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Maturity input in IRB formula for nostro accounts

Should a nostro account be treated as a qualifying short-term exposure for the purposes of Article 162 and therefore M can take a value of less than one year?

Principles governing the eligibility of credit risk mitigation techniques

Article 194, 10. : " EBA shall develop draft regulatory technical standards to specify what constitutes sufficiently liquid assets and when asset values can be considered as sufficiently stable for the purpose of paragraph 3. EBA shall submit those draft regulatory technical standards to the Commission by 30 September 2014." Could you send me please the regulatory technical standards adressing the sufficient stability of asset values ? The EBA report on the credit risk mitigation (CRM) framework (19 March 2018) says in its article 130 :" 130.Policy proposal: It is proposed to delete the mandate in Article 194(10) of the CRR, which requires the EBA to develop draft RTS to specify what constitutes sufficiently liquid assets and when assets’ values can be considered as sufficiently stable for the purposes of Article 194(3) of the CRR. It is recommended that institutions assess independently the sufficient liquidity and the price stability over time of the eligible assets held as collateral as required under Article 194(3) of the CRR, together with satisfying the other CRR requirements relevant for those assets for the purposes of CRM." => Has this proposal been endorsed by European Commission ? When ?

EBA validation rule v4859_m: [C 24.00 (c030;040;050;060)] {r100}

The prevailing implementing technical standards (Commission Implementing Regulation (EU) No 680/2014 of 16th April 2014 as amended by Commission Implementing Regulation (EU) No 2018/1627 of 9th October 2018 provide guidance, about the breakdown of figures relevant for the calculation of market risk, when using internal models. In the Annex II point 5.7.1 - General Remarks, is stated: "142. Generally, the reporting depends on the structure of the model of the institutions whether they report the figures for general and specific risk separately or together. The same holds true for the decomposition of the VAR /Stress-Var into the risk categories (interest rate risk, equity risk, commodities risk and foreign exchange risk). An institution can resign to report the decompositions mentioned above if it proves that a reporting of these figures would be unduly burdensome". Considering that the separate reporting of specific and generic risk, for equity instruments, would be unduly burdensome and low material, it is not foreseen by the structure of the model applied, therefore we judge that total amounts for general and specific risk should be checked against total positions only. This feature has never been reviewed during the assessments and extensions of the model.

Treatment of secured lending or capital market-driven transactions that would require an outflow rate higher than 25 % but they have been closed with eligible counterparties

