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List of Q&A's

Base for calculating Add-ons for Derivatives

For the calculation of potential future credit exposure, when should the notional amount be used and when the underlying value? Which notional amount should be used: Notional of the derivative contract or notional of the underlying?

Legal act: Regulation (EU) No 575/2013 (CRR)
COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

Exposure for Large Exposure Reporting - Accrued interests

Article 389 of the CRR states that for Large Exposure Reporting, the exposure should be identical to those in the standardised approach (Part II, Title 2, Chapter II) just without applying risk weights. According to Standard Approach for assets the risk position is defined by the balance sheet value including accrued interest and impairments being deducted. Can you confirm that this is also the definition for Large Exposures?

Legal act: Regulation (EU) No 575/2013 (CRR)
COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

CVA for Exposures in structures with underlying assets

In case the bank invests in a structure with underlying assets (e.g. UCITS) that consist also of derivatives. Should the CVA also be calculated for these exposures?

Legal act: Regulation (EU) No 575/2013 (CRR)
COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

Reconciliation between accounting and CRR scope of consolidation when no accounting scope exists

In case a bank has to provide financial information according to FINREP on a subconsolidated level, but the institution has no accounting obligation on a subconsolidated level, what should be filled in Template 17 of the FINREP-Reporting?

Legal act: Regulation (EU) No 575/2013 (CRR)
COM Delegated or Implementing Acts/RTS/ITS/GLs: Regulation (EU) No 680/2014 - ITS on supervisory reporting of institutions (repealed)

Look through approach to be applied for calculation of Leverage Ratio

Article 429b(1)(a) states that risk positions for the calculation of the Leverage Ratio should be calculated according to paragraph 111 (1) sent. 1 of the CRR, meaning, they are identical to risk positions in the Standard Approach.Does this mean that for transactions with underlying assets, e.g. UCITS a look through approach should also be used for the calculation of the Leverage Ratio?Does this apply to template C45.00 columns 010, 020 and 030 as well as to template C40.00 column 010?

Legal act: Regulation (EU) No 575/2013 (CRR)
COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

Table F 02.00 and Table F 43.00 - cross validation of Provisions charge

FINREP Table F 02.00 subtotal row 430 (Provisions or Reversals of Provisions) is identified on the template as cross referencing to Table F 43.00 (Provisions). The cross validations do not however identify what data should agree. Please confirm which columns (and for which rows ) on Table F 43.00 should agree back to Table F 02.00.

Legal act: Regulation (EU) No 575/2013 (CRR)
COM Delegated or Implementing Acts/RTS/ITS/GLs: Regulation (EU) No 680/2014 - ITS on supervisory reporting of institutions (repealed)

Total inflows excluded due do cap

Instructions concerning reporting on inflows, specify that total monies due which are excluded due to an inflow cap which is set at 75% of liquidity outflows shall be reported in row 990 of C 53.00. This will require to be checked by reference to total outflows as calculated from the outflow template. How is this supposed to be done, when the outflow template C 52.00 contains no row for total outflows (no reference to total outflows) and inflow template C 53.00 contains no row for total inflows before cap (no reference to total inflows before cap)?

Legal act: Regulation (EU) No 575/2013 (CRR)
COM Delegated or Implementing Acts/RTS/ITS/GLs: Regulation (EU) No 680/2014 - ITS on supervisory reporting of institutions (repealed)

Holding in an undertaking that is neither a financial sector entity nor outside the financial sector

According to Article 89 (1) of the CRR, a holding in an undertaking that is not a financial sector entity, carrying on certain ancillary activities (for which guidelines are pending to be issued by the EBA), shall not be treated as a qualifying holding outside the financial sector. In addition, the aforementioned holding does not seem to be captured neither by the deductions from eligible capital items (Articles 36, 56, 66) since relevant deductions relate only to holdings in financial sector entities. Therefore, shall a holding in an undertaking that is not a financial sector entity, carrying on certain ancillary activities, be treated as a holding in a financial sector entity or as an exposure which should be risk weighted?

Legal act: Regulation (EU) No 575/2013 (CRR)
COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

Supervisory reporting of bonds issued by promotional banks

In its instructions on the EBA LCR Monitoring Exercise for the end-June 2013 and end-September 2013 data collection the EBA gives examples of promotional banks whose bonds can be reported in row 10 of the ‘LCR EU Only’ tab, if they are not already reported in section A of that exercise. In this context we would like to raise two questions: 1. Is the list of promotional banks given in the instructions exhaustive and also applicable for the reporting of these assets in Row 180 of the Liquid Assets template of COREP (C 51.00)? 2. Do bonds issued by promotional banks always have to be reported in row 180 of the respective template?

