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List of Q&A's

Custom software development and support outsourcing clarification

Company for development and maintenance of banking software has identified the following unclarities related to the EBA Guidelines on outsourcing arrangements (EBA/GL/2019/02) that were published by European Banking Authority (EBA) and for which we ask for clarification/interpretation: Is custom software development, which is based on specifications and orders from a bank, and which covers thematic area or function that the bank defined as a critical function, considered as outsourcing (in terms of the referenced guidelines) when the act of development is performed on an occasional (not recurrent and not ongoing) basis? Is regular custom software maintenance and support of software mentioned in the previous bullet point, which covers thematic area or function that the bank defined as a critical function, considered as outsourcing (in terms of the referenced guidelines) if the company providing the software maintenance and support service doesn’t have access to bank’s production environment or data from the production environment? IT department of the bank exclusively maintains their production environment, and only the bank has access to production environment data (first level support). The company offers second level support to the IT department, which consists of consultations for resolving more demanding problems, which are simulated in the test environment (without any access to the production environment). In case any of the services mentioned in the previous bullet points are considered as outsourcing (in terms of the referenced guidelines), must the contract between the company and the bank implement all guidelines or only those that are relevant for the scope of cooperation between the company and the bank? Please confirm that there is no need for the contract to cover guidelines related to cloud services and outsourcing data processing services if the company does not offer cloud services nor processes any data of the bank.  

  • Legal act: Directive 2013/36/EU (CRD)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: EBA/GL/2019/02 - Guidelines on outsourcing arrangements
  • ID: 2021_6191
  • Topic: Supervisory review and evaluation (SREP) and Pillar 2
  • Date of submission:
  • Published as Rejected Q&A: 29/04/2022

Classification of derivatives on precious metals without physical underlying under SA-CCR

For Credit Risk calculation and in order to classify derivatives into the proper Risk Category (Commodity vs. FX Risk) under SA-CCR. Can you please advise on the category to use when derivatives on Gold do not have physical underlying ? Example with a Gold Option for which only the currency for Gold is used (XAU) and where Gold is physically not existing. Also, can you please advise if the same logic have to be applied for other precious metals (not physical) like Silver or Palladium ?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2021_6190
  • Topic: Credit risk
  • Date of submission:
  • Published as Rejected Q&A: 22/02/2022

Inclusion of undertakings other than institutions, financial institutions or ancillary undertakings in prudential consolidation

Are undertakings other than institutions, financial institutions or ancillary services undertakings unconditionally included in prudential consolidation by effect of Article 18(7) of Regulation (EU) No 575/2013 (CRR) and its requirement to apply the equity method, without being subject to conditions as is the case for full or proportional consolidation according to Article 18(8), or to the thresholds laid down in Article 19(1)?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2021_6189
  • Topic: Other issues
  • Date of submission:
  • Published as final Q&A: 15/07/2022

Regular-way purchases awaiting settlement (EBA Validation rule in C 43.00 LR4 v4448_m)

According to the formula v4448_m: {C 43.00.a, r0010, c0010} <= sum({C 47.00, c0010, (r0150-0180)}) This control checks the off-balance exposure declared in the C 43.00 that is equal to the off-balance declared in the rows 0150 to 0180 in the C 47.00. With CRR2, the off-balance exposures related to regular-way purchases awaiting settlement and declared on row 0188 and 0189 of the C 47.00 are not included in the formula of v4448_m. Should these new lines not be included in the formula?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Regulation (EU) 2021/451 – ITS on supervisory reporting of institutions
  • ID: 2021_6180
  • Topic: Supervisory reporting - Leverage ratio
  • Date of submission:
  • Published as final Q&A: 31/03/2023

Cut-off date for the implementation of the adjustment for massive disposals

The last part of the first subparagraph of Article 500 states that "The adjustment referred to in the first subparagraph [(i.e. Adjustment for massive disposals)] may only be carried out until 28 June 2022 and its effects may last for as long as the corresponding exposures are included in the institution's own LGD estimates".  How is 28 June 2022 to be interpreted? Is it a repetition of point (b) of subparagraph 1 (i.e. "the dates of the disposals of defaulted exposures are after 23 November 2016 but not later than 28 June 2022") or it represents the cut-off date by which the adjustment can be estimated?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2021_6174
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 15/07/2022

Inconsistencies between FINREP (F 02.00) and Funding Plans (P 04.01)

