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Q&As refer to the provisions in force on the day of their publication. The EBA does not systematically review published Q&As following the amendment of legislative acts. Users of the Q&A tool should therefore check the date of publication of the Q&A and whether the provisions referred to in the answer remain the same.

Please note that the Q&As related to the supervisory benchmarking exercises have been moved to the dedicated handbook page. You can submit Q&As on this topic here.

List of Q&A's

Risk weight for exposures to central-government-risk Public Sector Entities (PSEs) denominated and funded in domestic currency

May exposures to PSEs established in a Member State, whose level of risk in the opinion of the competent authority of the Member State in question does not differ from the level of risk of the central government, be assigned a risk weight of 0% in accordance with Article 114(4) of CRR if they are denominated and funded in domestic currency?

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

Template C 05.01 column 060 positive or not

In template C 05.01 we understand that all amounts in column 060 should be positive or null. In the first versions of validation rules, the rule v3693_s confirmed this interpretation. But this validation rule is deactivated from June 2014 in validation rules file. Should this column be systematically positive or not? When will you reactivate these validation rules?

  • 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Delegated or Implementing Acts/RTS/ITS/GLs: Regulation (EU) No 680/2014 - ITS on supervisory reporting of institutions (repealed)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 PD* and PD**

The formula provided for calculating PD* is based on a Normal approximation of the binomial confidence interval.The approximation formula is based on a case weighted approach. Should the formula be applied using the exposure weighted default rate as defined in the final draft RTS/ITS or can a case weighted default rate be used?RWA* and RWA** shall be calculated per rating grade. However, rating grade is not a segmentation criterion. How should be dealt with this?How should the default rate per rating grade be calculated? Should the rating grade of the year prior to the default be used? How should customers who are not in the portfolio the previous year be dealt with?In calculation of PD**, how the value “n” (i.e. the number of exposures non defaulted at the beginning of the period) has to be calculated?

  • Legal act: Directive 2013/36/EU (CRD)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Draft ITS on Supervisory Reporting of Institutions (for benchmarking the internal approaches)

Forbearance – past term interest only mortgages

Should interest only mortgage exposures where the customer has not repaid the capital at term but continues to pay interest and is not considered to be in financial difficulty, ever be considered as forborne?

  • 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)

Use of DGS to finance a transfer covered deposits

To what extent can the deposit guarantee scheme (dgs) be used to facilitate a transfer of covered deposits when applying the sale of business tool?

  • Legal act: Directive 2014/59/EU (BRRD)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

Consideration of securitisation positions and securitised exposures, for the purpose of significant risk transfer.

If the originator institution of a synthetic securitisation retains a vertical slice of securitised exposures, as well as some of the tranches, should this vertical slice be treated as a securitisation position as defined in Article 4(1)(62) of Regulation (EU) No 575/2013 (CRR)?If yes, should this position be taken into account to assess whether significant credit risk has been transferred to third parties in accordance with Article 245 of Regulation (EU) No 575/2013 as amended by Regulation (EU) 20179/2401?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Regulation (EU) No 625/2014 - RTS on requirements for investor, sponsor, original lenders and originator institutions of transferred credit risk exposures

Procedury monitorowania ochrony kredytowej / EN: Credit protection monitoring procedures

Czy aby w procesie szacowania wymogu kapitałowego możliwe było uwzględnienie instrumentu ograniczania ryzyka kredytowego w postaci zabezpieczenia na nieruchomości mieszkalnej konieczne jest zapewnienie przez Instytucję, iż na dzień wyliczenia posiada ona aktualne ubezpieczenie tejże nieruchomości zabezpieczające przez ryzykiem powstania szkody? Czy może w myśl zapisów artykułu 208 paragraf 5 (literalnie czytając) wystarczy, iż Instytucja udowodni, iż posiada procedury i skuteczne mechanizmy monitorowania aktualności/ważności posiadanej polisy ubezpieczeniowej?EN translation:In order for the calculation of capital requirement to take into account collateral of residential property as a credit risk mitigation instrument, is it necessary for the Institution to ensure that, as at the calculation date, it holds up-to-date insurance for such real estate, protecting it against the risk of damage? Or perhaps, in accordance with the provisions of Article 208(5) CRR  (read literally), it would suffice if the Institution could prove that it has procedures and effective monitoring mechanisms in place to ensure that the existing insurance policies are valid and up-to-date?

