We do not understand how collateral swaps should be integrated in the reporting template. o Indeed, to calculate the inflows / outflows concerning reverse repos and repos, there should theoretically be a cap on the difference between the cash value of the operation and the market value of underlying security. To calculate the inflows / outflows generated by collateral swaps, the same kind of calculation should be done, but without the cap. o Since operationally the same cells should be used to integrate repos / reverse repos and collateral swaps in the EBA template, we do not understand how this can give adequate results in terms of LCR ratio calculation.
Example: An institution contracts a repo maturing in the month with a level 2 asset for a cash value of 100. Case1: Imagine that the market value of this asset has increased since the conclusion of the repo so that it becomes 120, which makes a market value according §418 of CRR of 120*85%=102. Then, according to the instruction, we should put 100 in column “amount due” somewhere in lines 1.2.2. and 120 in column “market value” in the same line. So far as we understand the Basel and the European text (§422-2 outflows on other liabilities), you should multiply the cash value by 0% up to the market value of the underlying asset and by 100% for the remaining value. As 100<120*85%, we should only multiply 100 by 0%. Case 2: If the market value of the underlying level 2 asset stays 100, then its market value under §418 is 85 and the I should take an outflow of 15. Which means that the formula to calculate the outflows must be 100% * max(cash value – market value ; 0). If we do not put the max, in case 1, we will take an inflow for a repo which we think was not intended by the text. Consider now that the institution has concluded a collateral swap maturing in the month, giving a level 2 asset with a MV of 100 and receiving a level 1 asset with a MV of 100. The instructions tell you: “Collateral swaps where the institution simultaneously borrows collateral and lends collateral (in the form of assets other than cash), should be reported as follows: The market value of the asset lent should be reported in the “Market value of the asset securing the transaction” column in the appropriate subcategory of section 1.2.2 of this template. The “Amount due” column should be left blank (i.e. zero). The market value of the asset borrowed should be reported in the “Market value of the asset securing the transaction” column in the appropriate subcategory of section 1.1.3 of template 1.3 “Inflows”. The “Amount due” column should be left blank (i.e. zero).” So you should put 100 in the inflows corresponding to the MV of level 1 asset and 100 in the outflows corresponding to the MV of level 2 Normally, in the logic of the LCR, this kind of operation should give you an outflow of 15 corresponding to the need to increase the collateralization of the level 2 asset you provide. Which works in the template if you do the following operation : + 100%* (cash value – market value of the level 1 asset) – 100% * (cash value – market value of the level 2 asset*85%) = +100% * (0-100)- 100% *(1-85)= -100+85=-15 That is the formula of the repos and the reverse repos but without the cap. If we apply the cap, the formulas will give us zero as an output.