Deductions for cash variation margins

EBA Q&A 2024_7033 clarifies that cash variation margins should be reported as part of deductions to on balance sheet exposures in {C 43.00; r0080 to r0300; c0010 or c0020} if they fall within the application of Articles 429a(1)(l) and 429c(3) of Regulation (EU) No 575/2013.

Specific guidance regarding a diverging treatment in the reporting of cash variation margin related to trading book and non-trading book items, respectively, is currently not available in the instructions related to the reporting of template C 43.00 of Commission Implementing Regulation (EU) 224/3117 and Annex XI of EBA IT solutions.

Given the reasonable differentiation between trading book and non-trading book items, cash variation margins provided for trading book items shall be reported in {C 43.00; r0070, c0010}, provided the general criteria for deduction (Articles 429a(1)(l) and 429c(3) of Regulation (EU) No 575/2013 as amended by Regulation (EU) 2019/876) are applicable.

Initial margins (posted) in relation to trade exposures to a QCCP from client-cleared derivatives transactions and related deductions (Art. 429a(1)(g) of Regulation (EU) 575/2013) are to be considered in {C 43.00; r0070, c0010} for trading book exposures and {C 43.00; r0080 to r0300; c0010 or c0020} in case accounting rules result in a classification as non-trading book exposures.

Regarding the treatment of gross cash collaterals the question remains too unspecific to be answered in detail. Generally, supervisory reporting requires the consideration of all items being subject to the leverage ratio as well as potential deductions in accordance with the applicable regulation for the leverage ratio to ensure a correct reporting of the leverage ratio and its components. However, regarding margins to be considered in the leverage ratio, this general rule does not explicitly result in a consideration of a leverage ratio relevant margin and a related (margin) deduction in the same data cell by default. For example, in accordance with Art. 429c(3) second subparagraph of Regulation (EU) 575/2013, where an institution provides cash collateral to a counterparty and that collateral meets the conditions set out in points (a) to (e) of the first subparagraph of the same Article, the institution shall consider that collateral as the variation margin posted with the counterparty and shall include it in the calculation of the replacement cost of the derivative and consequently its leverage exposure value. In line with the instructions related to the reporting of template C 43.00, the leverage ratio exposure value for derivatives is to be reported in {C 43.00; r0040, c0010 or c0020}) or {C 43.00; r0050 c0010 or c0020}, respectively. Potential margin deductions on the other hand, are to be considered in {C 43.00; r0070, c0010},or {C 43.00; r0080 to r0300; c0010 or c0020} as outlined in the second paragraph of this Q&A.