Question ID
2026_7941
Legal act
Regulation (EU) No 575/2013 (CRR)
Topic
Supervisory reporting - COREP (incl. IP Losses)
Article
381-386
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
Regulation (EU) 2024/3117 - ITS on supervisory reporting of institutions
Article/Paragraph
5.8 (Annex II)
Type of submitter
Credit institution
Subject matter
CVA exemptions: marginal impact of reintegration
Question

Annex II of the ITS requires to show the marginal impact of reintegration of CVA exemptions, separately for each exemption. it defines the marginal impact as "the difference, expressed in absolute amount, between the relevant metric for the scope of transactions referred to in row 0010 after reintegrating the exemption, and the relevant metric for the scope of transactions referred to in row 0010". 

This statement may in our opinion be interpreted in two different ways:

  1. For each of the 7 exemptions and for the whole portfolio including the exemptions, institutions are required to calculate the cva risk charge for the non-exempted portfolio + the relevant exemption separately and report the difference to the cva risk charge calculated for the non-exempted portfolio. This requires 8 separate calculations and the marginal impact of individual exemptions will be accurate. However, the marginal impact for the individual exemptions will not add up to the marginal impact for the whole portfolio.
  2. Institutions are required to calculate the difference of the cva risk charge calculated for the whole portfolio to the cva risk charge calculated for the non-exempted portfolio. This difference will be split up for the 7 exemptions using the contributions on counterparty level already calculated for the whole portfolio. This requires 1 separate calculation and the marginal impact for individual exemptions will add up to the marginal impact for the whole portfolio. However, the marginal impact of each individual exemption will be only approximate (i.e. scaled by counterparty contributions).

Question: are institution allowed to use method (2)?

Background on the question

The following table gives a very stripped-down example for method (2):

  1. calculate cva risk charge for the portfolio (regulatory scope): 100
  2. calculate cva risk charge for the whole portfolio (including exemptions): 140
  3. sum up the contributions to cva risk charge for each exempted counterparty for its category: sum for exemption 1 is 30, sum for exemptions 2 is 50
  4. scale the summed contributions for each category so that the sum of marginal impacts is equal the total marginal impact (whole portfolio).
    CVA Risk Charge Marginal impact
CVA risk (regulatory scope)   100  
CVA Risk (incl. all exemptions)   140  
  Marginal Impact of all exemptions   40
  Sum of all exemptions (sum on Cpty level) 80  
  Exemption 1 (sum of relevant Cpties) 30 30 * (40/80) =15
 
  • Cpty 1
 10  
 
  • Cpty 2
 20  
  Exemption 2 (sum of relevant Cpties) 50 50 * (40/80) = 25
 
  • Cpty 1
 20  
 
  • Cpty 2
 30  

 

Submission date
Rejected publishing date
Rationale for rejection

This question has been rejected because the issue it deals with is already explained or addressed in the regulatory framework, which is sufficiently clear and unambiguous.

Status
Rejected question