Table 20.6 of FINREP contains a geographical breakdown of liabilities by residence of the counterparty. Nonetheless, there is no guidance on how to determine the counterparty in the case of short positions.
The item short positions shows the amount that an institution should pay in the market for buying the securities that it has sold when it has acquired them under a securities lending operation or under a repurchase agreement. It is our understanding that in the case of short positions the counterparty is the issuer of the securities because the obligation of the institution is to buy exactly the same securities in the market, but not to any specific counterparty. Additionally, the obligation to return the securities to the counterparty that has provided them is recognized under the reverse repo or under the securities lending operation. In this sense, ECB regulation 1071/2013, concerning the balance sheet of the monetary financial institutions, in Annex III, part 3, when is defining "debt securities" estabishes that "where the temporary acquirer (of securities under securities lending operations or under a repurchase agreement) sells the securities received, this sale must be recorded as an outright transaction in securities and entered in the balance sheet of the temporary acquirer as a negative position in the securities portfolio." This treatment, although different than the one required in FINREP, implies that, for statistical purposes, the counterparty in a short position is the issuer of the securities.
In the fact pattern submitted:
In such a situation, IAS 39 par. 37 b requires the institution to recognize in its financial statement a liability versus the counterparty of the securities borrowing transaction / reverse repurchase agreement for its obligation to return the collateral.
Therefore, for the purposes of table F 20.06 the same criterion shall apply. The short position shall be broken down by the country and the sector of the counterparty of the securities borrowing transaction / reverse repurchase agreement.