Response to cP on GLs Guidelines on harmonised definitions and templates for funding plans of credit institutions
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Moreover, institutions are not able to allocate the FX swaps per the requested sub-categories. These necessary shortcuts will give an incorrect view of the requested information.
The currently applicable template (before hedging) is more relevant than the proposed one, from a strategic view since hedges are not generally performed on a granular basis.
Moreover, the effect of FX hedging should not be taken into account in each line item of template P02.06. It would be more relevant to present all rows without the effect of FX hedging and a row “FX hedging”. In fact, FX hedging is not generally performed transaction by transaction but based on the overall FX exposure (macro-hedge).
Institutions don’t have long term forecasts (i.e. columns 030 and 040, “planned year 2” and “planned year 3”) and proactive strategy of “retained” vs. “non-retained” debt securities amounts.
The use of FINREP data as a reference to complete Funding plan templates oblige institutions to dedicate people to the completion of the Funding plan template, whereas Funding plan templates are considered as disconnected from risk management figures and not reused for the management of institutions. In order to better assess the institutions’ funding plans, we suggest to review the funding plan reporting to better align its components with definitions actually used by operational teams within the institutions to steer the funding plans and more largely the liquidity position on a prospective basis.
The breakdown of assets and liabilities should be aligned with liquidity definitions of the LCR, NSFR or ALMM (contractual maturity ladder template for instance). It is for us, the best solution to make that the institutions take ownership of these Funding plan regulatory templates within their internal management policy.
In the Consultation Paper (paragraph 10) the EBA mentions that a forecast on the main contributors to the LCR and NSFR are requested (please dee see template “1B-Liquidity ratios”). How do you define “main contributors” notably regarding the fact that the FINREP and Liquidity scopes are not equivalent: are they Entities subject to LCR/NSFR? In the template P01.01 the various rows dedicated to “accumulated impairment” (i.e. rows 037, 041, 092, 097, 107, 111, 162, 168) are not aligned with the way institutions manage their liquidity. We ask for their removal.
In the template P01.01, rows 205 (“debt securities”) and 207 (“equity instruments”) should be amended and defined as “liquid assets” and “other assets” as specified in the LCR Delegated Regulation (EU) 2015/61.
At least, the EBA should organize a workshop with institutions to understand the way institutions complete Funding plan templates.
1.1 Do respondents agree with the proposed breakdown of “Total long-term unsecured (original maturity >=1 year)”?
No1.2 Otherwise, which breakdown would you suggest?
NoTemplate P02.02 has been expanded to include additional public sector and Central Bank sources of funding. Do respondent believe that now this template covers all forms of public sector and central bank sources of funding or should additional forms of sources be included?
No3.1 Do respondents agree that information on currency breakdown after hedging (template P02.06) will provide effective insight into possible currency mismatches?
FINREP templates do not hold currency breakdown. As a consequence, to complete column 010 (“actual current position”) on template P02.06, institutions apply short-cuts to the data extracted from their liquidity management calculation engines.Moreover, institutions are not able to allocate the FX swaps per the requested sub-categories. These necessary shortcuts will give an incorrect view of the requested information.
3.2 Does the information reflect banks’ FX management approac more information to better reflect banks’ FX management?
The template P02.06 should be aligned with Liquidity reporting.The currently applicable template (before hedging) is more relevant than the proposed one, from a strategic view since hedges are not generally performed on a granular basis.
3.3 Are the instructions are clear enough?
Please see our answer to question 3.1.3.4 If the instructions are not clear please indicate how they could be improved.
Could you please define “largest material currency”: is it the same meaning as “significant currency” defined in the liquidity regulation (i.e. Article 415(1) of Regulation (UE) 575/2013 and Article 3 of Delegated Regulation (UE) 2015/61)? If yes, we ask for an alignment of the wording.Moreover, the effect of FX hedging should not be taken into account in each line item of template P02.06. It would be more relevant to present all rows without the effect of FX hedging and a row “FX hedging”. In fact, FX hedging is not generally performed transaction by transaction but based on the overall FX exposure (macro-hedge).
Do respondents agree with the possibility to have “retained issuance” for each of the instruments included in template P05.00? If not, could you please indicate which ones should be maintained and which ones should not and the reasons for it?
If the breakdown between “retained” and “non-retained” issuances makes sense for secured liabilities (rows 220 to 330 of P05.00), it seems less relevant for unsecured liabilities (rows 010 to 210 of P05.00).Institutions don’t have long term forecasts (i.e. columns 030 and 040, “planned year 2” and “planned year 3”) and proactive strategy of “retained” vs. “non-retained” debt securities amounts.
5.1 Which methodology do you apply to calculate carrying amounts for future issuances (please describe as detailed as possible and highlight any problem with that calculation)?
Liquidity management teams use carrying amount for their current position (column 010 on template P05.00) and ensure the accounting consistency of their forecasted data but they forecast nominal amount instead of carrying amount.5.2 Are you of the opinion that reporting maturing and new issuance volumes (as defined in P 05.00) as nominal amounts would better reflect your planning procedure and approach and do you believe that this alternative is preferable?
Nominal amounts would be better to report maturing and new issuance volumes.6.1 Do respondents believe that these movements could occur too often or be big enough so that including them as inflows or outflows as explained above and in the instructions may distort the analysis of the information?
No comment.6.2 If the answer to the 6.1 is positive, which would be the best way for the respondents to report this information?
No comment.7.1 Do respondents agree with amending the templates to align definitions with FINREP? Are there other definitions that could be further aligned with other parts of the EBA supervisory reporting framework?
We ask for a deep revision of Funding plan templates (i.e. templates P01.01 to P05.00) aiming at relying the requirement of “actual current position” on data extracted from asset and liability management engines (i.e. like for the NSFR and the LCR ratios) and not on accounting engines (FINREP).The use of FINREP data as a reference to complete Funding plan templates oblige institutions to dedicate people to the completion of the Funding plan template, whereas Funding plan templates are considered as disconnected from risk management figures and not reused for the management of institutions. In order to better assess the institutions’ funding plans, we suggest to review the funding plan reporting to better align its components with definitions actually used by operational teams within the institutions to steer the funding plans and more largely the liquidity position on a prospective basis.
The breakdown of assets and liabilities should be aligned with liquidity definitions of the LCR, NSFR or ALMM (contractual maturity ladder template for instance). It is for us, the best solution to make that the institutions take ownership of these Funding plan regulatory templates within their internal management policy.
In the Consultation Paper (paragraph 10) the EBA mentions that a forecast on the main contributors to the LCR and NSFR are requested (please dee see template “1B-Liquidity ratios”). How do you define “main contributors” notably regarding the fact that the FINREP and Liquidity scopes are not equivalent: are they Entities subject to LCR/NSFR? In the template P01.01 the various rows dedicated to “accumulated impairment” (i.e. rows 037, 041, 092, 097, 107, 111, 162, 168) are not aligned with the way institutions manage their liquidity. We ask for their removal.
In the template P01.01, rows 205 (“debt securities”) and 207 (“equity instruments”) should be amended and defined as “liquid assets” and “other assets” as specified in the LCR Delegated Regulation (EU) 2015/61.
7.2 Do respondents agree that alignment of definitions will facilitate reporting production process?
We do not agree that an alignment with FINREP definitions will facilitate reporting production process for the forecasts and we ask for a clarification of the purpose of the Funding Plan templates.At least, the EBA should organize a workshop with institutions to understand the way institutions complete Funding plan templates.