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

Exemption from bail-in of liabilities to institutions in order to avoid of systemic contagion

Are cash deposits of other institutions protected from bail-in? The question refers to simple deposits that are not under any pledge or collateral linked to any derivatives trade.

  • Legal act: Directive 2014/59/EU (BRRD)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

Notification of model changes

Does an alignment of the quantification of default to the default frequency based on an approved method (i.e. an update to the PD scale to better mirror the default frequency) require a notification? 

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Regulation (EU) No 529/2014 - RTS on materiality of extensions and changes in the advanced approaches (IRB and AMA)

COREP form C72

On form C72.00, should there be a calculation for row 020 Total unadjusted level 1 assets?

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

Application level of materiality threshold for assessing the materiality of extensions and changes to the IMA

What is the reference base for the materiality thresholds specified in the technical standards for assessing the materiality of extensions and changes of internal models be applied, if an EU parent institution uses an Internal Models Approach (IMA) on solo and/or (sub)consolidated level?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Regulation (EU) No 529/2014 - RTS on materiality of extensions and changes in the advanced approaches (IRB and AMA)

Clarifications on HDP benchmarking exercise instructions, templates and portfolios

1) Definition of HDPs (C103, Annex II)A clear indication of the definition of SME - CORPORATE and SME - RETAIL Portfolios (Column 020) is not provided in the instructions. Are they to be defined according to the CRR rules? Specifically, SMEs are the counterparties with Total annual sales for the consolidated group < 50 mln € and which are considered for RWA calculation according the specific formulation as of Art.153 (4). This may include also cases in which the Institution “shall substitute total assets of the consolidated group for total annual sales when annual sales are not a meaningful indicator of the firm size and total assets are a more meaningful indicator than total annual sales” 2) Weighting of default ratesDoes the EBA expect banks to compute the “default rate past 5 year” as the as the exposure weighted average of the default rates observed in the last 5 years? 3) Clusters without exposuresFor the exercise, some clusters might come up without any exposures. How should firms deal with them? Report them anyway with 0 values or simply not report?Moreover, if not as confirmed during the previous exercises, how should firms consider the general instruction “Institutions shall submit data only for those counterparties where an actual exposure or a valid rating exists”? (Annex IV Part 1) 4) Calculation of RWA* and RWA**The calculation of PD*/PD** thus RWA*/RWA** is due for each entity reporting a COREP. Therefore, some regional institutions (related to a parent institution) with low materiality are concerned by reporting the RWA*/RWA** values. However, these small institutions could show a low volume of defaults (sometimes equal to zero). Can these institutions be exempted from reporting RWA*/RWA** when their IRB approval takes place in the same country 5) EL ModelsAre institutions exempted from reporting EL models in the template Annex III C 105.01 (where institutions apply Article 160-2(a) CRR)?

  • Legal act: Directive 2013/36/EU (CRD)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Draft ITS on Supervisory Reporting of Institutions (for benchmarking the internal approaches)

