Promotional loans to private persons and non-public sector entities are not considered to be beneficiaries eligible for Article 429a(1)(d) exemption. Hence, private persons and non-public sector entities should be added to the graphics as beneficiaries. This exemption requires amendments to the corresponding COREP templates C 40.00 and C 47.00.
IPS structures in which a central institution passes through promotional loans to its group’s credit institutions have not been taken into account. Hence, some leeway to unburden small and non-complex institutions and to increase proportionality remains unused.
As these additional reporting requirements are only relevant for a small percentage of institutions with a certain business model, we would prefer to exclude those requirements from the overall reporting templates and to introduce a separate template that is only relevant for those specific institutions. Additionally, data collections within QIS could provide information whether these specific requirements have a substantial impact on LRE calculation.
The same applies to cash pooling and settlement/trade date accounting-specific reporting requirements. In some cases, those two topics have an only minor impact on the calculation but would lead to disproportionate operational complexity and costs. At the very least we would appreciate a situation where the reporting requirements for cash pooling arrangements that can be netted prudentially were to be removed from the templates, as they have no effect on the actual calculation of the leverage ratio exposure.
Because CPAs will only have to be disclosed separately in the context of the leverage ratio, meeting this extremely granular reporting requirement could lead to a disproportionately high investment cost and/or ongoing reporting effort. Reasons:
A netting process will have to be implemented in the reporting system in order to generate such granular outcome data. For a client, this netting process needs datasets on all asset and liability accounts with the following minimum content: account balances before netting, CPA contract number, attribute “Eligibility for accounting netting yes/no”, attribute “No eligibility for supervisory netting/Eligibility for supervisory netting under Article 429g(2) of the CRR/Eligibility for supervisory netting under Article 429g(3)”. The individual attributes would have to be generated in the course of extensive upstream processing; in addition, CPA contract datasets would probably have to be generated along the lines of derivatives and SFT netting.
We wish to point out that in the case of CPAs with daily settlement, that settlement is not normally performed at the end of the business day, but continuously over the course of the day. Simulated gross netting would have to be implemented in the account management system in which the CPAs are normally recorded so that the reporting system is fed with the corresponding outcome data.
We would also like to point out that the granularity in r193-198 breaches the systematic approach in template C 47. The model for all other items in C 47 is “1) Report entire exposure before deductions, 2) Report entire deductions“ (i.e. in line with the proposal shown above).
Alternative proposal: Institutions whose CPA business is not material (e.g. exposure value before netting is less than 5% of total assets) do not have to enter data in the cells in C 40.
C 47.00 Leverage Ratio Calculation (LRCalc)
Please delete the sub-items/secondary items 065/081/091/092/093 and 220. The related primary items 061 (Derivatives: replacement cost) and 091 (Derivatives: potential future exposure) must then be reported in accordance with Article 429c of CRR 2.
Compared with the previous calculation for derivatives, the calculation in the SA-CCR is more extensive and more complex. Disclosing parameters when calculating the leverage exposure for derivatives is only possible – if at all – with considerable technical effort. We are unable to discern any supervisory benefit from the separate disclosure of individual subtotals. For this reason, the level of detail in template C 47.00 should be limited to what is strictly necessary.
C 48.02 – Leverage ratio volatility: daily values for the reporting period (LR6.2)
The requirement to provide daily values in this context requires a new form of data storage and processing (temporary storage of daily values to determine mean quarter-end values). This will increase complexity. We therefore oppose the calculation of daily values.
Most: Securities finance transactions; however, reporting daily exposures is excessive and would lead to disproportionate operational complexity and costs. Our understanding is that a calculation based on weighted month-end average exposure values would provide the same information as an operationally excessive reporting of daily actuals. In any case, LR6.2 (C 48.01) should be deleted in order to reduce excessive burdens, as LR6.1 (C 48.02) already shows the average result of LR6.2.
Least: Other on-balance-sheet items.
If it remains mandatory to calculate LRE based on daily averages, we would appreciate a change in C 48.02 from reporting 60 daily values to reporting the maximum exposure amount within the specified quarter reporting time frame.
We would generally agree to aligning RWA and LRE figures and would prefer to report both figures after substitution.
However, we do not see any basis for retaining template C 43.00 and therefore advocate deleting it (see also Q24).
The main reasons are operationally based. To report RWA figures before substitution would require additional background processes, leading to increased complexity and costs.
Generally, no. Nevertheless we would ask you to consider the following two issues:
a. Template C 48.01 requires the mean the daily values of the reporting quarter to be reported – in addition, all business days within the reported period must be reported in template C 48.02.
This would lead to the fact that, for the first reporting date as at 30 June 2021, the daily process must be in place by 1 April 2021.
In order to reduce the burden and to give the institutions enough time for process implementation, the daily reporting should be shortened for the first reporting of daily values to one month (June 2021).
b. According to EBA Q&A 2015_1856, the “Other Assets” item should be stated gross. Any offsetting related to tax assets or liabilities should be reversed. We would suggest inserting a separate row in Template C 47.00 “LRCalc” to increase transparency about the amounts reversed.
c. The titles of rows 185 to 189 are very confusing. In order to provide better guidance for reporting institutions, we suggest the following adjustments:
i. row 185 “Regular-way purchases or sales awaiting settlement: Accounting value under trade date accounting”: Change to “Trade date accounting: Regular-way sales awaiting settlement”
ii. row 186 “Regular-way purchases or sales awaiting settlement: Reverse out of accounting offsetting under trade date accounting”: Change to: “Trade date accounting: Reverse out of accounting offsetting regarding regular-way sales awaiting settlement”
iii. row 187 “(-) Regular-way purchases or sales awaiting settlement: offset in accordance with 429(g)(2) of the CRR”: Change to: “Trade date accounting: Regular-way purchases awaiting settlement offset in accordance with 429(g)(2) of the CRR”
iv. row 188 “Regular-way purchases or sales awaiting settlement: Full recognition of assets under settlement date accounting”: Change to “Settlement date accounting: Regular-way purchases awaiting settlement”
v. row 189 “(-) Regular-way purchases or sales awaiting settlement: offset for assets under settlement date accounting in accordance with 429(g)(3) of the CRR”: Change to “(-) Settlement date accounting: Regular-way sales awaiting settlement offset in accordance with 429(g)(3) of the CRR”
Especially with regard to reporting requirements in LRCalc (C 47.00): the extensive data collection on regular way purchases or sales and cash pooling leads to a complex and confusing reporting structure with only minor additional insights. This also contradicts the initial idea of an easily comprehensive and comparable ratio/reporting. The relevant reporting requirements should be deleted. At the very least, we would appreciate it if the reporting requirements for cash pooling arrangement that can be netted prudentially were to be removed from the templates as they have no effect on the actual calculation of the leverage ratio exposure.
Further, the additional reporting requirements on public development credit institutions are only relevant for a small percentage of institutions with a certain business model, so we would prefer excluding those requirements from the overall reporting templates and introducing a separate template that is only relevant for those specific institutions. Additionally, data collections within QIS could provide information whether these specific requirements have a substantial impact on LRE calculation (see question 19.2).
There have been no changes in the derivative limits above which additional reporting items must be recorded, although the new definition of small and non-complex institutions has now been introduced. In this case, the derivative limits should be aligned with the same limit used for the application of the OEM (Article 273a(2) of CRR 2) in order to ensure more consistent treatment.
Additionally, we do not see any legal basis for retaining templates C 40.00 and C 43.00. In the same way as C 41.00 and C 42.00, which will be deleted under the present Draft, these templates were introduced for reporting data necessary to produce the report in accordance with Article 511 of the CRR. The EBA already submitted this report in 2016. Retaining data reports that are no longer required for supervisory purposes is excessively time-consuming for the institutions, so we are advocating the deletion of both templates.