8 Q&As on CRR: Supervisory reporting and CRD IV: Credit risk

The EBA has published the following 8 new Q&As regarding issues relating to the Capital Requirements Regulation (CRR) and the Capital Requirements Directive IV (CRD IV):
##### 2021_6300 – Supervisory reporting – COREP (incl. IP Losses) – In template C 34.02, the column Exposure Pre-CRM (column 150) aims to report EAD of all CCR exposures following articles 274 or 281 or 282 (according respective CCR method) and sub-sequent articles defining the effects of margin agreements or aims to report a new EAD value gross of all forms of collaterals and margins included in the margin agreement
QUESTION: To comply with the requirement of columns 150, 160 of C 34.02 of Annex 1 of Regulation (EU) 2021/451 (ITS on Supervisory Reporting) we seek clarification regarding what is expected to be delivered in these 2 columns.
Does any of the below 3 scenarios describe correctly the interpretation of the ITS guidance?
If none of below scenarios reflect the correct interpretation, what is the calculation expected to be performed to derive the EAD Pre-CRM and EAD Post-CRM?
Scenario 1: for EAD Pre-CRM value apply all SACCR formulas as if the netting set is unmargined and no form of collateral is accepted
For banks under SACCR, for margined and un-margined netting sets the EAD should be calculated as follows:
1. Maturity factor at trade level should use the following formula:
2. MF(unmargined) = sqt root [ (min {M;1year})/ 1year]
3. RC (replacement Cost) = max { sum V; 0}
4. Multiplier = min { 1; Floor + (1-Floor)exp[ sum(V)/(2(1-Floor)AddOnaggregate)]
Exclude from all steps of the EAD calculation:
+ Initial margin given or received
+ Variation margin given or received
+ Any instrument identified as NICA:Collaterals or guarantees received
+ Collaterals or guarantees given
Scenario 2: For EAD Pre-CRM value, apply all SACCR formulas as if the netting set is unmargined
For banks under SACCR, margined netting sets will be treated as unmargined netting sets. The EAD should be calculated as follows:
1. Maturity factor at trade level should use the following formula:
2. MF(unmargined) = sqt root [ (min {M;1year})/ 1year]
3. RC (replacement Cost) = max { sum V-C; 0}
4. Multiplier = min { 1; Floor + (1-Floor)exp[ sum(V-C)/(2(1-Floor)AddOnaggregate)]
Where V includes:
+ initial margin given
+ Collaterals or guarantees given identified as NICA
Where C includes:
+ Collaterals or guarantees received identified as NICA
+ Initial margin received
According to scenario 2, exclude from all steps of the EAD calculation (RC or PFE multiplier) the following items:
+ Variation margin given
+ Variation margin received
Scenario 3: For EAD Pre-CRM (col150), apply all SACCR formulas as prescribed in Chapters 4 and 6 of Title II of Part Three CRR, and for EAD Post-CRM (col160) show the effects of a third-party collateral/guarantee received pledging the netting set(s), mitigants of which, are out of the netting or margin agreement with the counterparty
EAD Pre-CRM (col 150 of c34.02) calculation follows the respective formulas for SACCR (simplified SACCR or OEM according to Chapters 6 of Title II of Part Three CRR articles 274 or 281 or 282 accordingly) depending if margined or unmargined netting sets.
Therefore, EAD Pre-CRM includes all the below items which are contractually part of the margining agreement with the counterparty, and which intrinsically are part of the EAD calculation and do not constitute an actual transfer of risk as per credit risk mitigation:
+ Initial margin given or received to/from
+ Variation margin given or received
+ Any instrument identified as NICA:Collaterals or guarantees received
+ Collaterals or guarantees given
EAD Post-CRM (C34.02 col160) reflects the effects of any mitigants given by a third-party (different entity from margin agreement counterparty). These mitigants may pledge one or more, derivative or SFT’s netting sets.
As these mitigants are given by a different counterparty from the counterparty with who the reporting entity has a margin agreement, and consequently the covered portions by these mitigants are subject to different risk weight and there is an actual transfer of risk, it is relevant to trace what is the EAD Post-CRM value net of the effects of these mitigants.
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##### 2022_6442 – Supervisory reporting – COREP (incl. IP Losses) – Equity exposures and other non-credit obligation assets in C 08.07
QUESTION: Should the values in column 0010 of COREP template C 08.07 for rows 0150 (Equity) and 0160 (Other non-credit obligation assets) be reported, which are not in scope of Article 166 CRR?
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##### 2022_6512 – Supervisory reporting – COREP (incl. IP Losses) – Scope of the C 08.07 template
QUESTION: Where a group as defined in Article 4 of CRR has both SA and IRB exposures, what should be the scope of the total exposure value subject to SA and IRB as defined on column 0020 of template C 08.07 – Credit risk and free deliveries: IRB approach to Capital Requirements (Scope of use of IRB and SA approaches)? Should the scope only include entities consolidated within the group with permission to use the IRB approach, or should it include all entities consolidated within the Group, even those with no permission to use IRB approach and no IRB exposures?
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##### 2022_6530 – Supervisory reporting – COREP (incl. IP Losses) – C 34.08 – Reporting of received collateral
QUESTION: Should the values in column 0010 of COREP template C 08.07 for rows 0150 (Equity) and 0160 (Other non-credit obligation assets) be reported, which are not in scope of Article 166 CRR?
Regarding the columns pertaining to the ‘Fair value of collateral received’ of template C 34.08 of Annex 1 of Regulation (EU) 2021/451 (i.e. columns 0010 – 0040 and 0090 – 0130), both the general guidance for the template (paragraph 131) along with the specific guidance for these columns provided in Annex II state that the institution shall report the fair values of received collateral that is used in CCR exposures.
Is the correct interpretation of the term ‘used in CCR exposures’, that only the portion of received collateral that is actually used to offset CCR exposures should be reported in C 34.08, and not the full original fair value of collateral received relating to CCR exposures?
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##### 2022_6582 – Supervisory reporting – COREP (incl. IP Losses) – C 14.00, columns 0302 and 0303
QUESTION: C 14.00: When is a tranche considered to be sold and must be reported in columns 0302 and 0303?
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##### 2023_6693 – Supervisory reporting – COREP (incl. IP Losses) – Reporting of securitisation positions when Article 244(1), point (b), CRR is applied
QUESTION: It is not clear how to report in C 13.01, C 14.00 and C 14.01 the securitisation positions held when Article 244(1)(b) CRR is applied.
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##### 2023_6694 – Supervisory reporting – COREP (incl. IP Losses) – Overcollateralisation and funded reserved accounts in C 14.01
QUESTION: Under framework v3.2, which column of template C 14.01 should contain the retained position of the overcollateralisation and funded reserve accounts shown in column 0254 of the COREP C 14.00?
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##### 2022_6606 – Credit risk – Exposure of the borrower to ESG factors
QUESTION: Does the assessment of exposure and mitigating techniques in the referenced articles apply to the impact of the borrower on ESG factors, or to the impact of ESG factors on the borrower?