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List of Q&A's

Netting of Perfectly Matching Contracts under the Mark-to-Market Method

In the context of the application of contractual netting under the Mark-to-Market Method outlined in Article 274 of Regulation (EU) No 575/2013 (CRR), Article 298 (2) refers to ‘perfectly matching contracts’ that include “similar contracts in which a notional principal is equivalent to cash flows if the cash flows fall due on the same value date and fully in the same currency”. It is not defined in the CRR is what constitutes "similar" and whether the reference in the Article implies that perfectly matching contracts are limited to FX related contracts.

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2014_798
  • Topic: Market risk
  • Date of submission:

What is meant with 'mainly' in the definition of 'financial holding company'?

A 'financial holding company' is defined as a financial institution, the subsidiaries of which are exclusively or mainly institutions or financial institutions, at least one of such subsidiaries being an institution, and which is not a mixed financial holding company. Could you please provide more guidance on what is meant with 'mainly'?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2014_796
  • Topic: Other issues
  • Date of submission:
  • Published as final Q&A: 21/11/2014

The use of the Collateral Simple and Comprehensive Methods under the Large Exposure regime

Does the phrase "where it is permitted to use" referred to in the third sub-paragraph of Article 403(1) of Regulation (EU) No 575/2013 (CRR) intend to prescribe that the treatment for collateralised exposures specified under Article 403(1)(b) is available for: • those institutions which are allowed to use both the Financial Collateral Simple and Comprehensive Methods?; or • collateral types which are eligible for both methods?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2014_793
  • Topic: Large exposures
  • Date of submission:
  • Published as final Q&A: 20/04/2021

Securities borrowing transactions within the LCR - inflows

How should to treat potential inflows regarding an unsecured securities borrowing transaction as they are not mentioned within Article 425 (2) of Regulation (EU) No 575/2013 (CRR) be treated.

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2014_792
  • Topic: Liquidity risk
  • Date of submission:
  • Published as final Q&A: 11/07/2014

Wrong member in the taxonomy categorization for ‘Type of risk’ dimension in column 040 of template F 13.01

In Report F 13.01 – Breakdown of loans and advances by collateral and guarantees, column 040 (Other collateralized loans – Rest) is interpreted, in the template, as being ‘Collateral other than real estate and other than Cash [Debt instruments issued]’. In this column, for dimension Main category of collateral or guarantees received, all members are being categorized as ‘Other than Real Estate’ while they should be categorized as ‘Other than Real estate, Deposits, Debt securities issued’ thus including other Deposits and Debt securities issued for collaterals other than real estate and being consistent with it’s Hierarchy for collateral received (MC22).

  • 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)
  • ID: 2014_789
  • Topic: Supervisory reporting - FINREP (incl. FB&NPE)
  • Date of submission:
  • Published as final Q&A: 22/08/2014

Inconsistency between validation rule v0620_m from Annex XV (Validation Formulae) and the hierarchy definition for TR1 in template C 21.00

According to the Validation formulae (Annexe XV) v0620_m for COREP report C 21.00 – Market risk: Standardised Approach for position risk in equities, {r010, c060} is the total of own funds requirements for General Risk, Specific risk, Particular Approach for position risk in CIUs and Other non-delta risks for options. For ‘Type of risk’ dimension categorization in {r080,c060} - Particular Approach for position risk in CIUs, the member is ‘Market not look-through CIUs risk’. But, according to TR1 hierarchy, this member is not included in the hierarchy for ‘Equity risk’ member. This results in inconsistency between the hierarchy definition and the validation formulae specified. The numbers do not add up naturally as expected in the validation rule.

