Question ID
2018_3992
Legal act
Regulation (EU) No 575/2013 (CRR)
Topic
Supervisory reporting - COREP (incl. IP Losses)
Article
99
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
Draft ITS on Supervisory Reporting of Institutions
Article/Paragraph
Annex XI, part 1, paragraph 1.3 (8)(b) and Annex X, C 43.00, r060, c020
Type of submitter
Individual
Subject matter
Validation rule v0682_m - DPM 2.7.0.1
Question

Is the validation rule v0682_m correct?

Background on the question

In accordance with Annex X (templates) and Annex XI (instructions) of Regulation (EU) No 680/2014 (ITS on Supervisory Reporting) for the reporting on the leverage ratio (including C 43.00 - Alternative breakdown of leverage ratio exposure measure components), the definition of Securities Financing Transactions (SFTs) includes “repurchase transaction, securities or commodities lending or borrowing transaction, long settlement transaction and margin lending transaction as referred to in Regulation (EU) No 575/2013”. Furthermore, according to Annex I (templates) and Annex II (instructions) of ITS on Supervisory Reporting for the reporting on Own funds and own funds requirements (including templates C 7.00 - Credit and counterparty credit risks and free deliveries: Standardised Approach to capital requirements and C 08.01 - Credit and counterparty credit risks and free deliveries: IRB Approach to Capital Requirements), the definition of SFTs includes: “(i) Repurchase and reverse repurchase agreements defined in Article 4 (82) of CRR as well as securities or commodities lending and borrowing transactions; (ii) margin lending transactions as defined in Article 272 (3) of CRR.” Based on the definitions above, it is clear that the scope of SFTs for the purposes of the reporting on the leverage ratio is broader than the scope of the reporting of the credit and counterparty credit risk in which long settlement transactions are excluded from the STFs and included in the Derivatives and Long Settlement Transactions category. This is not reflected in validation rule v0682_m introduced by the DPM version 2.7.0.1. On the contrary, with specific reference to the item “SFT not subject to a cross-product netting agreement”, this states that the amount of {C 43.00.a, r060, c020} is equal to or lower than the sum of the amounts of {C 07.00.a, r090, c220, s001}, {C 08.01.a, r040, c260, s001} and {C 08.01.a, r040, c260, s002}. Consequently, the validation rule v0682_m may not be valid in all cases and it would therefore be necessary to amend its sign.

Submission date
Final publishing date
Final answer

Annex II, Part II of Regulation (EU) No 680/2014 (ITS on Supervisory Reporting) defines SFTs for the purpose of credit risk reporting (templates C07 and C08) “as defined in paragraph 17 of the Basel Committee document ‘The Application of Basel II to Trading Activities and the Treatment of Double Default Effects’, includes: (i) Repurchase and reverse repurchase agreements defined in Article 4(82) of CRR as well as securities or commodities lending and borrowing transactions; (ii) margin lending transactions as defined in Article 272(3) of CRR.”

Annex XI, Part 1, section 1.3 of the ITS on Supervisory Reporting defines SFTs for the purpose of the leverage reporting (template C43) as “‘repurchase transaction, securities or commodities lending or borrowing transaction, long settlement transaction and margin lending transaction’ as referred to in Regulation (EU) No 575/2013;”. The data point {C43.00.a, r060, c020} contains SFTs, not subject to a cross-product netting agreement as defined in Article 272(25) of the CRR.  

The rationale behind v0682_m is to safeguard the consistency between the data reported in the template C.43 (column 020 – RWA) and those reported template C.07 (row 090). Nevertheless, in the template C.07 the component referred to long settlement transactions is included in the row 110 and not in row 090. In C 08.01, long settlement transactions are recorded in row 050. Therefore, in case of Long Settlement transactions > 0, the validation rule cannot be satisfied.

Additionally, data reported in template C43.00 (row 060 - column 020) refers to exposures/transactions ‘subject to credit and counterparty credit risk of SFTs’. In contrast row 090 of template C07.00 and row 050 of template C08.01  refer to counterparty credit risk, only.

Hence, the validation rule should be deactivated.

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

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