Clarifications on portfolio specifications & general instructions for Annex V

Portfolio 1.5 (equity variance swap) - In the formula for realised variance in Annex V, the summation index i goes from 1 to n-1. That is not how standard booking works, where the index should start at 0 not 1. Portfolio 1.15 (knock-out currency option) - In the table (page 5) of Annex V it states 'cash settled' while in appendix 2.4 it states that settlement = deliverable which we interpret as physically settled. Could you clarify? Also which currency to settle in if it is settled in cash? Portfolio 1.18 (oil put option) - Annex V is somewhat ambiguous on which contract month to use for the underlying (currently we use Feb16) and to set the strike (currently we use May16). Could you confirm? Portfolio 1.10 (Contradiction between general instructions and term sheet) - Under trade 1.10 “Seller of an OTC receiver swaption” - there is ambiguity whether the premium should be included or excluded from the valuation. The term sheet requires premium as payable at expiry although the general regulatory instructions indicate that premiums should be excluded. Can you please clarify how premiums should be treated? Portfolios 1.10, 1.30 and 1.32 - Can you please confirm whether the swaption #10 should be booked as cash settled or physically settled? Portfolio 1.20 - When firms calculate the IMV on the 26th Oct, do they have to use the same FX rates as of the 15th Oct to convert the USD bond to EUR? Same question applies for the VaR calculation in December. Common instructions - Should firms assume LDN close unless explicitly stated when market data were referenced (e.g. “strike = 3m forward exchange rate as end of day 15 Oct 2015") given that evaluation time is LDN close? Common instructions - Reporting currency - For templates covered by Annex V, firms are asked to disclose positions against EUR, USD etc. In terms of the instrument/position-booking values, are the EBA expecting firms to provide in the actual transaction currency requested i.e. EUR, USD etc or should they convert to local (for instance for UK headquartered firms to GBP)? Firms currently submit all existing CoRep returns in local currency (GBP) as systems used by national authorities only accept local base currency (GBP) values. If firms must submit in local currency, will the EBA take care of the conversion?

  • Legal act: Directive 2013/36/EU (CRD)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Draft ITS on Supervisory Reporting of Institutions (for benchmarking the internal approaches)

Definition of Active Contractual Relationship

What is the definition of an Active Contractual Relationship?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Delegated Regulation (EU) 2015/61 - DR with regard to liquidity coverage requirement

Article 116 Colleges of Supervisors

When conducting supervision on a consolidated basis, is the consolidating supervisor of an EU-headed banking group with subsidiaries only in third countries subject to the provisions of EU law, notably to the provisions of Regulation (EU) No 575/2013, Directive 2013/36/EU and the relevant delegated and implementing acts? If so, how is Article 116 of Directive 2013/36/EU to be applied in that case, in particular under the considerations that there is no need for a joint decision and that third-country supervisors are not subject to EU law? How does the situation change when the ECB is the consolidating supervisor and the banking group has subsidiaries only in participating Member States and in third countries?

  • Legal act: Directive 2013/36/EU (CRD)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

Eligible collateral in a central bank

Must liquid assets be eligible in a central bank when LCR is calculated?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Delegated Regulation (EU) 2015/61 - DR with regard to liquidity coverage requirement

NCWO principle in a group resolution

When a group is put under resolution and when the normal insolvency law of a country is not applicable to a group but only entity by entity, is the NCWO principle valuated at the level of the group or entity by entity?

  • Legal act: Directive 2014/59/EU (BRRD)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

Composition of resolution college

For the purpose of Article 88(2)(g)) of Directive 2014/59/EU (BRRD), should “the authority that is responsible for the deposit guarantee scheme of a member state” be the “designated authority” in accordance to Article 2(1)(18) of Directive 2014/49/EU (DGSD)?

  • Legal act: Directive 2014/59/EU (BRRD)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

Resolution plan for an institution without any critical economic functions

Is the resolution authority under the obligation to elaborate resolution plans even for institutions without critical functions for which the waiver under Article 4(8) of Directive 2014/59/EU (BRRD) is not available? Must the resolution authority elaborate resolution plans for groups that do not have any critical functions?

  • Legal act: Directive 2014/59/EU (BRRD)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

Depositor preference where the deposit is recived from a fiduciary

Do deposits received from financial institutions on behalf of clients that are individuals and SMES benefit from depositor preference.

  • Legal act: Directive 2014/59/EU (BRRD)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable