The structure seems to be complete however not relevant for most institutions due to their business model.
As these additional reporting requirements are only relevant for a small percentage of institutions with a certain business model, we suggest excluding those requirements from the overall reporting templates and introduce a separate template 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 welcome if the reporting requirements for cash pooling arrangements that can be netted prudentially would be removed from the templates as they have no effect on the actual calculation of the Leverage Ratio Exposure.
The Securities Finance Transactions (SFTs) volumes may be subject to temporary increases or reductions over the reporting period, with particular reference to Repos and Reverse Repos, rather than all the SFT deals e.g. security lending.
In particular, we deem that the item mostly susceptible to temporary reductions/increases is the Gross Accounting balance sheet value of Repo and Reverse Repo transactions, meaning the exposure value before the application of the:
reverse of any accounting off-setting according to article 429(7)(b) as emended by article 2(117) of CRR2, and
netting of cash receivables and cash payable according to article 429(b)(4) as amended by article 2(117) of CRR2.
We deem appropriate to monitor the Gross Accounting balance sheet value, as it represents the real volume of the transactions across the whole reporting period, while the remaining figures (accounting off-setting, cash-netting, add-on) provide non-significant information for the purpose of analyzing the volume evolution.
In particular, with reference to the add-on, being it a risk based measure not strictly correlated with the volume of the transactions, we would suggest not to rely on this item to assess the potential volatility of SFT transactions e.g. in case of Repos and Reverse Repos with Central Counterparties, the gross amount can be significantly high with a relative low add-on.
Moreover, we would recommend assessing the average amount based on the observation of the last 3 months end of the reporting period.
Least susceptible: Other on-balance-sheet items.
If it remains mandatory to calculate LRE based on daily averages, it would be welcomed that C48.02 should change from a reporting of 60 daily values to a report of the maximum exposure amount within the specified quarter reporting time frame.
We do not agree with this representation. Given the current nature of RWA calculation, where the substitution effect is fully integrated in the assessment, we do not deem significant to calculate an RWA value which does not consider the substitution effect and that would not be taken into account for any other steering process of the bank.
Yes, reasons are operationally based. Should the bank be required to implement a new specific RWA calculation only for Leverage ratio C 43.00 template purpose, the relevant implementation and maintenance would be expensive, time consuming and provide less significant results for the reasons stated above.
C 47.00 – Leverage ratio calculation (LRCalc): row 251 IPS exposures exempted in accordance with Article 429a(1)(c) of the CRR: instructions shall be more explained on IPS exposures.
Yes, we identified a discrepancy related to the definition of “Security Financing Transactions – SFT”.
In fact, in paragraph 1.3 it is stated the following: “SFT, which is an abbreviation of Securities Financing Transaction and shall mean “repurchase transaction, securities or commodities lending or borrowing transaction, long settlement transaction and margin lending transaction” as referred to in Regulation (EU) No 575/2013;”
The above definition including the “Long Settlement Transactions - LST” among the SFT, contrasts with the SFT definition included in the CRR2 article 2(a)(xv)(139) in which the LST are not included: (139) ‘securities financing transaction’ means a repurchase transaction, a securities or commodities lending or borrowing transaction, or a margin lending transaction;
Furthermore, according to article 429(4) as amended by article 2(117) of CRR2: “Institutions shall treat long settlement transactions in accordance with points (a) to (d) of the first subparagraph, as applicable.” We therefore assume that Long Settlement Transactions should not be defined as SFTs, even though it is not clearly defined in which row of C 47.00 template they should be inserted. Further clarifications on this matter would be welcomed.
Furthermore, we identified a discrepancy related to the description of row 188 “Regular-way purchases or sales awaiting settlement: Full recognition of assets under settlement date accounting” and 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”, and the related instructions.
In particular, for row 188 the instructions state: “The full nominal value of commitments to pay related to regular-way purchases, for institutions that, in accordance with the applicable accounting framework, apply settlement date accounting to regular-way purchases and sales.” Hence only the commitments related to the purchases have to be included in the present row.
Regarding row 189 the instructions state: “The full nominal value of cash receivables offset by the institutions, when they are allowed to offset the full nominal value of the commitments to pay related to regular-way purchases by the full nominal value of cash receivables related to regular-way sales awaiting settlement, in accordance with Article 429g(3) of the CRR.” Hence only the cash to be received related to the sales have to be included in the present row.
We thus propose to change the descriptions of rows 188 and 189 as follow:
row 188: “Regular-way purchases awaiting settlement: Full recognition of assets under settlement date accounting”, and
row 189: “(-) Regular-way sales awaiting settlement: offset for assets under settlement date accounting in accordance with 429(g)(3) of the CRR”
Finally, we would EBA to consider the two consequent issues:
1. In template C48.01, the mean of the daily values of the reporting quarter should be reported – in addition all business days within the reported period shall be reported in Template C48.02. This would lead to the fact, that for the first reporting date as per 30th June 2021 the daily process must be in place on 1st April 2021.
In order to reduce burden and to give the institutions enough time for process implementation the daily reporting should be shortened for the first reporting on daily values to one month (June 2021).
2) According to EBA Q&A 2015_1856 the position “Other Assets” should be stated gross. Offsetting related to tax assets or liabilities should be reversed. We would suggest inserting a separate row in Template C47.00 “LRCalc” to increase transparency on the amounts reversed.
With regards to reporting requirements in LRCalc (C47.00): 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 respective reporting requirements should be removed. At the very least, it would be welcomed if the reporting requirements for cash pooling arrangement that can be netted prudentially are removed from the templates as they have no effect on the actual calculation of the Leverage Ratio Exposure.
Besides the additional reporting requirements on public development, credit institutions 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 introduce a separate template 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).