Legal act: Regulation (EU) No 575/2013 (CRR)
COM Delegated or Implementing Acts/RTS/ITS/GLs: Regulation (EU) No 680/2014 - ITS on supervisory reporting of institutions (repealed)

EBA Q&A 2013_160

This is a follow up question to Q&A 2013_160.A matched (hedged) FX position will result in four cash flows; an inflow in currency 1 and an outflow in currency 2 with counterpart A and an opposite outflow in currency 1 and an inflow in currency 2 with counterpart B.At an all currency LCR level the inflow and outflow with counterpart A can be netted in line with 422(6) and the inflow and outflow of counterpart B can be netted in line with 422(6), giving rise to a net position with each couterpart which will be a very small FX translation difference; one will be a small inflow with one counterpart and one a small outflow with the other counterpart.However at a single currency level the off-setting cashflows are in the same currency, but are not with the same counterpart, and so strictly under LCR rulles they can not be netted. They will therefore be reported gross as an inflow with one counterpart and outflow with the other counterpart, but the inflows will be subject to the 75% cap of outflows in each currency LCR if the 75% cap on inflows apply to both the all currency and the single currency.This will give rise to the sum of the individual currency LCRs showing a worse position than the all currency combined and we question if this is the intended outcome.

Legal act: Regulation (EU) No 575/2013 (CRR)
COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

Inclusion of indirect holdings in the large exposures regime

Do indirect holdings have to be included in the large exposure regime based on Article 389 of Regulation (EU) No. 575/2013 (CRR) if they are held against a financial sector entity (that is fulfil the definition in Article 36 (1)(h) or (i) of the CRR), but are not deducted from own funds and instead risk weighted according to Articles 48(4), 46(4) or 49(4) of the CRR? If the answer is yes, can the financial sector entity being regarded as the relevant client for large exposure purposes?

Legal act: Regulation (EU) No 575/2013 (CRR)
COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

Credit valuation adjustment, standardized method to calculate own funds requirement

"Maturity" definition referred to Art 384 para. 1 for the CVA standardized method calculate for non-IMM banks only refers to Art. 162(2)(b), i.e., derivatives covered by the master netting agreement. However, if derivatives are not included in a netting set and no collateral has been taken into account, how is maturity for the purpose of CVA standardized approach calculation determined?

Legal act: Regulation (EU) No 575/2013 (CRR)
COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

Additional Tier 1 and Tier 2

Should the Additional Tier 1, Tier 1 ,Tier 2 and own funds stemming from undertakings of third countries outside Europe and subject to local requirements equivalent to those requirements under Regulation (EU) No 575/2013 (CRR) and Directive (EU) 2013/36 (CRD), be included in the consolidated own funds?

Legal act: Regulation (EU) No 575/2013 (CRR)
COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

FINREP Reporting - Cumulative from ARD or period-on-period

Can the EBA please confirm whether data in the FINREP templates should be reported on a cumulative basis (from the start of the accounting reference date), or period-on-period?

Legal act: Regulation (EU) No 575/2013 (CRR)
COM Delegated or Implementing Acts/RTS/ITS/GLs: Regulation (EU) No 680/2014 - ITS on supervisory reporting of institutions (repealed)

Assessment criteria of the conditions of forbone exposures that are performing

Performing exposures with forbearance measures are distinguished into these that were considered as performing from the date when forbearance measures were extended (see paragraph 178) and these that were previously non-performing and have been reclassified from the non-performing category. Is there a distinction regarding the assessment criteria for these two types of exposures or have all performing exposures with forbearance measures to be assessed on a quarterly basis (see paragraph 177), although the class of formerly non-performing exposures is exposed to a higher risk to become non-performing again as compared to these that have always been performing since forbearance measures were extended?

Legal act: Regulation (EU) No 575/2013 (CRR)
COM Delegated or Implementing Acts/RTS/ITS/GLs: Draft ITS on Supervisory Reporting of Institutions

Calculation of EADi(total) for CVA purposes under the standardised method

How should an institution using Mark-to-market Method for calculating the exposure value for CCR purposes calculate an EADi(total) when calculating the own funds requirements for CVA risk under standardised method? How should collateral be taken into account?

Legal act: Regulation (EU) No 575/2013 (CRR)
COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

Validation Rules FINREP - COREP

CRR states that certain balance sheet items shall be used for COREP reporting only, if they have been reviewed by an auditor. The last reviewed or audited values have to be used for COREP purposes until auditor’s review or audit of the current values have been carried out (so called "static principle"). For example some interim financial statements are not published and/or not reviewed by auditors (e.g. as of March 31st). In this case the last audited deferred tax assets or liabilities - i.e. as of December 31st of the preceding year- have to be used for all COREP reporting (e.g. March 31st, June, 30th, etc) until the next financial statement is reviewed or audited by the auditor. For FINREP reporting the most recent accounting values would be used for preparation of the quarterly reporting- e.g. even if no auditor’s review is conducted as of March 31st, 2014 current accounting values would be submitted for FINREP reporting. Because of this static principle for COREP reporting, COREP values may not equal FINREP accounting values for specific positions and specific reporting dates. However, according to EBA validation rules specific balance sheet positions (e.g. deferred tax assets or liabilities) shall equal in the FINREP and COREP templates. These validations do not appear to be valid because of the difference in principles in preparing COREP and FINREP numbers. For example validation rule v1780_h states that {F 01.01 , r330} = +{F 01.01 , r340} +{C 04.00 , r010}). COREP- FINREP validation rules are applicable for share premium and accumluated other comprehsensvie income too. These validations do not appear to be valid for all reporting dates. Which numbers are required for deferred tax assets and liability reporting in the COREP and FINREP tables respectively?

