Single Rulebook Q&A

Question ID: 2018_4093
Legal act : Directive 2013/36/EU (CRD) as amended
Topic : Supervisory reporting
Article: 78
Paragraph:
Subparagraph:
COM Delegated or Implementing Acts/RTS/ITS/GLs: Draft ITS on Supervisory Reporting for Institutions (for benchmarking the internal approaches)
Article/Paragraph : Draft ITS on 2019 (EBA-2018-ITS-04), part 2.2 Credit risk changes
Type of submitter: Credit institution
Subject matter : Category on which the covered part of exposures should be reported.
Question:

How to report the covered part of exposures under IRB approach ?

Background on the question:

Reporting of the covered part under IRB approach, split by Collateral type.

According to the Draft ITS on 2019 portfolios in the supervisory benchmarking exercise (EBA-2018-ITS-04) published the last 2nd July 2018 in the Draft benchmarking package for 2019 exercise (end 2018 data), the covered part is reported as an ‘unsecured exposure’ in the guarantor asset class. Our understanding of the paragraph is that no exposure after CRM will be reported on the Collateral Type “Unfunded credit protection”. In those portfolios, there would only be Original Exposure. E.g. we have an exposure with a client from the Category “Large Corporate”, which is guaranteed by an “Institution”. Substitutions techniques takes place on this exposure, so the Exposure after CRM has to be reported on the guarantor portfolio. The question is, when we have splitting registers by Collateral Type: 1. The original Exposure of the Large Corporate should be reported on the Collateral Type “Unfunded credit protection”, and the Exposure after CRM of the Institution should be reported on the Collateralization Status “Exposures without credit protection”. 2. The original Exposure of the Large Corporate should be reported on the Collateral Type “Unfunded credit protection”, and the Exposure after CRM of the Institution should be reported on the Collateral Type “Unfunded Credit Protection”.

Date of submission: 10/07/2018
Published as Final Q&A: 29/03/2019
EBA answer:

The secured part of the exposure should be reported under the relevant option(s) in the column “collateral type” in template 102 of Annex I of the ITS on Supervisory Reporting for Institutions for benchmarking the internal approaches (ITS on benchmarking), where the option “unfunded credit protection” should be understood as “other unfunded credit protection”, and should be used for exposures subject to the double default treatment, i.e. for guarantees and credit derivatives covering exposures subject to the double default treatment reflecting Articles 202 and 217(1) of Regulation (EU) No 575/2013, which is in line with column 220 of template C 08.01 of Annex I to Implementing Regulation (EU) No 680/2014.

Consequently,  the secured part of the exposure should be reported under:

- the exposure class of the guarantor, this is as “Institutions” in the example, and under the collateralization status as “Exposures without credit protection”, under the collateral type “not applicable”(.

- the exposure class of the original obligor for the purpose of reporting the “Original exposure pre conversion factors” under the collateralization status as “Exposures with credit protection” and under the collateral type “guarantees”(or “Credit derivatives” as applicable).

The unsecured part of the exposure should be reported under the collateral type “not applicable” and under the collateralizations status as “exposures without credit protection”. The unsecured part of the exposure should be reported under the exposure class of the obligor, this is “corporate non-SME” in the stated example.

Exposures subject to the double default treatment should only be reported in the portfolio of the exposure class of the original obligor, under the collateralization status as “Exposures with credit protection”, under the collateral type “Unfunded credit protection”.

Example:

· LC exposure of 100, of which 80 is guaranteed by an institution

· Portfolio sec refers to portfolios with collateralization status as “Exposures with credit protection” & collateral type “guarantee”. Under option 2 and 3 it does not include anything else. Under option 1 it also includes portfolios with collateral type “Unfunded credit protection”.

· Portfolio unsec refers to portfolios with collateralization status as “Exposures without credit protection” & collateral type “not applicable”

Portfolio

EAD before CRM (80)

EAD after CRM (90)

Institutions - total

0

80

Institutions - sec

0

 

Institutions - unsec

0

80

 

 

 

Large corporates - total

100

20

Large corporates - sec

80

0

Large corporates - unsec

20

20


Please see also Q&A 2018_4271.

Disclaimer
The present Q&A on Supervisory reporting is provisional. It will be reviewed after the Implementing Regulation is in force and published in the Official Journal. The text of the Implementing Regulation may differ from the text of the draft ITS to which this Q&A refers.

 

Status: Final Q&A
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