FINREP 3.0 changed the definition of gross carrying amount of debt instruments at FVOCI from "carrying amount before adjusting for any loss allowance" to "the amortised cost before adjusting for any loss allowance" (Regulation (EU) No 2021/451, Annex V, PART 1, paragraph 5.2., point 34(b)). Basis for the calculation of NPE ratio and coverage of NPEs with accumulated impairment is gross carrying amount being reported in template F 18.

On the other hand, PART 2, paragraph 12.1., point 172 of the same regulation states that the sum of the amounts of the financial guarantee and/or collateral shown in the related columns of template 13.1 shall not exceed the carrying amount of the related loan.

Consequently, the sum of impairment and of collateral of the loan, which is fully collateralized, unjustifiably shows in FINREP a deficit or surplus of coverage for the effects being recognized and reported in OCI.

Let’s illustrate it by loan example of the question ID 2017_3318, adding financial guarantees received in amount of 1000:

- Nominal value = 1.000

- Carrying amount = 920 (fair value in compliance with IFRS 9)

- Loss allowance = -120

- Amortised cost = 880

- Fair value adjustment in OCI = 40

- Gross Carrying amount = 1.000

Coverage with impairment = 120/1000 = 12,0 %

Coverage with collateral = 920/1000 = 92,0 %

Sum of both coverages amounts to 104,0 %

In line with current regulation the sum of both coverages exceeds 100 % in case of positive effects being recognized in OCI (like in presented example) and shows a shortfall of coverage (is less than 100 %) in case of negative valuation being recognized in OCI.

In addition, on the one hand carrying amount of the financial guarantee and/or collateral is limited to the carrying amount of the related loan, on the other hand the difference between gross carrying amount and accumulated impairment in case of debt instruments at FVOCI doesn’t equal carrying amount. Consequently, the amounts reported in template F 18.0 are for those instruments (row 0201 and detailed rows) not anymore consistent and validation rule v2708, which limits the amount of the financial guarantee to the difference between gross carrying amount and accumulated impairment, is for these rows not correct.