The question concerns the reporting method under the Credit Risk Standardised Approach (CRSA) of (reverse) repurchase transactions and/or securities financing transactions (SFT) which are (partly) collateralised by cash on deposit. Specifically, this concerns the correct reporting of the CRM substitution effect of cash collateral received and the allocation of a 0% risk weight of the portion of the exposure covered by such collateral.

Article 222(4) CRR permits the 0% risk weight of the portion of the references exposures which is collateralised by cash. However, the COREP reporting instructions (ITS on Supervisory Reporting Annex II) are not clear on how to correctly report this permitted risk weight reduction.

Article 271 of Regulation (EU) No 575/2013 (CRR) provides a discretion for institutions to determine the exposure value of repurchase transactions either in accordance with Part Three, Title II, chapter 6 (i.e. counterparty credit risk – CCR) or with Part Three, Title II, chapter 4 (i.e. credit risk mitigation – CRM).

The question explicitly refers to the second alternative (determination based on the CRM rules), namely the case where the application of Article 222(4) CRR is allowed. In accordance with this article, the 0% risk weight is permitted to be applied to the collateralized portion of the exposure arising from repurchase transaction and securities lending or borrowing transactions which fulfil the criteria in Article 227 CRR.

In this case, the reporting method according to COREP CRSA templates (template C 07.00 of Annex I to Regulation (EU) No 680/2014 (ITS on Supervisory Reporting)) is the following:

• In columns 010 to 040, the relevant amounts are reported in the exposure class of the counterparty
  1. in row 010 (total)
  2. in rows 090 and 100 (pertaining to Securities Financing Transactions) and
  3. in the row corresponding to the applicable risk weight of the counterparty,

i.e. without taking into account the CRM effects.

• As a consequence of credit risk mitigation techniques with substitution effects – in this case linked to a financial collateral simple method in accordance with Article 222 of CRR –, exposures collateralized should be reallocated to the exposure class of the issuer of the collateral. In case of cash collateral, the exposure class ‘other items’ is applied.
  1. The CRM effects calculated according to the Financial Collateral Simple Method (Article 222 CRR) are reported in column 070 and the related outflows in column 090 of rows 010, 090 and 100 in the exposure class of the counterparty;
  2. An inflow is reported in column 100 of rows 010, 090 and 100 in the exposure class of the counterparty
• Consistently with the amounts reported as outflows (column 090) and inflows (column 100), institutions report in column 150 (Fully adjusted exposure value (E*))
  1. the unsecured part of the exposure in row 010, rows 090 and 100 and in the relevant row from 140 to 280 on the basis of the risk weight attributable to the counterparty and thus in the exposure class of the counterparty,
  2. while the collateralized part of the exposure is shown in rows 010, 090, 100 and 140 in the exposure class ‘other items’ in case of cash collateral when Article 222 (4) CRR applies.