Official sources
Primary instruments only. Each is named in full so the reference remains traceable even if a link moves.
- Regulation (EU) 2019/2033 (IFR), Part Six — disclosure by investment firmsEUR-Lex · Regulation · the disclosure obligations and their scope
- Commission Implementing Regulation (EU) 2021/2284 on supervisory reporting and disclosures of investment firms, as amendedEUR-Lex · Implementing Regulation · disclosure formats and the reporting counterpart
- Financial Conduct Authority Handbook — MIFIDPRU 8, for firms subject to the United Kingdom regimeFCA Handbook · the corresponding United Kingdom disclosure rules
Questions, answered
We are small and non-interconnected. Do we disclose at all?
The public disclosure obligation is aimed at firms that are not small and non-interconnected, with a narrower obligation applying to some firms. Confirm your position against the Regulation and, in the United Kingdom, against the corresponding rules, because the answer follows the classification rather than the firm's own view of its size.
Can we cross-refer to our annual report instead of repeating information?
Cross-referencing is permitted where the referenced information is equivalent in substance and equally accessible. A reference to a document that presents the information on a different basis, or that sits behind a barrier, does not satisfy the requirement.
The disclosure and the supervisory return show different own funds. Is that a problem?
It depends on why. Perimeter, timing and granularity differences are legitimate and should be explained. A difference in the same figure on the same basis at the same date is a defect, and it is visible to anyone comparing the two.
Do the disclosures need auditing?
The regime does not itself impose an audit requirement on the disclosure, but the firm must have policies to verify that what it publishes is appropriate and that the disclosures convey its risk profile comprehensively. In practice the own funds reconciliation is checked against audited figures.
REGREP is an independent software provider. This record explains a reporting framework in plain language and is not legal, tax or regulatory advice. Confirm scope, thresholds and submission dates with your competent authority before you file.
Keep reading
More on this framework, and the module that produces the filing.
UK IFPR: ICARA and the SNI distinction
The classification that determines the disclosure set.
Read the guide →Pillar 3 module
Build the disclosure set from the same data as the supervisory return.
See the module →One dataset, two audiences.
Produce the disclosure from the same figures as the return, with the reconciliation retained rather than rebuilt each year.