Legal act: Regulation (EU) No 575/2013 (CRR)
COM Delegated or Implementing Acts/RTS/ITS/GLs: Regulation (EU) No 680/2014 - ITS on supervisory reporting of institutions (repealed)

Calculation of exposure value for counterparty credit risk under Mark-to-market Method

Is there any exemption for the calculation of "add ons" when using Mark-to-market method for determining the exposure value for Regulation (EU) No. 575/2013 (CRR)? What is the right treatment of a single transaction that is not subject to legally enforceable netting agreement, if the contract has a negative value?

Legal act: Regulation (EU) No 575/2013 (CRR)
COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

Validation Rule

German Question (Deutsche Frage): Die validation rule mit der ID-Nr v1927_h sieht eine Abstimmbarkeit der Zeile 520 in Tabelle F 02.00 mit der Zeile 100 in Tabelle F 16.07 vor. In Tabelle F 02.00 ist Zeile 520 aber die Summe der Zeilen 530 bis 570, (fünf Zeilen) während in Tabelle F 16.07 Zeile 100 die Summe der Zeilen 110 bis 140 (vier Zeilen)ist. Da außerdem die Zeilen 530 bis 560 der Tabelle F 02.00 abstimmbar sein sollen zu den Zeilen 110 bis 140 der Tabelle F 16.07 (siehe validation rules ID Nr. v1333_m, v1334_m, v1335_m, v1928_h) gibt es hier einen Widerspruch: Entweder ist Zeile 570 in Tabelle F 02.00 obsolet und ist entsprechend zu streichen, oder die validation rule v1928_h ist insoweit zu erweitern, dass Zeile 140 in Tabelle F 16.07 abstimmbar sein muss mit der Summe der Zeilen 560 und 570 aus Tabelle F 02.00. Die EBA ist zu fragen, wie dieser Widerspruch gelöst werden soll. English Question: The validation rule with the ID No v1927_h provides for reconciliation of row 520 in table F 02.00 to row 100 in table F 16.07. In table F 02.00, however, row 520 is the sum of rows 530 to 570 (five rows), whereas in table F 16.07, row 100 is the sum of rows 110 to 140 (four rows). Furthermore, as rows 530 to 560 of table F 02.00 should be reconciled to rows 110 to 140 of table F 16.07 (see validation rules ID Nos v1333_m, v1334_m, v1335_m, v1928_h), there is a contradiction here. Either row 570 in table F 02.00 is obsolete and must therefore be deleted, or validation rule v1928_h must be expanded accordingly so that row 140 in table F 16.07 is reconciled to the sum of rows 560 and 570 from table F 02.00. The EBA must be asked how this contradiction should be resolved.

Legal act: Regulation (EU) No 575/2013 (CRR)
COM Delegated or Implementing Acts/RTS/ITS/GLs: Regulation (EU) No 680/2014 - ITS on supervisory reporting of institutions (repealed)

Cash and cash balances at central banks’

German Question (Deutsche Frage): In dem ITS-Update vom 26.7.2013 wird in dem Dokument “EBA FINAL draft Implementing Technical Standards.pdf” auf Seite 51 folgende Aussage getroffen: “On the basis of the feedback on the definition and use of ‘cash and cash equivalents’, the EBA decided to change the item to ‘cash and cash balances at central banks’, in line with the practice followed by banks. In addition to the instructions provided in the ITS examples will be provided in additional implementation guidance on the EBA website.“ Diese Aussage scheint inkonsistent zu der vorgenommen Zuordnung des Postens “other demand deposits” in Tabelle F 05.00 (alt F 09.00) zu sein und insofern gerade nicht der Praxis der Bilanzierung der Barreserve bei Kreditinstituten zu entsprechen. Wie ist hiermit umzugehen? Daneben ist eine „additional implementation guidance on the EBA website” nicht zu finden. Der letzte Stand datiert diesbezüglich aus 2009. Wann ist mit einem entsprechenden Dokument zu rechnen? English Question: In the ITS Update of 26.7.2013, the following statement appears in the document ‘EBA FINAL draft Implementing Technical Standards.pdf’ on page 51: ‘On the basis of the feedback on the definition and use of “cash and cash equivalents”, the EBA decided to change the item to “cash and cash balances at central banks”, in line with the practice followed by banks. In addition to the instructions provided in the ITS, examples will be provided in additional implementation guidance on the EBA website.’ This statement seems to be inconsistent with the assignment that was already carried out of the item ‘other demand deposits’ in table F 05.00 (prev. F 09.00), and is therefore not in line with the practice of balancing the cash reserve in credit institutions. How should this be dealt with? Moreover, the ‘additional implementation guidance on the EBA website’ cannot be found. The last update on this is from 2009. When can the relevant document be expected?

Legal act: Regulation (EU) No 575/2013 (CRR)
COM Delegated or Implementing Acts/RTS/ITS/GLs: Regulation (EU) No 680/2014 - ITS on supervisory reporting of institutions (repealed)

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