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Q&As refer to the provisions in force on the day of their publication. The EBA does not systematically review published Q&As following the amendment of legislative acts. Users of the Q&A tool should therefore check the date of publication of the Q&A and whether the provisions referred to in the answer remain the same.

Please note that the Q&As related to the supervisory benchmarking exercises have been moved to the dedicated handbook page. You can submit Q&As on this topic here.

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List of Q&A's

Level of application of the new FINREP framework

Can a competent authority impose FINREP at a solo level. Moreover, would a competent authority be free to add to or delete information from a specific template?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Regulation (EU) No 680/2014 - ITS on supervisory reporting of institutions (repealed)
  • ID: 2013_197
  • Topic: Supervisory reporting - FINREP (incl. FB&NPE)
  • Date of submission:
  • Published as final Q&A: 20/12/2013

Possibility to increase the frequency of reporting with regard to information covered by Draft ITS on Supervisory Reporting.

Article 104(1)(j) of Directive 2013/36/EU (CRD) provides for competent authorities to have inter alia the power to impose additional or more frequent reporting requirements, including reporting on capital and liquidity positions. The draft Implementing Technical Standard on reporting (ITS on reporting) submitted by EBA to the European Commission on 26 July 2013 includes strict provisions regarding format and frequency of reporting. In light of this does the competent authority have the power to impose more frequent reporting requirements relating to information that to some extent is covered by parts of Draft ITS on reporting (for instance the tables CA1, CA2) .

  • Legal act: Directive 2013/36/EU (CRD)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Regulation (EU) No 680/2014 - ITS on supervisory reporting of institutions (repealed)
  • ID: 2013_175
  • Topic: Supervisory reporting - Other
  • Date of submission:
  • Published as final Q&A: 20/12/2013

Treatment of non-grandfathered amount of bonds

1. As of January 1, 2014, if an innovative Tier 1 security has more than 5 years to the first call date (e.g., a first call in 2020), does the non-grandfathered amount of bonds (i.e. 100%-80% = 20% in 2014) have any regulatory value? Could this be Tier 2 until 2015, given it will have at least 5 years to the first call date as per Article 63 Regulation (EU) No 575/2013 (CRR)? 2. In a similar vein, can the non-grandfathered part of non-innovative Tier 1 with no incentive to redeem count as Tier 2, either pre- or post-first call date?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_47
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 20/12/2013

Treatment of existing Tier 1 and Tier 2 instruments

This question is a supplement to Question 2013_46. For Tier 1 or Tier 2 instruments with an incentive to redeem and quarterly/semi-annual/annual calls beyond the first call date, would these instruments qualify as Tier 2 capital if the issuer gave an undertaking to its regulator and the market that it would not exercise its call option for at least 5 years after the first call date? This would save the issuer the time and expense of having to modify the actual instrument documentation but would achieve a similar outcome in terms of its capital position/quality.

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_105
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 13/12/2013

How shall an institute explain a rating decision?

Article 431, paragraph 4 says that "institutions shall, if requested, explain their rating decisions to SMEs and other corporate applicants for loans, providing an explanation in writing when asked." Shall this be interpreted as institutions shall show the exact probability of default for the applicants or the applicants rating on the institutions internal rating scales or in any other way?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_240
  • Topic: Transparency and Pillar 3
  • Date of submission:
  • Published as final Q&A: 06/12/2013

Off-balance sheet items and definition of default

Please confirm that indeed the off-balance sheet part of a facility (e.g. undrawn amount) or any other off-balance sheet items e.g. acceptances, guarantees, etc should not be categorised in the "in default" exposure class even if the customer is classified as "in default".

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_239
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 06/12/2013

Inclusion of year-end profit in Common Equity Tier1 Capital as of the end of first quarter of the following year.

Can the year-end profit (reduced by the expected burdens and dividends), after verification by persons independent of the institution that are responsible for the auditing of the accounts of that institution, be included in Common Equity Tier1 Capital of the institution as of the end of first quarter of the following year without the prior permission of the competent authority in the situation in which the General Meeting of Shareholders approves the financial statements with the year-end profit (and approves the dividend in the amount reducing the year-end profit in the calculation) before the issuing date of the first quarter financial statements, but after the date of first quarter reporting period?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_208
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 06/12/2013

Possibility to remove a Tier 1's call options to make the securities Tier 2 compliant

Based on the answer to question 2013_16, if a step-up Tier 1 bond’s terms were changed (which had a call date in, say, 2016) so that all call options were removed, this could not prolong its grandfathering as Tier 1, if that were the sole rationale for removing the calls. However, if a removal of calls is to make the Tier 1 bonds count as eligible Tier 2 (as there is no call feature), then could they be reclassified as Tier 2?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_49
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 06/12/2013

Uncollateralised stock borrowing (unsecured) Transactions

How should uncollateralised (unsecured) stock borrowing due with 30 days be reported? Such transactions will have an impact on the liquidity position of the institution: 1) If the securities borrowed qualify under Article 416(1) as liquid assets 2) If the securities borrowed do not qualify under Article 416 but have been re-pledged and used to raise funding for the institution with a maturity beyond 30 days 3) If the securities borrowed have been used to cover institution shorts.

