Question ID:
2014_1000
Legal Act:
Regulation (EU) No 575/2013 (CRR)
Topic:
Supervisory reporting - FINREP (incl. FB&NPE)
Article:
99
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations:
Draft ITS on Supervisory Reporting of Institutions
Article/Paragraph:
Annex V
Disclose name of institution / entity:
No
Type of submitter:
Credit institution
Subject Matter:
Statement of profit or loss
Question:

Can you please clarify what is required by the Annex V guidance on this data point? Two parts of paragraph 24 (the reference given in the template) appear to be inconsistent. The phrase "May be reported" suggests that there is an option about whether or not to classify derivates Held For Trading in this data point, whereas "shall be included" suggests that the income and expense must be shown within interest income and expense, and therefore must be included in this data point 020 or data point 100 for any expense. Further, can you clarify how this paragraph 24 of Annex V relates to paragraph 21? Paragraph 24 is not given as a reference for this data point, but appears to be applicable as it applies to financial instruments Held For Trading. It strongly suggests that it is optional whether to include gains or losses from such instruments within Interest Income/ Expense or Gains and Losses. -------------

Background on the question:

24. The amounts related to those derivatives classified in the category “held for trading” which are hedging instruments from an economic but not accounting point of view may be reported as interest income and expenses, to present correct interest income and expenses from the financial instruments that are hedged. These amounts shall be included as a part of the items “Interest income. Financial assets held for trading” and “Interest expenses. Financial liabilities held for trading”. 21. Interest income and interest expense from financial instruments held for trading, and from financial instruments designated at fair value through profit or loss, shall be reported either separately from other gains and losses under items “interest income” and “interest expense” (so-called “clean price”) or as part of gains or losses from these categories of instruments (“dirty price”).

Date of submission:
25/03/2014
Published as Final Q&A:
27/02/2015
Final Answer:
In general, as stated by paragraph 21 of part 2 of annex V Regulation (EU) No 680/2014 13 ITS on Supervisory Reporting of institutions (ITS), interest income and expenses from financial instruments held for trading can be classified separately as interest income and expenses ("clean price") or as part of the gains and losses from these assets (namely, fair value changes), a practice known as "dirty price". The word "shall" in the paragraph means that these are the only two accepted possibilities for the reporting of these amounts.
 
Paragraph 24 of part 2 of annex V of the ITS on Supervisory reporting covers those derivatives which are classified as held for trading, which are economic hedges (see paragraphs 73 and 74 of part 2 of annex V of the ITS on Supervisory reporting) but which are not hedges from an accounting point of view; that is to say, they do not comply with the definition of hedge accounting in IAS 39. In this specific case, there is a possibility to report the amounts separately as interest income: financial assets held for trading (row 020) or interest expense: financial liabilities held for trading (row 100).
Status:
Final Q&A
Answer prepared by:
Answer prepared by the EBA.
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