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Draft ITS on Supervisory Reporting of Institutions
  • ID: 2014_788
  • Topic: Supervisory reporting - COREP (incl. IP Losses)
  • Date of submission:
  • Published as final Q&A: 23/10/2015

Large exposures - excluding exposures if fully deducted from own funds

May a credit institution exclude exposures from large exposure calculations which are fully covered by own funds (i.e. full deduction of own funds for this large exposure amount) and which are not used otherwise (e.g. for minimum capital requirements)?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2014_787
  • Topic: Large exposures
  • Date of submission:

Distinction between Securitisation and Specialised Lending Exposures

How can specialised lending schemes used to finance physical assets (such as e.g. ships, aircrafts, projects or real estate) and involving direct payment obliga-tions of different seniority owed by an SPV, be distinguished from securitisations?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2014_786
  • Topic: Securitisation and Covered Bonds
  • Date of submission:
  • Published as Rejected Q&A: 11/02/2022

Inflows

Article 425(8) of Regulation (EU) 575/2013 states that "institutions shall not report inflows from any new obligations entered into". Is it the case that all forward starting transactions should be excluded from the LCR, including those which produce an outflow? For instance, a bank may enter into a forward starting reverse repo trade which begins in two days time, with a maturity one month from the settlement date. In the buffer, cash will be reported, however in two days time that cash will have been lent out and a lower quality asset may have been received; the trade is in affect a downgrade which has not yet been accounted for.

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2014_784
  • Topic: Liquidity risk
  • Date of submission:
  • Published as final Q&A: 11/07/2014

Repo conducted with a non-financial customer

Article 425 subparagraph 2(a) of Regulation (EU) No 575/2013 (CRR) states that: "Monies due from customers that are not financial customers for the purposes of principal payment shall be reduced by 50 % of their value or by the contractual commitments to those customers to extend funding, whichever is higher. This does not apply to monies due from secured lending and capital market-driven transactions as defined in point (3) of Article 192 that are collateralised by liquid assets in accordance with Article 416 as referred to in point (d) of this paragraph." As this provision refers only to secured lending conducted with liquid assets (and not non-liquid assets), it would seem to suggest that repos conducted with a non-financial customer using non-liquid assets is subject to only a 50% inflow rate (e.g. now 100%). Could the EBA please confirm the correct interpretation?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2014_783
  • Topic: Liquidity risk
  • Date of submission:
  • Published as final Q&A: 25/07/2014

Outflows

Article 423 subparagraph 5(b) states that: 5. The institution shall add an additional outflow corresponding to: (b) collateral that is due to be returned to a counterparty; What is meant by “returned”? Is this intended to be “not yet posted”? Collateral which is due to be posted by the institution, but has not yet been, is not necessarily collateral which is being returned to a counterparty.

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2014_782
  • Topic: Liquidity risk
  • Date of submission:
  • Published as Rejected Q&A: 11/02/2022

Outlfows associated with shorts

Does Article 423(4) of Regulation (EU) No. 575/2013 only cover assets that the institution itself has sold short, or client short positions originated from an institution’s Prime Brokerage business, or both?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2014_781
  • Topic: Liquidity risk
  • Date of submission:

Liquidity cash-flows

Article 418(1) of Regulation (EU) No 575/2013 (CRR) states that: “If the institution hedges the price risk associated with an asset, it shall take into account the cash flow resulting from the potential close-out of the hedge.” Could the EBA please confirm how this should be reflected within the liquid asset reporting?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2014_779
  • Topic: Liquidity risk
  • Date of submission:
  • Published as final Q&A: 25/07/2014

Maturity Buckets for LE4 and LE5- Amount to be considered.

The Annex IX with reference to LE4 and LE5 reads .... For each exposure value before application of exemptions and CRM (column 210 of LE2 template), the expected amounts maturing shall be allocated to the respective bucket. Consequently, an exposure maybe spread across different columns. Instruments which do not have a fixed maturity, like equity, shall be included in the column “undefined maturity”. Does this mean that for each exposure which qualifies for this template we consider the actual cash flow spread across the tenure till the actual maturity of the exposure? Secondly, is it expected that the total amount of exposure should match in LE4 spread across maturity buckets should match with Exposure value in LE3?

  • 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)
  • ID: 2014_769
  • Topic: Supervisory reporting - Large Exposures
  • Date of submission:
  • Published as final Q&A: 26/09/2014

LE2: Credit insurance allowed as CRM technique?

