Question ID:
2017_3307
Legal Act:
Regulation (EU) No 575/2013 (CRR) as amended
Topic:
Supervisory reporting - Large Exposures
Article:
394
Paragraph:
n.a.
Subparagraph:
n.a.
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations:
Regulation (EU) No 680/2014 - ITS on supervisory reporting of institutions (as amended)
Article/Paragraph:
Annexes VIII and IX
Disclose name of institution / entity:
No
Type of submitter:
Individual
Subject Matter:
How to fill out the COREP C 28.00 for an exposure secured by an insurance wrapper?
Question:

Article 390(7) CRR and RTS 1187/2014 specify how to determine the overall exposure to a client or a group of connected clients in respect of transactions with underlying assets. According to Article 200 CRR, insurance policies pledged to the lending institutions are eligible as Other Funded Credit Protection. As per Article 232 CRR, for banks under the Standardised Approach, the risk-weight of the original debtor is substituted with a different risk-weight ranging from 20% to 150%. Under the Standardised Approach, where an exposure is secured by a pledged insurance policy in the form of an insurance wrapper (life insurance policy ‘wrapped’ around the policy owner’s investment portfolio), how should the exposure and the collateral be reported in COREP C 28.00? Is there a difference between the Financial Collateral Simple Method and the Financial Collateral Comprehensive Method?

Background on the question:

To fill COREP C28.00 correctly.

Date of submission:
25/05/2017
Published as Final Q&A:
04/10/2019
EBA Answer:

The answer is provided based on the following case: The reporting institution has an exposure to client A amounting to EUR 100. A assigns his investment portfolio (value EUR 100) consisting of government bonds (eligible financial collateral) together with the security interests resulting from a life insurance hedging all portfolio positions (‘wrapped around the portfolio’) to the reporting institution. The insurance covers all possible losses stemming from the investment portfolio, i.e. EUR 100. The criteria set out in Articles 232 and 212 of Regulation (EU) No 575/2013 (CRR) are met.

 

For large exposures purposes, the reporting institution may (and from 28 June 2021 - in application of Regulation (EU) 2019/876 - shall) substitute, based on Article 403 CRR, in a first step the original client A with the underlyings of the portfolio and in a second and final step these underlyings with the insurance undertaking.

The following should be reported in template C 28.00 of Annex VIII to Regulation (EU) No 680/2014 (ITS on Supervisory Reporting):

The following should be reported in template C 28.00 of Annex VIII to Regulation (EU) No 680/2014 (ITS on Supervisory Reporting):
- Exposure to A:
o Transactions where there is an exposure to underlying assets (column 030): no
o Total Original Exposure (column 040): 100 EUR
o Debt instrument (column 060):100 EUR
o Substitution effect of eligible credit risk mitigation techniques, debt instruments (column 240): – 100 EUR
o Total (column 330):0 EUR
- Exposure to the life insurance undertaking:
o Transactions where there is an exposure to underlying assets (column 030): no
o Total Original Exposure (column 040): 100 EUR
o Indirect Exposure – Debt instrument (column 120):100 EUR

Status:
Final Q&A