Response to consultation on Implementing Technical Standards amending Commission Implementing Regulation (EU) 2021/451 on supervisory reporting
Question 1: Are the instructions and templates clear to the respondents?
Please find below the elements of the templates that, in our opinion, should be better clarified:
Template C 03.00:
Row 0360-0380 - Please note that inside the regulatory references in Annex I and II, paragraphs 5(a) and 7 of the new art. 465 of Regulation should be added in addition to par. 3, 4, 5 and 5b
Template C 6.01 col. 250:
Please clarify if the TREA indicated in col. 0250 of template C 06.01 should reconcile - in line with the current DPM 3.2 - with TREA indicated in row 0010 column 0010 of template C 02.00 or if it should reconcile with the row 0036 (U-TREA pre floor).
If it is necessary to square with row 0010 column 0010 of C 02.00 in the presence of a "floor adjustment" in row 0035, the problems would be i) how to represent the floor adjustement for the purposes of C 06.01 (column 250 is the sum of columns 260-280 and the floor adjustment is not splittable by type of risk), as well as ii) how to reconcile with the Template C 06.02 that opens the various columns for reporting unit (the consolidated floor adjustment is not splittable by Reporting Unit).
Template C 10.00:
Please confirm if it would be correct to refer to a single paragraph of Article 465 (par. 5 point a) for col. 090; par. 5 point b) for col. 0100; par. 3 for col. 0110) or if it would be more correct to consider all the paragraphs included in art 465. Generally, regarding the interrelations between the paragraphs of Article 465 and considering that it will be necessary to calculate a fully loaded S-TREA (therefore, by not applying any type of transitional provision, even interconnected between paragraphs), it should be highlighted that the creation of "partial" reporting views related to the application of only a few paragraphs without considering the interconnections with the other paragraphs of Article 465 could lead to a high cost of compliance.
Template C13.01 col. 0940, 950, 960 e C 14.01 col. 0451, 0452, 0453:
Please note that within the regulatory references in the templates and in Annex II, par 5b should be replaced by paragraph 7 of the new art. 465 of the Regulation. In addition, it is requested to confirm if it is correct to refer only to paragraph (7) of Article 465 for the mentioned columns or if it would be better to consider all the possible interrelations between paragraphs (3)(4)(5a)(5b)(7) included in Article 465.
For example, a securitisation exposure originally considered in SEC-IRBA for the purposes of the U-TREA with corporate underlyings could require the simultaneous application of both art. 465(7) (p factor) and art. 465(3) (WF% equal to 65%) for the purposes of calculating the SEC-SA. Following the example, in column 940 of C 13.01 / 451 of C 14.01 it is required only the effect coming from the non-application of art. 465(7) (and therefore art 465(3) shall be applied) or also the effect resulting from both the non-application of art. 465(7) and art. 465(3)?
Template C 34.02 col. 0250:
For the purposes of Template C 34.02 column 0250, it is requested to confirm if it is correct to refer only to paragraph (4) of Article 465 for reporting of the mentioned column or if it is better to consider all possible interrelations between paragraphs (3)(4)(5a)(5b) included in art 465. For example, a derivative exposure to corporate may require the application at the same time of both art. 465(4) (alpha factor equal to 1) and art. 465(3) (WF% equal to 65%). Following the example, to compile column 0250 is it required only the effect coming from the non-application of art. 465(4), or, at the same time, even the effect resulting from the non-application of art. 465(3)?
Template C 14.01 Col. da 430 a 444 (FRTB):
Please note that it is impossible to define useful information for the generation of such columns for the Trading Book securitisations, because it is not possible to detail for each single ISIN the capital absorption / RWA resulting from the SBA Sensitivity/ Credit Spread Risk methodology, since the risk measure is aggregated through correlations dependent on regulatory buckets.
Secured Exposure Representation: In the templates C 02.00, C 08.01 and C 10.00, it is required to represent quantitatives data resulting from the FULL STD pro OF calculation on AIRB portfolios. Please specify how to connect the RWA Full STD pro OF in IRB portfolios even in the presence of guarantees that determine the division into covered/ uncovered tranches which are different for AIRB approach and for FULL STD pro OF. With reference to Template C 08.01, we point out the high cost of the representation of IPRE/ NON IPRE/ ADC/ NON ADC exposures in unsecured/ secured tranches (loan splitting approach), which have to merge the STD and IRB logics into a single template. (topic linked to Question 16).
