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Single Rulebook Q&A

Question ID: 2016_2756
Legal act : Regulation (EU) No 575/2013 as amended by Regulation (EU) 2019/876 – CRR2
Topic : Market risk
Article: 105
Paragraph: 14
COM Delegated or Implementing Acts/RTS/ITS/GLs: Regulation (EU) 2016/101 - RTS for prudent valuation under Article 105(14) CRR
Article/Paragraph : 4/2
Type of submitter: Credit institution
Subject matter : Calculation of the threshold for using the simplified approach for the determination of AVAs.

Exactly matching, offsetting fair-valued assets and liabilities shall be excluded from the calculation of the threshold for the simplified approach in the determination of AVAs. Does “exactly matching” refer to specific conditions regarding the counterparties of assets and liabilities that otherwise may qualify to be offset?

Background on the question:

Institutions where the sum of the absolute value of fair-valued assets and liabilities is less than EUR 15 billion, may apply the simplified approach described in Chapter II of the Commission Delegated Regulation (EU) 2016/101. For the purpose of this calculation “exactly matching, offsetting fair-valued assets and liabilities shall be excluded” (Article 4 of the mentioned Delegated Regulation). Clarification of the meaning of “exactly matching” assets and liabilities is needed as it may be interpreted that specific conditions of the counterparties (or even that in order to consider  offsetting of matching positions they will have be with the same counterparty) also have to be considered.

Date of submission: 30/05/2016
Published as Final Q&A: 20/01/2017
EBA answer:

Q&A 2015_1715 defines ‘Exactly matching, offsetting assets and liabilities’ as ‘positions for which all contractual future cash flows are identical and in opposite direction under any circumstances’.

The criteria `identical´ only refers to the cash-flows, not to the counterparty. Hence, offsetting positions with different counterparties may be considered as exactly matching, provided the above criteria are met.

As regards the threshold computation, Article 4(2) explicitly excludes ‘exactly matching, offsetting fair-valued assets and liabilities’ from the threshold computation, as well as from the determination of AVAs under the simplified approach, as set out in Article 5. This is regardless of the counterparty, which is also consistent with the simplified nature of the simplified approach. 

As regards the computation of AVAs under the core approach, Article 8(1) stipulates that ‘for fair-valued assets and liabilities for which a change in accounting valuation has a partial or zero impact on CET1 capital, AVAs shall only be calculated based on the proportion of the accounting valuation change that impacts CET1 capital’.

However, the application of Article 8(1) is dependent on the valuation positions considered for the computation of the AVA concerned.

Indeed, while in line with Q&A 2015_1715, ‘exactly matching, offsetting fair-valued assets and liabilities’, as defined above, are to be disregarded for most AVA types, it might not be the case when the position in itself is driven by its counterparty. It is expected that, where the AVA is computed from a perspective (i.e. the counterparty) where valuation positions do not appear to be ‘exactly matching, offsetting fair-valued assets and liabilities’, then those valuation positions cannot be considered as matching for the purposes of computing the AVA: this is especially true for the unearned credit spread AVA, which is computed at counterparty level.   

Status: Final Q&A
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