Will validation rule v08928_m be deactivated, temporarily? Where shall 'Cash contributions to resolution funds and deposit guarantee schemes' be included until row r0385 will be introduced in P 04.01?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: EBA/GL/2019/05 – Guidelines on harmonised definitions and templates for funding plans of credit institutions under Recommendation A4 of ESRB/2012/2 - repealing EBA/GL/2014/04
  • ID: 2021_6169
  • Topic: Supervisory reporting - Funding Plans
  • Date of submission:
  • Published as final Q&A: 17/02/2023

Direct and indirect funding of capital instruments

Is Article 9(1)(c) of Commission Delegated Regulation 241/2014 (RTS) applicable to the funding granted to a borrower that passes the funding on to the ultimate investor for the purchase of an institution’s capital instrument which had been issued and acquired before the funding was granted (e.g. refinancing of the purchase)? The same issue may be raised with reference to Article 8(2) and 8(3) of RTS.

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Regulation (EU) No 241/2014 - RTS for Own Funds requirements for institutions
  • ID: 2021_6165
  • Topic: Own funds
  • Date of submission:
  • Published as Rejected Q&A: 22/02/2022

LCR treatment of open maturity reverse repos which can be terminated at any point in time

What is the LCR treatment of reverse repos with open maturity which can be terminated at any point in time? Will they be considered as regular secured lending transactions pursuant to Article 32(3)(b) of Delegated Regulation (EU) 2015/61? Or are they to be excluded since any inflows arising from the termination of those transactions are contingent?

  • 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
  • ID: 2021_6163
  • Topic: Liquidity risk
  • Date of submission:
  • Published as final Q&A: 30/09/2022

Risk weights for exposures towards Member States’ central governments and central banks denominated and funded in the domestic currency of that central government and central bank.

Shall exposures towards Member States’ central governments and central banks denominated in the domestic currency of that central government and central bank be given a 0% risk weight if they are funded by equity denominated in the same currency?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2021_6160
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 11/11/2022

Prudential consolidation: definition of “unified management”

Article 18(3) CRR covers cases of prudential consolidation of groups of undertakings that are related to each other within the meaning of Article 22(7) of Directive 2013/34/EU of the European Parliament and of the Council where a parent-subsidiary relationship does not exist. The absence of a parent-subsidiary relationship creates the need to determine the entity at which level the requirements of that Regulation should be applied on a consolidated basis in such cases. Article 22(7) of Directive 2013/34/EC refers to the case where  a) two or more undertakings which are not related, as described in paragraphs 1 or 2 of Article 22, are managed on a unified basis in accordance with a contract, or a memorandum or articles of association; or b) the administrative, management or supervisory bodies of two or more undertakings which are not related, as described in paragraphs 1 or 2 of Article 22, consist of the majority of the same persons in office during the financial year and until the consolidated financial statements are drawn up. To what extent is unified management required to be considered linked for purposes of these provisions?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2021_6158
  • Topic: Other issues
  • Date of submission:
  • Published as Rejected Q&A: 22/02/2022

Arbitrating between security and obstacles

Can an Account Servicing Payment Service Provider (ASPSP) know a mobile phone number inside of the Third Party Provider (TPP)’s organisation in order to send a decryption password to the TPP out-of-band via SMS?   

  • Legal act: Directive 2015/2366/EU (PSD2)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Regulation (EU) 2018/389 - RTS on strong customer authentication and secure communication
  • ID: 2021_6156
  • Topic: Strong customer authentication and common and secure communication (incl. access)
  • Date of submission:
  • Published as final Q&A: 27/01/2023

Recognition of a CRM provided by a guarantor treated under A-IRB on a securitization position treated ender SEC-SA

For the recognition of unfunded credit protection on securitisation positions, should institutions apply on the protected portion the approach that they would apply for a direct exposure on the protection provider regardless of the approach applied on the securitization position ?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2021_6146
  • Topic: Securitisation and Covered Bonds
  • Date of submission:
  • Published as Rejected Q&A: 22/02/2022

SCA applicability / Application of SCA at tokenisation stage

Does the authentication to unlock the mobile device count as one of the elements of strong customer authentication when a payment service user is tokenising a card on an e-wallet solution such as Apple Pay?

  • Legal act: Directive 2015/2366/EU (PSD2)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Regulation (EU) 2018/389 - RTS on strong customer authentication and secure communication
  • ID: 2021_6145
  • Topic: Strong customer authentication and common and secure communication (incl. access)
  • Date of submission:
  • Published as final Q&A: 31/01/2023

Treatment of multi-seller securitisations in CRR (Significant Risk Transfer)

It is not clear from the provisions of the CRR how to treat multi-originator securitisations regarding the existence of significant risk transfer.

