Question ID
2015_1856
Legal act
Regulation (EU) No 575/2013 (CRR)
Topic
Supervisory reporting - Leverage ratio
Article
430
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
Regulation (EU) No 680/2014 - ITS on supervisory reporting of institutions (repealed)
Article/Paragraph
Annex XI - LRCalc
Type of submitter
Credit institution
Subject matter
Other Asset
Question

Should all the accounting based off-settings (here including for example tax assets/ liabilities off-setting) be grossed-up on Other Asset of LR exposure?

Background on the question

Annex XI states that

"All assets other than contracts listed in Annex II of the CRR, credit derivatives, repurchase transactions, securities or commodities lending or borrowing transactions, long settlement transactions and margin lending transactions. Institutions shall base valuation on the principles set out in Article 429 (5) of the CRR."
According to Article 429(5) CRR:
(a) the exposure values of assets means exposure values in accordance with the first sentence of Article 111(1)
(…)
(c) loans shall not be netted with deposits”.
According to Article 111 CRR "The exposure value of an asset item shall be its accounting value remaining after specific credit risk adjustments, additional value adjustments in accordance with Articles 34 and 110 and other own funds reductions related to the asset item have been applied."

Submission date
Final publishing date
Final answer

Article 429(5)(a) of Regulation (EU) No 575/2013 (CRR), as amended by the Delegated Regulation (EU)2015/62 (DR), specifies that the leverage ratio exposure value of assets, including SFTs, should be calculated in accordance with the first sentence of Article 111(1) CRR, pursuant to which the exposure value of an asset item shall be its accounting value remaining after specific credit risk adjustments, additional value adjustments in accordance with Articles 34 and 110 and other own funds reductions related to the asset item have been applied.

Art. 195 CRR also clarifies that “an institutions may use on-balance sheet netting of mutual claims between itself and its counterparty as an eligible form of credit risk mitigation” (CRM), thus including the on-balance sheet netting of mutual claims among the forms of CRM.

Given that the instructions for the position “Other assets” in Annex XI of the Regulation (EU) No 680/2014 (ITS on Supervisory Reporting) also refer specifically to the principles set out in Article 429(5) of the CRR, which allow no netting nor application of CRM, offsetting relating to tax assets / liabilities should be reversed.

Status
Final Q&A
Answer prepared by
Answer prepared by the EBA.

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