Article 428d(2) CRR2 states that: “Without prejudice to Article 428ah(2), institutions shall take into account the fair value of derivative positions on a net basis where those positions are included in the same netting set that fulfils the requirements set out in Article 429c(1). Where that is not the case, institutions shall take into account the fair value of derivative positions on a gross basis and shall treat those derivative positions as belonging to their own netting set for the purposes of Chapter 4”.

At the same time, Article 428d(4) CRR2 states that: “Without prejudice to Article 428ah(2), all derivative contracts listed in points 2(a) to (e) of Annex II that involve a full exchange of principal amounts on the same date shall be calculated on a net basis across currencies, including for the purpose of reporting in a currency that is subject to separate reporting in accordance with Article 415(2), even where those transactions are not included in the same netting set that fulfils the requirements set out in Article 429c(1)”.

A clarification is requested regarding which criterion should be followed and prioritized to optimize the NSFR in the reporting currency for all transactions, as well as in currencies subject to separate reporting.

This is particularly relevant for derivative contracts involving a full exchange of principal amounts on the same date.

Under the assumption that an institution has only two netting sets:

• netting set agreement 1, in which is included a cross-currency interest rate swap and a plain vanilla interest rate swap. The settlement currency is Euro;
• netting set agreement 2, in which is included a cross-currency interest rate swap and an interest-rate futures. The settlement currency is USD;

For the purpose of NSFR reported for all transactions, it is not clear if the netting under Article 428d should be done following:

1. paragraph (2), netting CCS and IRS belonging to the same netting set 1, and netting CCS and IRF belonging to the same netting set 2; or
2. paragraph (4), netting CCSs in netting sets 1 and 2 as if belonging to the same ‘fictitious’ currencies netting set.

Should these contracts be netted within their respective netting sets, or should they be extracted and netted across currencies with similar contracts?