Response to consultation on ITS amending Implementing Regulation (EU) No 680/2014 with regard to operational risk and sovereign exposures
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We would like to have more indications and precise criteria to include institutions and their subsidiaries to reporting the full sheet C.17 on Oprisk Loss data. And if all the entities of a Bank Group would be concerned by an ITS (included STA or BIA entities).
Annex II Page 2 art 129:
Template C17.01, line X50: Could you confirm if we shall apply the same rule as the one concerning the line X60 (cf. page 2, Art 129) : Reported maximum single loss for the first time within the reporting period (i) or the largest positive adjustment for events reported for the first time within a previous reporting period (ii) if (ii) > (i)
Annex II Page 2 art 130 and 131:
We would like to make a negative sign for these lines to be consistent with others lines (template C17.01, line X70 and X80)
Annex II Page 2 art 134:
Presently, the use of the « Corporate items » row is limited to establishments using the AMA methodology (as article 322 refers to article 312-2, dedicated to AMA). In the consultation paper, the wording is unchanged (point 134 in the consultation paper being equivalent to point 130 of the current appendix 2). However, for COREP consolidation purposes, and as the AMA methodology is to be discarded soon, this row should be made available for all (and not restricted to AMA establishment).
Annex II Page 7 art 138:
Should we only provide the losses for the period or should we include the largest positive loss adjustment reported for the first time within a previous reporting period?
Annex II Page _8 § 4.2.3.2 : ID event : Would it be possible for each institution to keep its specific IDs for easier checking ?
Annex II Page _8 § 4.2.3.2 : Description (Column 200) : The internal process of validation of the qualitative data is very burden and complex. It’s very difficult to meet this need for 17 lines without burdening the process. We propose to make a comment only for the 5 largest losses
Reporting period:
For an OPR DETAILS on 31/12/2016, is the reporting period of the OPR DETAILS of 30/06/2016 (reporting period: 01/01/2016 au 30/06/2016) considered as « a previous reporting period »?
Other comments:
Linked roots events: Do we have to use the same approach used in the Short term exercise?
For some institutions, it will be difficult to separate recoveries from insurance and other recoveries
Number of loss event: We would like to know if a single adjustment will be double counted, once in the range before adjustment and once in the range after adjustment. This will complicate controls and verification of such rules.
Annex II Page 5 – “Rows 940-944”
“(i.e report the original loss amount with a negative sign in row 940)”. Please provide more indications to precise if we are talking about the amount of the adjustment or the amount of the original loss.
We would like to clarify the situation when an adjustment causes the loss adjusted to fall into a new range (comment (c)). We believe that the best option is to impact the new range for the entire loss adjustment (eg loss in N-1 = € 19,000 to be carried over to line 921, loss adjustment in N = + 4000 € to be carried over totally on line 922). It would be too complex in information system if we exclude the original loss amount in the previous range and assigning the loss adjusted in the new range. It’s not consistent with line 931-934 because if we would apply this rule (c) we report 2 event (one on previous range and another one on new range)
Annex II Page 6 –“Rows940-944
c) It would be easier to implement and control if a single adjustment is reported in only one bucket and not two
These rules could lead to a negative amount in a cross cell business Line/ risk category
e) ” the negative net amount of the loss adjustment shall still be included in row 940”. Please clarify how the net amount should be calculated (net of recoveries, of insurance, both of them?)"
We need more clarification on the threshold of identification and reporting of the largest incidents.
This new template is similar to template 05 from STE (with the difference that in STE we also report the largest incidents by sub-categories). Thus, this means reporting twice the same list of largest incidents.
Will the STE reporting be maintained, or will this new template C17.02 be partially replacing it?
Question 1: Could you please quantify both the implementation costs and recurring production costs (expressed in man days) that would arise when implementing the changed reporting requirements on OpRisk as part the regular reporting framework? How would these recurring production costs compare to a situation in which institutions were required to comply with ad-hoc data requests that are required to comply with current competent authorities’ requests on institutions’ OpRisk losses (e.g. SSM short-term exercise)? [see page 16]
The time estimation to implement the changed reporting requirements on OpRisk depends on data model of each entity. This could lead to a workload from 60 man/days to over 200 man/days.Question 2: Could you please quantify the implementation costs (expressed in man days) that would arise when implementing the new reporting requirements on sovereign exposures as part the regular reporting framework? How would these implementation costs compare to a situation in which institutions were required to comply with ad-hoc data requests that are required (i) to comply with the EBA’s transparency exercises and (ii) to comply with competent authorities’ requests on institutions’ sovereign exposures (e.g. SSM short-term exercise)? [see page 17]
As presented in this consultation, we estimate that the cost of producing these two new templates on sovereign exposures will be higher than collecting additional information through STE Exercise and Transparency Exercise on a recurrent basis and not to mention very highly costs for the implementation that should be assimilated to those of BCBS239 IT developments.Question 3: The threshold defined in Article 5 (b) 3 (a) exempts institutions that fall short of the threshold from the new requirements. Do you think that this threshold is appropriate so that (i) institutions with material sovereign exposures are required to report (and hence supervisors will have the relevant information for their assessments) while (ii) smaller and less complex institutions are more likely to be exempt from the new reporting requirements? [see page 17]
No commentQuestion 4: Is there a noteworthy difference in terms of costs between point (b) which requires a full country breakdown and point (c) which limits the breakdown to a total and domestic country? If there is a noteworthy difference, please try to quantify the cost difference and put it into context with the overall implementation costs that you expect with the new reporting requirements on sovereign exposures. [see page 17]
The difference is noteworthy regarding costs and operational impacts on IT systems as mentioned in our comments presented aboveQuestion 5: Are the reporting templates related to sovereign exposures (C 33.01 and C 33.02) as set out in Annex I and related instructions in Annex II sufficiently clear? In case of uncertainties on what needs to be reported, please provide clear references to the respective columns/rows of a given template as well as specific examples that highlight the need for further clarifications. [see page 18]
Could you please confirm that sovereign exposures are to be reported at the consolidated level in IFRS GAAP when applicable.Question 6: Are the reporting templates related to OpRisk losses (C 17.01 and C 17.02) as set out in Annex I and the related instructions in Annex II sufficiently clear? In case of uncertainties on what needs to be reported, please provide clear references to the respective columns/rows of a given template as well as specific examples that highlight the need for further clarifications. [see page 19]
onsultation Paper Page 10: Art 18We would like to have more indications and precise criteria to include institutions and their subsidiaries to reporting the full sheet C.17 on Oprisk Loss data. And if all the entities of a Bank Group would be concerned by an ITS (included STA or BIA entities).
Annex II Page 2 art 129:
Template C17.01, line X50: Could you confirm if we shall apply the same rule as the one concerning the line X60 (cf. page 2, Art 129) : Reported maximum single loss for the first time within the reporting period (i) or the largest positive adjustment for events reported for the first time within a previous reporting period (ii) if (ii) > (i)
Annex II Page 2 art 130 and 131:
We would like to make a negative sign for these lines to be consistent with others lines (template C17.01, line X70 and X80)
Annex II Page 2 art 134:
Presently, the use of the « Corporate items » row is limited to establishments using the AMA methodology (as article 322 refers to article 312-2, dedicated to AMA). In the consultation paper, the wording is unchanged (point 134 in the consultation paper being equivalent to point 130 of the current appendix 2). However, for COREP consolidation purposes, and as the AMA methodology is to be discarded soon, this row should be made available for all (and not restricted to AMA establishment).
Annex II Page 7 art 138:
Should we only provide the losses for the period or should we include the largest positive loss adjustment reported for the first time within a previous reporting period?
Annex II Page _8 § 4.2.3.2 : ID event : Would it be possible for each institution to keep its specific IDs for easier checking ?
Annex II Page _8 § 4.2.3.2 : Description (Column 200) : The internal process of validation of the qualitative data is very burden and complex. It’s very difficult to meet this need for 17 lines without burdening the process. We propose to make a comment only for the 5 largest losses
Reporting period:
For an OPR DETAILS on 31/12/2016, is the reporting period of the OPR DETAILS of 30/06/2016 (reporting period: 01/01/2016 au 30/06/2016) considered as « a previous reporting period »?
Other comments:
Linked roots events: Do we have to use the same approach used in the Short term exercise?
For some institutions, it will be difficult to separate recoveries from insurance and other recoveries
Question 7: Are the rules for the assignment of loss adjustments to ranges as defined for rows 940 to 944 sufficiently clear? In case of uncertainties, please provide suggestions to improve the clarity and/or effectiveness of the reporting instructions for loss adjustments. [see Annex II, page 7]
Annex II Page 5 – “Rows 930-934” : c) and d)Number of loss event: We would like to know if a single adjustment will be double counted, once in the range before adjustment and once in the range after adjustment. This will complicate controls and verification of such rules.
Annex II Page 5 – “Rows 940-944”
“(i.e report the original loss amount with a negative sign in row 940)”. Please provide more indications to precise if we are talking about the amount of the adjustment or the amount of the original loss.
We would like to clarify the situation when an adjustment causes the loss adjusted to fall into a new range (comment (c)). We believe that the best option is to impact the new range for the entire loss adjustment (eg loss in N-1 = € 19,000 to be carried over to line 921, loss adjustment in N = + 4000 € to be carried over totally on line 922). It would be too complex in information system if we exclude the original loss amount in the previous range and assigning the loss adjusted in the new range. It’s not consistent with line 931-934 because if we would apply this rule (c) we report 2 event (one on previous range and another one on new range)
Annex II Page 6 –“Rows940-944
c) It would be easier to implement and control if a single adjustment is reported in only one bucket and not two
These rules could lead to a negative amount in a cross cell business Line/ risk category
e) ” the negative net amount of the loss adjustment shall still be included in row 940”. Please clarify how the net amount should be calculated (net of recoveries, of insurance, both of them?)"
Question 8: Are the new rules for the determination of the number of loss events subject to loss adjustments for certain ranges of gross loss amounts as defined for rows 931 – 934 and the rules for the assignment of loss adjustments to ranges as defined for rows 940 to 944 appropriate in terms of cost/benefit? Please try to quantify the cost impact and put it into context with the overall implementation costs that you expect with the changed reporting requirements on OpRisk. [see Annex II, page 7]
No commentQuestion 9: Which option as regards the threshold for OpRisk loss events is the least complex or least costly in terms of implementation? [see Annex II, page 8]
Annex II Page 7, art 138.139 and Consultation Paper Page 12: art 26We need more clarification on the threshold of identification and reporting of the largest incidents.
This new template is similar to template 05 from STE (with the difference that in STE we also report the largest incidents by sub-categories). Thus, this means reporting twice the same list of largest incidents.
Will the STE reporting be maintained, or will this new template C17.02 be partially replacing it?