Our primary business is Factoring. Therefore our balance credit figures are mainly invoices / accounts receivables, which we have bought from our clients. As security / protection against credit losses we have established a credit insurance with a credit insurance company. Can we use the credit insurance ("Warenkreditversicherung") as CRM technique? Is column 290 "other commitments" in template LE2 the correct position to fill in the credit amount covered by our credit insurance contract? To our understanding "credit insurance" could be regarded as a position under item (1) k) or (2) b) iv) of CRR-Appendix I .

  • 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)
  • ID: 2014_768
  • Topic: Supervisory reporting - Large Exposures
  • Date of submission:
  • Published as final Q&A: 07/11/2014

Instructions - Annex II CRSA

We are not clear about how should we report exposures with following combination of exposure class on row 020 and 030 of Total Sheet. Should defaulted exposure to SME (subject to supporting factor ) in Corporate / Retail/ Immovable property , be reported on Total Sheet on Row 020 and 030 ? Should exposure to Corporate SME (subject to supporting factor ) which has been reassigned an exposure class "High Risk", be reported on Total Sheet on Row 020 and 030 as well as "Items associated with particular high risk " ?

  • 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)
  • ID: 2014_763
  • Topic: Supervisory reporting - COREP (incl. IP Losses)
  • Date of submission:
  • Published as final Q&A: 05/09/2014

Maturity used in IRB RWA calculations

Is there an error in this paragraph? It currently says "....shall calculate M for each of these exposures as set out in points (a) to (e)....."; should this read "as set out in points (a) to (f)" in order to be consistent with the previous version of the legislation. Based on the current wording the effect of this is to exclude the possibility of banks using a residual maturity ".....M shall be the maximum remaining time (in years) that the obligor is permitted to take to fully discharge its contractual obligations,......"

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2014_762
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 23/10/2015

High Income OECD countries and High Income Euro Area countries as defined in the OECD

High Income OECD countries and High Income Euro Area countries as defined in the OECD (currently e.g. USA, UK, Germany, Luxembourg, Canada, Finland, etc.) receive since early 2013 no longer a country risk classification, due to their high solvency, tax income as well as tax possibilities etc. As a consequence, it is not possible to derive a risk weight according to article 137 (2) CRR without using any appropriate mechanism for determining the corresponding country risk classification. Can it be assumed, that High Income OECD countries and High Income Euro Area countries which are supposed to be even “better” than country risk classification 0 can be treated under Article 137 with an MEIP being equal to 0?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2014_760
  • Topic: External Credit Assessment Institutions (ECAI)
  • Date of submission:
  • Published as final Q&A: 23/05/2014

Disclosure of certain information by large subsidiaries of EU parent institutions on an individual or sub-consolidated basis

The disclosure information of regulatory groups is according to Article 13(1)/(2) first paragraph (each) of Regulation (EU) No. 575/2013 (CRR) to be done on a consolidated basis in any case. However, Article 13(1)/(2) second paragraph (each) of the CRR requires the disclosure of certain information by significant subsidiaries etc. as well. In the past, the implementation of that rule in Article 72 of Directive 2006/48/EC led in practice to the disclosure of only one consolidated report disclosing the required information also for all individual institutions or sub-groups which are of material significance. To our understanding, there exists a factual possibility for the entity in charge of the disclosure obligation on a consolidated level to either separately disclose the required information within one disclosure report or to take care for the issuance of separated individual disclosure reports of the significant subsidiaries and/or those subsidiaries which are of material significance for their local market.Is it possible to disclose also under CRR only a consolidated disclosure report with – in case need be – individual information per institution when requested? Is this particularly the case, where that practice has been used in the past and accepted by the national competent authorities?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2014_759
  • Topic: Transparency and Pillar 3
  • Date of submission:
  • Published as final Q&A: 30/04/2014

CCF applicable to ABCP liquidity facilities for Leverage ratio purposes

Where do liquidity facilities, as defined in CRR Chapter 5 "Securitisations", stand among the off-balance sheet items listed in Annex I? What is the CCF that should be applied to them when calculating their exposure value for the purpose of the leverage ratio?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2014_756
  • Topic: Leverage ratio
  • Date of submission:
  • Published as final Q&A: 08/05/2014