Validation Rules:
Considering the function performed by validation rules, that often clarify the requests for reporting representation, please inform us when they will be available, in order to be able to correctly address the interventions to be applied to our systems.
Large exposures: In order to properly manage the feeding of the templates on Large Exposures, please to specify which one of the FULL STD calculations, according to CRR3 purposes, meet the feeding requirements of the LEX templates (if from Full STD pro OF processing round, with the application of the transitional provided for in Article 465, or from the FULL STD round, without the application of the transitional).
Question 2: Do the respondents identify any discrepancies between these templates and instructions and the calculation of the requirements set out in the underlying regulation?
We have found some discrepancies within the update of the template C.09.04.
Taking into account that:
- In March 2025, if not postponed, FRTB framework for Pillar 1 purposes will come into effect;
- CRD6 for CCyB market risks still refers to pre-FRTB metrics (see in particular Article 140 (4) (b));
- Chapter 5 (“Use of internal models to calculate own funds requirements” for market risk) referred to in CRD6 has been deleted in CRR3;
- Chapter 2 ("Own funds requirements for position risk" for market risk) mentioned in CRD6 refers to the previous pre-FRTB methodology and, to the extent still in force, should only be applied by companies that use the Simplified Standardized Approach (SSA). We would have expected a reference to the ASA instructions (new standard in the FRTB context) referred to in chapter 1-bis of the CRR3 with an indication of the calculation areas on which split by country (e.g. default risk, etc.)
Considering the points above, we ask if there is a need to update the structure of Template C 09.04/ the instructions that govern the feeding of market risk rows (rows 0030/0040/0090) or if it will be necessary to continue feeding C.09.04 based on pre-CRR3 metrics, with additional reporting costs to keep the previous pre-FRTB framework in place for C 09.04 purposes only.
Do you identify any issues regarding the introduction of this template? Would it be more useful to report the information in C 08.01 to directly compare between capital requirements determined by the IRB approach and the SA?
It is preferable to adopt an ad hoc template (C10.00), instead of inserting new columns in template C 08.01.
However, it is pointed out that this is a template which requires an high cost of compliance, because it considers at the same time the definition of the AIRB scope, the one of STD portfolio, and the one for MEMO ITEMs requiring Full STD Fully loaded processing ex art 465.
Please specify if within the EADs if the EPE EADs (from the official calculation), or the FULL SA-CCR EADs (from the S-TREA elaboration) for CCR exposures should be reported.
That being said, we have doubts on the contents of the Columns 090, 0100, 0110 of the Template C.10.00:
There is a doubt if these columns should be fed only for CREDIT RISK exposures and not for COUNTERPARTY RISK exposures too, considering also the connection provided by the mapping tool for the tables CMS1 and CMS2 of Pillar 3 that refer only to exposures subject to CREDIT RISK.
If Col. 0090, 0100, 0110 must also contain COUNTERPARTY RISK exposures, please clarify why paragraph (4) of art. 465 is not recalled.
In this case, it is necessary to confirm if it is correct to refer only to the paragraph of Article 465 recalled by Annex II in order to calculate the effect to report (in particular: par. 5 point a) by col. 090; par. 5 point b) by col. 0100; par. 3 by col 0110) or if it is more correct to consider the effect resulting from the interrelations which could exist between paragraphs (3)(4)(5a)(5b) included in Article 465. For example, a derivative exposure to corporate may require the application at the same time of both art. 465(4) (alpha factor equal to 1) and art. 465(3) (WF% equal to 65%). Following the example, in column 0110 is it required only the effect deriving from the non-application of art. 465(3) or also the effect deriving from the non-application of art. 465(4)?
Question 10: Do you have any comment on the other changes included in the C 07.00 template? Other changes include a separate exposure class for “Corporates – Specialised lending, an “of which” row for exposures to central banks, revised memorandum item rows to align with the breakdown for exposures secured by immovable property, a new column “other” for transitional CCFs for UCC, and a last column to report the impact of transitional provisions on CCFs for UCC.
We report an issue at regulatory reporting level, due to the potential high cost of compliance for the generation of column 0241 and related ad hoc calculations to be run just for a view on CCF% without transitional provisions.
Question 11: CIUs under the SA approach – Please also refer to question 16 on the reporting of CIU positions and underlying exposures under the IRB: Do institutions have information readily at their disposal on underlying exposures of CIUs in order to be reported as it is proposed to be done in C 08.01? Would this add substantial reporting costs?
Template C 07.00:
The current representation of CIUs with STD approach seems consistent with regulatory dictate, instead a reporting representation in line with what DPM 4.0 proposes for CIUs to IRBs to be reported in C 08.01 would add significant reporting costs.
Template C 08.01:
Please clarify the ratio related to the inclusion in Template C 08.01(template Credit Risk IRB Approach) of rows 0200 - Mandate-based approach and 0210 Fall-back approach, beacuse these methodologies, based on the combined interpretation of Art. 132, 132a, 152 of CRR2 (REGULATION (EU) 2019/876 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL), involve standard logics, also considering that, according to that Regulation, the use of these approaches is expected when institutions do not have sufficient information on the individual underlying exposures of a CIU (see Art. 132a para 2 CRR2 for MBA and Art. 132 para 2 for FBA).
Indeed, currently, MBA and FBA approaches contribute to the generation of STD template C 07.00 in the specifc SA Exposure Class named 'Collective Investment Undertakings'.
In addiction, trying to rebuild the example shown on p. 24 para 5.1.1 for the allocation of underlying CIUs in the field of credit IRBs, we find the presence of potential inaccuracies in the descriptive part, which would not seem to match the numerical representation in the Templates (PLEASE SEE THE EXAMPLE IN THE ATTACHED FILE)
Finally, the row 0190 - Look-through approach would be redundant and not exhaustive
(related topic to question 15.3)
• Question 15.1: Is it clear how positions of exposure class CIU (Art. 147 (2) e1) CRR3 are to be reflected in the CR-IRB templates (C 08.01 to C 08.07)?
Regarding the reporting of IRB CIUs, it would be desiderable for Templates C 08.01 purposes to have a representation in line with what is already required in C 07.00 of DPM 3.2, in other words a CIU portfolio in which all exposures converge, but without including memorandum items to be provided on the other IRB reporting portfolios to identify the underlying exposures to the CIUs
• Question 15.2: Regarding CIU positions whose underlying are securitisations or equity exposures, would it be clearer and easier to report these underlying exposures under the securitisation and equity templates (C 13.01 and C 10.01, respectively)? Inversely, should they be reported under the credit risk templates?
In case of Look-through approach, it is clearer and easier to report the underlyings represented by securitizations into template C 13.00, and underlyings represented by equity into template C 10.01, if treated under AIRB approach. We confirm the as-is reporting representation.
AIRB underlying credits will be added, according to IRB logic, inside C 08.01, feeding only row 0190 - Look-through approach (which even if feedable, would be redundant and not exhaustive)
• Question 15.3: If you identify any issues, please suggest how to clarify their treatment in the templates and/or instructions.
We indentify the following issues:
Template C 08.01
We point out a significant impact due to change of reporting setting and high cost of compliance, because in addiction to the presence of underlyings involving STD logic (which should not be included within C 08.01), at the same time is required to create the CIU sheet and to provide the disclosure of exposure class on the counterparty's portfolio. Similarly, the Memorandum ITEM will be created in the counterparty sheet, while rows without the presence of Memo Item will feed the CIU sheet.
Mandate-based approach
It is necessary to clarify why, in the Question 15.3 'Option 1', it is requested for the Mandate-based approach to identify the underlying asset classes in the borrower's portfolios; we point out high cost of compliance due to the unavailability of such information.
In fact, it should be noted that, according to Article 132a(2) of CRR2 (REGULATION (EU) 2019/876 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL), the Bank uses a methodological approach that does not allow for the identification of the single specific MBA underlyings.
• Question 15.4: Do institutions have information readily at their disposal on underlying exposures of CIUs in order to be reported as it is proposed to be done in C 08.01? Would this add substantial reporting costs? If so, how are those underlying exposures currently reported?
Please see the previous responses to questions 15.2 and 15.3 pointing out significant impacts and costs.
Currently, the CIUs weighted with MBA and FBA are fed as SA Exposure Class inside Template C 07.00, beacuse these are standard methodologies.
Underlyings of CIUs weighted using LTA are reported in C08.01(underlying loans), C10.01 (underlying equities), C13.01 (underlying securitizations), if treated under AIRB approach
• Question 15.5: Would it add substantial reporting burden for institutions if these exposures would be reported under a separate template where both the CIU positions and the underlying exposures would be reported under the corresponding exposure class? Would this approach be clearer?
The introduction of a new ad hoc template for feeding CIUs, assigned to the exposure class under Art. 147(2) and (1) CRR3. 147(2) and (1) CRR3, would require high compliance costs.
In template C 08.01 a breakdown on mortgages is added for covering supervisory information needs on residential and commercial real estate as well as IPRE and ADC exposures. In this context, a breakdown for non-IPRE exposures into “secured” and “unsecured” (risk weighted as not secured by immovable property) is introduced referring to Articles 125 (1) respectively 126 (1) CRR3 in order to further align reporting for SA and IRB exposures. Do institutions – in particular the ones applying own LGD estimates – have information readily at their disposal for providing this further split into “secured” and “unsecured”. Would this add substantial reporting costs?
We report the high cost of representing IPRE/ NON IPRE/ ADC/ NON ADC exposures in unsecured/ secured tranches (loan splitting approach), having to combine in a single template STD and IRB logics. In fact, in case of Tranche n(AIRB) : n(STD x OFL), it is difficult to create a tranche-by-tranche link between AIRB and FULL STD PRO OFL calculation.
Please clarify the reason underlying the request, considering the low added value and high cost of compliance. As an alternative, we propose to consider whether to include in C10.00 the opening of the STD portfolio to decrease the criticality and high compliance costs of Template C 08.01
Question 17 – revised instructions for template C 15.00: The instructions have been updated to align with the legal references with the new articles introduced in Regulation (EU) No 575/2013 for exposures secured by immovable property and the revised [Article 430a] on specific reporting obligations. The instructions have been clarified on certain aspects. The template has been amended to remove the two columns referring to the mortgage lending value. Are the revised instructions clear enough? If you identify any issues, please suggest how to clarify the reporting.
We want to raise a point on Immovable Property Lossess. It has been confirmed that the frequency remains annual, as indicated by the reference to Article 430a. The impacts arising are noted from the fact that the logic representing the amounts must refer to the SPLIT LOAN methodology (Articles 125 and 126) within the STD approach of credit secured by residential and commercial real estate. Therefore, clarification is necessary, as current exposures are reported regardless of the approach used, whether, given the reference to a specific methodology of the new STD approach, the template will need to be generated from the FULL STD elaboration.
Are the reporting template C 25.00 and related instructions clear enough? If you identify any issues, please suggest how to clarify the reporting.
We identify the following issues:
- Col. 0080 "Notional of CVA hedges": we ask if the data is to be represented as the net Notional between CDS in protection purchase and (any) CDS in protection sale
- Col. 0090 and 0100 "BACVAcsr-unhedged" and "BACVAcsr-hedged": Please clarify if it is correct that the discount factor (DS=0.65) is already included in the BACVA_unhedged data, rather then in the BACVA_hedged. In this regard, counterintuitive data could be presented in the C25 template in which the BACVA_unhedged is smaller than the BACVA_hedged
a) Did you identify any issues regarding the representation of the (policy) framework for the boundary in templates C 90.05 and C 90.06?
Template C 90.06
It seems the following columns-rows combinations of Template C90.06 should be greyed out. Shouldn't they be considered as "not applicable" (grey cells)?
C0030 - R. 0030
C0040 - R 0010
C0040 - R. 0040
C0040 - R. 0050
C.0060 - R.0030
C.0060 - R.0040
C.0060 - R.0050
C.0060 - R.0060
C.0070 - R.0030
C.0070 - R.0040
C.0070 - R.0050
C.0070 - R.0060
C.0080 - R. 0030
C.0080 - R. 0040
C.0080 - R. 0050
C.0080 - R. 0060
C.0090 - R.0030
C.0090 - R.0040
C.0100 - R.0030
C.0100 - R.0040
C.0110 - R.0030
C.0110 - R.0040
C.0110 - R.0050
C.0110 - R.0060
C.0160 - R.0030
C.0160 - R.0040
C.0160 - R.0050
C.0160 - R.0060
Question 21: Do you agree with the changes to the Leverage ratio reporting as implementing the new CRR3 provisions? Do you see any further amendments needed?
Despite a significant revision in credit risk exposure portfolios, the C43 template structure has not changed in the current version of ITS under consultation. It is requested if it is planned a review/revision of the Template's structure