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2021_6143
  • Topic: Securitisation and Covered Bonds
  • Date of submission:
  • Published as Rejected Q&A: 20/06/2022

Association of personalised security credentials to the payment service user

Should strong customer authentication (SCA) elements always be issued under control of the Account service Payment Services Provider (ASPSP)?

  • Legal act: Directive 2015/2366/EU (PSD2)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Regulation (EU) 2018/389 - RTS on strong customer authentication and secure communication
  • ID: 2021_6141
  • Topic: Strong customer authentication and common and secure communication (incl. access)
  • Date of submission:
  • Published as final Q&A: 17/12/2021

Scope of application of EBA guidelines on loan origination and monitoring

Are sections 4, 5 and 8 of the EBA guidelines on loan origination and monitoring not applicable to agreements referred to in Article 2(2)( h) of Directive 2008/48/EU, while all other parts of the guidelines are still applicable to those agreements?   

  • Legal act: Directive 2013/36/EU (CRD)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: EBA/GL/2020/06 - Guidelines on loan origination and monitoring
  • ID: 2021_6130
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 07/01/2022

C 48.02: doubts about ‘daily reporting’: how the amount referred to no business day has to be reported?

I have some doubts about the ‘daily reporting’ in the template C 48.02 as the regulation changed from ‘business days’ to ‘each day of the reporting period’. I would like to know how the amount referred to no business day has to be reported: Banks have to drag the amount of the previous day (for example if the reporting day is Saturday and the bank has not operativity the reporting bank has to drag the amount of Friday ?) even if we notice that this method gives more weight to the pre-holidays in the calculation of the average Banks have to report ‘zero’ for no business days? At consolidated level it could be possible that, for some banks belonging the group , the holidays are not in the same date. The reporting bank has to report for these days only the amount referred to the subsidiary that is operating? Or they have to drag the amount of the previous day of the other omponent of the group that are on holiday in that date?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Regulation (EU) 2021/451 – ITS on supervisory reporting of institutions
  • ID: 2021_6128
  • Topic: Supervisory reporting - Leverage ratio
  • Date of submission:
  • Published as final Q&A: 17/02/2023

Gamma correlations regarding curvature risk in low and high scenario

To calculate the gamma correlation to be used for the curvature risk in the low and high scenarios, should institutions at first square the gamma correlation used for the delta risk and then apply the formulas provided for in Article 325h CRR or vice versa?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2021_6122
  • Topic: Market risk
  • Date of submission:
  • Published as final Q&A: 11/02/2022

C34.08 report - define the collaterals considering the both legs of the securities financing transactions (SFTs)

Column 0130 and column 0180 from C34.08 report Composition of collaterals for CCR exposures highlights the information related to the SFT security. In accordance with the requirements provided in Annex II Reporting on own funds and own funds requirements, the institution shall report the fair values of collateral appearing as security in SFTs (e.g. the security leg of the SFT that has been received for column 0130, or posted for column 0180). In this context, considering that the SFTs involve two legs for each transaction and taking into account also the ITS requirements applied for the C34.08 report Composition of collaterals for CCR exposures, how the reporting institutions should treat the cash leg of the transaction? In which column the reporting institutions should populate the cash leg of the transaction?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Regulation (EU) 2021/451 – ITS on supervisory reporting of institutions
  • ID: 2021_6121
  • Topic: Supervisory reporting - COREP (incl. IP Losses)
  • Date of submission:
  • Published as final Q&A: 04/02/2022

C34.08 report - the collaterals which are related to derivatives, long settlement transactions and SFTs and which are not initial or variation margins should be reported in the Initial margin columns

Considering the definition of the initial margin which is provided in CRR, Article 4, paragraph 140, the collaterals posted or received which are related to a SFT transaction / derivative transaction / long settlement transaction and are not initial or variation margin should be reported in the C34.08 report Composition of collaterals for CCR exposures, column 0010 / column 0030 / column 0050 / column 0070 / column 0090 / column 0110 / column 0140 / column 0160 Initial margin?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Regulation (EU) 2021/451 – ITS on supervisory reporting of institutions
  • ID: 2021_6118
  • Topic: Supervisory reporting - COREP (incl. IP Losses)
  • Date of submission:
  • Published as final Q&A: 10/03/2023