Question ID:
2015_2190
Legal Act:
Regulation (EU) No 575/2013 as amended by Regulation (EU) 2019/876 – CRR2
Topic:
Supervisory reporting
Article:
100
COM Delegated or Implementing Acts/RTS/ITS/GLs:
Regulation (EU) No 680/2014 - ITS on supervisory reporting of institutions (as amended)
Article/Paragraph:
Annexes XVI and XVII
Type of submitter:
Consultancy firm
Subject Matter:
Wrong validation rule v2855_m
Question:

Is a netting of repurchase agreements with securities lending needed in Asset Encumbrance?

Background on the question:

The validation rule v2855_m checks whether row 050, column 010 of template AE-SOU equals or is smaller than several rows of FinRep: {F 32.04.a, r050,c010} <= xsum({F 08.01.a, (r100, r150, r200, r250, r300, r350, c010-035)}). Since it's not clear whether a netting of repurchase agreements with securities lending is needed in Asset Encumbrance or in FinRep, deactivating the rule would be helpful as the validation rule is hurt often.

Date of submission:
31/07/2015
Published as Final Q&A:
13/12/2019
EBA Answer:

The definitions of repurchase agreements in Finrep instructions (Annex V to the Commission Implementing Regulation No 680/2013, page 23, paragraph 93) and in the Asset Encumbrance reporting instructions (Annex XVII to the Commission Implementing Regulation No 680/2013, page 19) are identical.
However the Asset Encumbrance reporting instructions also indicate (page 6) that repurchase transactions shall be reported as follows:
“• the carrying amount of the repo is reported as a source of encumbrance in {AE-SOU; r050; c010};
• the collateral of the repo should be shown:
• if the collateral is an asset of the reporting institution: its carrying amount is reported in {AE-ASS; *; c010} and {AE-SOU; r050; c030}; its fair value is reported in {AE-ASS; *; c040};
• if the collateral has been received by the reporting institution through a previous reverse repurchase agreement (matching repo), its fair value is reported in {AE-COL; *; c010}, {AE-SOU; r050; c030} and in {AE-SOU; r050; c040}.”
As each repurchase transaction has to be reported separately, the Asset Encumbrance reporting does not allow for netting between repurchase agreements and reverse repurchase agreements, even in cases when accounting rules would permit it.
Allowing for netting would lead to a misleading representation of the sources of encumbrance in the AE-SOU table, as encumbered assets and collateral would be reported on a gross basis while the carrying amount of repurchase agreements would be reported on a net basis.
Therefore validation rule v2855_m should be deactivated.

Status:
Final Q&A