Credit institutions have to calculate the “withdrawable central bank reserve” amount (Template C72.00 1.1.1.2) as the difference between “the actual balances on reserve accounts on day t” and “the amount of the minimum reserves to be held over a reserve maintenance period”. This principle is explicitly described in the “common understanding between the ECB and National Competent Authorities” communication but it seems that the same document doesn’t provide details on how to calculate the inflows/outflows (templates C73.00, C74.00) arising from the treatment of central bank reserves. Please, consider these two examples for which the LCR-30 days are interested by a single maintenance period. This approach of treating the central bank reserves proposed in “common understanding between the ECB and National Competent Authorities” doesn’t take into consideration the fact that the credit institution held on average, from the beginning of the maintenance period to the analysis date, its balance on reserve accounts below or above the required reserve. Example (1) - LCR-30 days are interested in a single maintenance period - 42 days mandatory reserve maintenance period (T1) - Analysis date (t): 11th day from the beginning of the maintenance period (LCR 30-days are within this maintenance period) - Mandatory reserve to be held on average over the maintenance period (RAVGT1): euro 200.000.000 - Actual balances on reserve accounts at the analysis date(RACTt): euro 220.000.000 - Average balances on reserve account held by the credit institution from the beginning of the maintenance period to analysis date(RAVGt): euro 850.000.000 Under these conditions, based on the "common understanding between the ECB and National Competent Authorities", the bank has to consider as "withdrawable central bank reserve" the amount of euro 20.000.000 (C72.00 1.1.1.2). After considering the "withdrawable central bank reserve" amount of € 20.000.000, the bank could withdraw the remaining euro 200.000.000 from the actual balances on reserve accounts and still be able to meet the mandatory reserve requirement limit of the period. Hence, an inflow of € 200.000.000 should be included in C74 1.1.12 (other inflows). Indeed, if these additional inflows are not allowed, and €200.000.000 of central bank reserves remain undrawn until the end of the maintenance period than the running average will be more than required. Example (2) - LCR-30 days are interested in a single maintenance period On the other hand: - 42 days mandatory reserve maintenance period (T1) - Analysis date (t): 11th day from the beginning of the maintenance period (LCR 30-days are within this maintenance period) - Mandatory reserve to be held on average over the maintenance period (RAVGT1): euro 200.000.000 - Actual balances on reserve accounts at the analysis date (RACTt): euro 220.000.000 - Average balances on reserve account held by the credit institution from the beginning of the maintenance period to analysis date (RAVGt): € 22.000.000 Under these conditions, based on the "common understanding between the ECB and National Competent Authorities", the "withdrawable central bank reserves" still remain of € 20.000.000 (C72.00 1.1.1.2). The credit institution can determine the exact amount to add in the central bank reserves at day t+1 in order to meet the mandatory reserve requirement until the end of the maintenance period. In formulas, inflows or outflows will result from: Min(-Adjustment(T1)/(T1-t),RACTt-Max(0,RACTt-RAVGT1)) Where Max(0, RACTt-RAVGT1) is the "withdrawable central bank reserves"; Where RACTt - Max(0, RACTt-RAVGT1)=UACTt is the undrawn central bank reserves; And Adjustment(T1), (the adjustment to be done to meet the mandatory reserve requirement of the period T1, after considering the withdrawable central bank reserves) is: RAVGT1 x T1 – RAVGt x t – UACTt x (T1-t) When the adjustment amount is negative an inflow is expected from formula (1). In the other case, when a positive adjustment is obtained an outflow is expected. Please, consider these other two examples for which the LCR-30 days are interested in two maintenance periods. Example (1) - LCR-30 days are interested in two single maintenance periods - 42 days of mandatory reserve maintenance first period (T1) - 45 days of mandatory reserve maintenance second period (T2) - Analysis date (t): 26th day from the beginning of the first maintenance period - Mandatory reserve to be held on average over the first maintenance period (RAVGT1): euro 200.000.000 - Mandatory reserve to be held on average over the second maintenance period (RAVGT2): euro 250.000.000 - Actual balances on reserve accounts at the analysis date(RACTt): euro 800.000.000 - Average balances on reserve account held by the credit institution from the beginning of the maintenance period to analysis date(RAVGt): euro 300.000.000 Under these conditions, based on the "common understanding between the ECB and National Competent Authorities", "withdrawable central bank reserves" (C72.00 1.1.1.2) should be defined according to this modified formula: Max(0, RACTt-RAVG), RAVG should be that one referring to the first or the second period? If it refers to the first period: Where Max(0, RACTt-RAVGT1) is the "withdrawable central bank reserves" (euro 600.000.000 in this example); Where RACTt - Max(0,RACTt-RAVGT1) = UACTt is the undrawn central bank reserves (euro 200.000.000 in this example). When the condition UACTt - Min(-Adjustment(T1)/(T1-t),UACTt)<=RAVGT2 is true, then the expected flow is calculated as: UACTt - RAVGT2 To meet the mandatory reserve requirement of the first period (T1) the expected flow to be performed at t+1 is calculated as: - Min(-Adjustment(T1)/(T1-t),UACTt)=+162.500.000 euro (C74 1.1.12 - other inflows) Due to the fact that the beginning of the second maintenance period will start within the LCR 30 days, the bank needs to calculate another cash flow, Adjustment (T2) as the difference between UACTt - Min(-Adjustment(T1)/(T1-t), UACTt) and RAVGT2. In this example [(200.000.000 – 162.500.000) – 250.000.000] = -212.500.000 (C73.00 1.1.7.3 other outflows). Please, consider the following example for the opposite case. Example (2) - LCR-30 days are interested in two single maintenance periods This example aims to deal with the case when the condition below is true: UACTt - Min(-Adjustment(T1)/(T1-t),UACTt)>RAVGT2 The bank has to calculate the “withdrawable central bank reserves” and the Adjustment(T1), which can be an additional inflow included in C74 1.1.12 other inflows, if positive, or in C73.00 1.1.7.3 other outflows, if negative, like the previous examples. In these cases, the Adjustment(T2) will be calculated as the difference between UACTt - Min(-Adjustment(T1)/(T1-t), UACTt) and RAVGT2 and it will be a further inflow included in C74 1.1.12.

Validation rules in template C43.00.b

According to the Annex XI, part II, point 30, column 010, row 180 (Institutions – Leverage Ratio Exposure Value – SA exposures) the exposure value should equal the exposures that fall under article 199 to 121 of the CRR. In the current EBA validation rules we can't find any rules between column 010 in the LR template C43.00.b row 180 and C07.00.a (007) row 070 column 200. Is there any reason for that? If yes, why doesn't the exposure value in SA (C07.00.a) need to correspond to the LR exposure value in C43.00.b? There are validation rules between C43.00.b column 030 and C07.00.a row 070 column 220 (for example validation rule no v0688_m)

Potential typos in validation rule v6216_m

From DPM 2.8, rule v6216_m is added. In the Excel sheet of validation rules which is downloaded from the EBA website (under Reporting framework: https://eba.europa.eu/risk-analysis-and-data/reporting-frameworks/report...), there are a few potential typos: 1. In its formula: "abs({P 01.03, r030, c010} - {C 76.00.a r030, c010}) < 0.25 * abs({C 76.00.a r030, c010})", two commas are missing between C76.00.a and r030. Should it be abs({P 01.03, r030, c010} - {C 76.00.a, r030, c010}) < 0.25 * abs({C 76.00.a, r030, c010})? 2. In column "T2" which identifies the second table of a cross-table validation, table C 76.00 is filled in. However, "C 76.00" is the name of a template as well as column "Prerequisites" also mentions "C 76.00.a". Therefore, the correct value in "T2" should be "C 76.00.a" (similar to multiple other cases in this column such as "C 08.01.a" or "F 18.00.b")?

Treatment of unfunded default fund contributions.

How should unfunded default fund contributions facing Qualifying and Non-qualifying CCPs be treated for leverage purposes?