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_159
  • Topic: Liquidity risk
  • Date of submission:
  • Published as final Q&A: 29/11/2013

IRB Approach

Regarding the IRB approach for the calculation of capital requirements for preventing credit risk, where should the weighting formula be applied? Is it contract by contract, or is it a weighted average of the probability of default (PD) and loss given default (LGD) for each pool and then apply the risk weight formula to this mean?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_144
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 29/11/2013

Transfer Restrictions

There is no definition within the Regulation of 'Transfer Restrictions' referred to in article 417(b) with regards to excess liquid assets in third countries

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_136
  • Topic: Liquidity risk
  • Date of submission:
  • Published as final Q&A: 29/11/2013

Cash in CIUs and its impact on CIUs being treated as liquid assets

According to Article 416(5) of Regulation (EU) No 575/2013 (CRR) CIUs may be treated as liquid assets provided that, among other things, they only invest in liquid assets as referred to in Article 416(1). Typically CIUs hold cash to a certain extent (e.g. 1-10 %) in order to secure their liquidity. However, would it lead the shares or units in the CIU being ineligible for liquid assets if the CIU deposited the cash at another bank, because credit institutions are not included in Article 416(1)? Alternatively would the CIU have to hold the cash directly at the ECB (or inside a bank safe in cash) for being eligible?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_132
  • Topic: Liquidity risk
  • Date of submission:
  • Published as final Q&A: 29/11/2013

Definition of ‘retail deposit’

How should liabilities to clients who have not been classified to any segment under the Standardised or Advanced IRB (AIRB) approach be treated? Those clients placed only deposits with the bank and therefore the bank does not have sufficient data to assign them to any segment.

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_128
  • Topic: Liquidity risk
  • Date of submission:
  • Published as final Q&A: 29/11/2013

SA - Retail Classification - EUR1 million limit

In the definition of the retail exposures it states "...excluding exposures fully and completely secured on residential property collateral that have been assigned to the exposure class laid down in point (i) of Article 112..." of Regulation (EU) No. 575/2013 (CRR). Does this mean that exposures that are in default but fully secured on residential property (meeting all minimum requirements and limits) are not excluded?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_72
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 29/11/2013

Grandfathering

Article 486(3)(c) of Regulation (EU) No 575/2013 (CRR) states: “the amount of instruments referred to in Article 484(4) which on 31 December 2012 exceeded the limits specified in the national transposition measures for point (a) of Article 66(1) and Article 66(1a) of Directive 2006/48/EC;..” is to be deducted from the amount eligible for inclusion.” This same rule is also applied for Tier 1 grandfathering under CRR. This in effect preserves the current Tier 2 restrictions. Because that amount is at an aggregate level i.e. not by instrument, how then are the individual instruments to be treated under CRR? Each instrument may have different terms including maturity and so how should aggregated restricted amount be spread across instruments?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_60
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 29/11/2013

Old-style Tier 1 requalifying as CRR Tier 2 capital

When an old-style Tier 1 instrument with an incentive to call passes its step-up date and ceases to be recognised as grandfathered Tier 1 capital under Regulation (EU) No 575/2013 (CRR), can it qualify as Tier 2 capital going forward if it were to meet all the requirements of Article 63 of CRR? For many existing instruments, the quarterly calls following the first call date of the Tier 1 instrument would prevent the inclusion in Tier 2 capital under CRR. If an old-style Tier 1 instrument had the Issuer's Call entirely removed from the instrument's documentation by the Issuer or Trustee, could it theoretically requalify as Tier 2 if it met all the other provisions for Tier 2 capital (Article 63 etc) after the removal of the Call provision?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_46
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 29/11/2013

Grandfathering, cascading and phasing out limits

In the case of an issuer whose outstanding Tier 2 instruments as at December 2012 are fully CRR compliant (ie bullet Tier 2 bonds), should Article 486(4) apply? To put it simply: can an issuer still have some disqualfied parts of Tier 1 instruments (for limit reasons) cascaded into Tier 2 even if the issuer has no phased out Tier 2 amount as at December 2012 (and hence no phased out limits for Tier 2) ?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_44
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 29/11/2013

Recognised amount as regulatory capital for an Additional Tier 1 with a write-down mechanism

According to Regulation (EU) No 575/2013 (CRR) Article 54(3): “The amount of Additional Tier 1 instruments recognised in Additional Tier 1 items is limited to the minimum amount Common Equity Tier 1 items that would be generated if the principal amount of the Additional Tier 1 instruments were fully written down or converted into Common Equity Tier 1 instruments”. Given the fact that a write-down may be seen as a profit under local accounting GAAP, and hence taxable (NB: true should the issuer be supposed to pay taxes at this time. However, it is unlikely that the issuer records a profit at a time where a write-down is operated), one can think that the recognized amount as Additional Tier 1 at the issue date is the nominal amount less the foreseeable paid tax amount in case of write-down. What's the final view of EBA? Can the entire nominal issue amount be recognized as Additional Tier 1 at the issue date or only a reduced amount (i.e. the nominal amount - the foreseeable paid tax amount in case of write-down)?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_29
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 29/11/2013

Grandfathering limit

Once applicable percentages in the range are specified by the local regulator, would it be applied: (1) at the beginning of the period; (2) at the end of the period or (3) on a straight-line basis throughout the 12 months period?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_30
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 29/11/2013