A validation in CA4 (v3688_s) prevents completion of rows 240, 270 and 291, therefore how should a short synthetic position be reported to offset a direct long position?

Row 230 of C 04 returns the amount of 'Holdings of CET1 capital of financial sector entities where the institution does not have a significant investment, net of short positions' and the guidance notes for completion reference Article 45 of the CRR. This row is a calculated row summing rows 240, 270 and 291, returning the holdings of direct, indirect and synthetic positions respectively. In turn each of these are calculated rows summing the gross and permitted short positions. However the COREP return includes validations at rows 230, 240, 270 and 291 which do not permit a negative value to be returned, i.e. the short position cannot be greater than the long position. The guidance notes for completing these rows refer to article 45 of the CRR which specifically allows the offsetting of the short and long positions in the same underlying exposure and this is not restricted to within the same holding type e.g. direct, indirect or synthetic. Thus a short synthetic position should be allowed to offset a direct long position.

Holdings are exposures net of the relevant short positions, i.e. not negative amounts. Negative amounts resulting from netting according to Article 45 of Regulation (EU) No. 575/2013 (CRR) are not deducted according to Art. 36 (1) h) or i) of CRR and therefore also not reported in the templates C 01.00 and C 04.00 of Annex I of Regulation (EU) No 680/2014 - ITS on supervisory reporting. As a consequence, for each type of holding (direct, indirect, synthetic), the amount to be reported net of the relevant short positions in rows 230, 240, 270 and 291 of C 04.00 must be positive or zero. The reporting of offsetting positions in template C 04.00 is in line with Article 45 CRR, since in the relevant rows (e.g. row 260) all offsetting positions in relation to the type of holding they belong to shall be reported, i.e. independent from whether the offsetting position itself is a direct, indirect of synthetic position. Hence, validation v3688_s is correct.