Question ID:
2017_3561
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
Disclose name of institution / entity:
No
Type of submitter:
Credit institution
Subject Matter:
Consistency of COREP validations rules e4896_n & e4895_n
Question:

Are the COREP EBA validation rules e4896_n & e4895_n consistent with Article 134 (7) of the CRR?

Background on the question:

The COREP EBA validation rules e4896_n & e4895_n creates blocking points when there are Corporates or Retail exposures with "Other weights" for credit risk in standard approach. Nevertheless, it is possible to have some leasing exposures with counterparts classified as Corporates or Retail in COREP. Considering the CRR Article 134 (7), it states that the residual value of leasing exposures can be weight at 1/t , and so classified in "Other weight". Besides this article also states that the residual value non risky asset must be classified in Other Risky Assets in the same exposure class of counterparty, To this end, it is possible to have Corporates or Retail exposures with "Other weights" weight in credit risk standard approach

Date of submission:
13/10/2017
Published as Final Q&A:
08/05/2020
EBA Answer:

As stated in the sentence four of Article 134 (7) of Regulation (EU) No 575/2013 (CRR), minimum lease payments shall be assigned to the relevant exposure class in accordance with Article 112 CRR. The same applies to the residual value of the leased asset if it forms part of the credit obligation (see Q&A 2017_3548).
The relevant exposure class is the exposure class of the lessee – usually corporates or retail –; and the risk weights of that exposure class apply. As the multiplication by 1/t is not relevant in the context of credit obligations, the row ‘other risk weights’ (r280) of template C 07.00 of Annex I to Regulation (EU) No 680/2014 (ITS on Supervisory Reporting) is not relevant and both validation rules e4895_n and e4896_n are correct in preventing a reporting of these minimum lease payments in this row.
The residual value of the leased asset, if it does not constitute a credit obligation (see Q&A 2017_3548) is assigned to the exposure class ‘other items’ (sheet 017 of template C 07.00). In this case, the multiplication factor of 1/t takes effect, resulting potentially in risk weights other than the ones explicitly mentioned in the template. Consequently, the reporting of values is row 280 (‘other risk weights’) of sheet 017 of template C 07.00 is not restricted by any validation rule.

Status:
Final Q&A