Question ID:
2015_1868
Legal Act:
Regulation (EU) No 575/2013 (CRR) as amended
Topic:
Supervisory reporting - COREP (incl. IP Losses)
Article:
99
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations:
Regulation (EU) No 680/2014 - ITS on supervisory reporting of institutions (as amended)
Article/Paragraph:
Annex II, C 08.01, r090, c110
Disclose name of institution / entity:
No
Type of submitter:
Credit institution
Subject Matter:
CR IRB template – inclusion of haircut exposure value
Question:

In what column of the Credit Risk IRB templates shall the increase of the exposure value by the haircut exposure value be reported (in column 090, in column 110 or just in column 255 and 260)?

Background on the question:

In relation to column 090 of the Credit risk IRB templates, the instructions determine that the exposure assigned in the corresponding obligor grade or pool and exposure class after taking into account outflows and inflows due to CRM techniques with substitution effects on the exposure is to be reported.

In column 110 of the Credit risk IRB templates the exposure value in accordance with Article 166 of CRR and Article 230 (1) sentence 2 of CRR is to be reported.

If the Financial Collateral Comprehensive Method is used, the exposure in accordance with Article 166 (7) CRR shall be increased by the volatility adjustment appropriate to the exposure (“haircut exposure value”).

Is this statement an instruction for calculating the correct exposure or does that mean that the reported exposure value in the Credit Risk IRB templates (column 090 and column 110) should already be increased by the haircut exposure value?

Example:

Repurchase agreement with the following amounts original exposure E (column 020) 50.000.000
Haircut exposure He 4% 
Haircut exposure value (E*He) 2.000.000
Collateral 20.000.000
Collateral adjustment 0.

Date of submission:
03/03/2015
Published as Final Q&A:
24/07/2020
EBA Answer:

In the example provided, the risk-weighted exposure amount is calculated according to Chapter 3 of Regulation (EU) No. 575/2013 (CRR) (IRB exposure) and the Financial Collateral Comprehensive Method (FCCM) is used.

If the FCCM is used with regard to such an IRB exposure, this exposure value is not determined under consideration of collaterals.

Instead, as emphasised in the 2nd sentence of Article 166(7) CRR, for a transaction mentioned in the first sentence of Article 166(7) CRR the exposure value shall be increased by the volatility adjustment appropriate to such securities or commodities, where the Financial Collateral Comprehensive Method as set out under Article 223 is used.

Regulation (EU) 680/2014 (ITS on supervisory reporting), template C 08.01 of Annex I, column 090 requires institutions to provide the “exposure after CRM substitution effects pre conversion factors”. According to the instructions of Annex II of ITS on supervisory reporting, the value reported in this column takes into consideration CRM substitution effects to the exposure value calculated according to Article 166 CRR, which is reported in column 020 of template C 08.01 of Annex I of ITS on supervisory reporting. In line with Article 166 CRR, the exposure value reported in column 110 of template C08.01 additionally considers the application of conversion factors. However, the substitution effects are understood here as the methodology to take into account the unfunded credit protection (UFCP).

Based on the figures provided in the example above, the value reported in each of the columns 020, 090 and 110 (assuming no CRM with substitution effects and a conversion factor of 100%) should:

  • for columns 020 and 090, an exposure value of 50.000.000 would have to be reported, that is the exposure value before taking into account any CRM effect;
  • for column 110, an exposure value of 52.000.000 would have to be reported that is the exposure value increased by the appropriate volatility adjustment in accordance to Article 223(3) CRR.
Status:
Final Q&A