Question ID:
2016_2699
Legal Act:
Regulation (EU) No 575/2013 (CRR)
Topic:
Supervisory reporting - COREP (incl. IP Losses)
Article:
99
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations:
Regulation (EU) No 680/2014 - ITS on supervisory reporting of institutions (repealed)
Article/Paragraph:
Annexes I and II, C 03.00
Disclose name of institution / entity:
No
Type of submitter:
Competent authority
Subject Matter:
How institution-specific buffer and Capital buffer shall be reported in target CET1, T1 and Total Capital ratios (COREP C 03.00)
Question:

Our question is related to COREP template C 03.00. How to fill in lines 080, 100 and 120 (Target CET1, T1 and total capital ratios due to Pillar II adjustments) of this template is not entirely clear for us.

  1. When a jurisdiction requests a capital conservation buffer of 2.5 % that is applicable to all banks subject to own funds requirements on top of minimum own funds requirements of 4.5%, 6% and 8% defined under CRR Article 92, shall this buffer be reflected in Target CET, T1 and Total Capital leading to respectively 7%, 8.5% and 10,5%?
  2. When a bank has an institution-specific buffer of 2.25%, shall this buffer be reflected in all target ratios, in Target CET1 only, or in none?
  3. In the end, if both of the buffers mentioned in 1) and 2) are imposed, which of following options a) to f) is the one to be applied?
    1. target CET1, T1 and TC of respectively 4.5,%, 6% and 8% (capital buffer and institution-specific buffer not taken into account)
    2. target CET1, T1 and TC of respectively 7%, 8.5% and 10.5% (capital buffer common to all banks of 2.5% taken into account)
    3. target CET1, T1 and TC of respectively 6.75,%, 6% and 8% (capital buffer not taken into account and institution-specific buffer only reflected in CET1)
    4. target CET1, T1 and TC of respectively 6.75,%, 8.25% and 10.25% (capital buffer not taken into account and institution specific buffer reflected in CET1, T1 and TC)
    5. target CET1, T1 and TC of respectively 9.25,%, 8.5% and 10.5% (capital buffer taken into account and institution specific buffer reflected in CET1 only)
    6. target CET1, T1 and TC of respectively 9.25,%, 10.75% and 12.75% (capital buffer taken into account and institution specific buffer reflected in CET1, T1 and TC)
  4. Following the requirement of a NCA that the reporting institution should maintain a specific CET 1 capital ratio, after the Supervisory review and evaluation process, what figure should banking institutions report in own funds template C 04.00, row 820 as ‘own funds requirements related to Pillar II adjustments’?
Background on the question:

Can an institution-specific buffer be only reflected in the CET1 ratio leading to a target CET1 > Target Tier 1? Shall the capital buffer imposed to all banks in a jurisdiction be considered as specifc? We believe not by definition but we would like to get it confirmed.

Date of submission:
06/04/2016
Published as Final Q&A:
03/02/2017
Final Answer:

The legal basis for reporting rows 070 to 120 of C 03.00 and row 820 of C 04.00 of Annex I of Regulation (EU) No 680/2014 (ITS on Supervisory Reporting) is Article 104 (2) of Directive 2016/36/EU (CRD). This means that measures with effects on the capital ratios, that are based on Article 104 (2) CRD are reflected in these cells. Measures or requirements that are not based on this specific Article are not reflected. This includes buffer requirements in accordance with Articles 128 to 140 CRD or Article 458(2) point d (iv) of Regulation (EU) No 575/2013 (CRR), that are only reflected in C 04.00, rows 740 to 810, applicable columns of C 06.01 / C 06.02 and C 09.03 or C 09.04 of Annex I of the ITS on Supervisory Reporting.

Question 1)

A capital conservation buffer in accordance with Article 128 (1) CRD is not reflected in rows 070 – 120 of template C 03.00 of Annex I of the ITS on Supervisory Reporting in any case (i.e. neither when an additional Pillar II requirement in accordance with Article 104 (2) CRD is imposed nor when no Pillar II requirements are set). Thus, the corresponding amount – i.e. the own funds needed to fulfil the capital conservation buffer requirement as of the reporting reference date – should be reported exclusively in row 750 of C 04.00 of Annex I of the ITS on Supervisory Reporting.

Question 2)

An institution-specific countercyclical capital buffer in accordance with Article 128 (2) CRD is reported in C 04.00, row 770 (corresponding amount as applicable at the reporting reference date).

In case the requirement is different from the buffer requirement of Art. 128 point (2) of CRD and is imposed by the competent authority pursuant to Article 104 (2) CRD, this buffer shall be reflected in C 03.00.

It then depends on the requirements of the competent authority whether rows 070, 090 and 110 or rows 080, 100 and 120 have to be filled. The competent authority should clarify whether the imposed target ratio is only related to the CET 1 ratio or also to T1 ratio and / or total capital ratio.

In case the competent authority requires the institution to fulfil a specific target ratio, this is reported in rows 080, 100 and / or 120 of C 03.00, as applicable.

If the competent authority requires the institution to calculate additional own funds requirements for Pillar II reasons in accordance with Article 104 (2) CRD, then these additional own funds requirements have to be reported in C 04.00, row 820 and the capital ratios including these adjustments have to be reported in C 03.00, rows 070, 090 and 110. No target ratios in rows 080, 100 and 120 will be reported in this case.  

Question 3)

Assuming that the ‘institution-specific buffer’ mentioned in question 2 is a Pillar II requirement imposed in accordance with Article 104 (2) CRD and specified in form of a target ratio, either option b) or c) – depending on the content of the decision of the competent authority – represent the correct way of reporting in C 03.00. In accordance with the legal references and instructions provided for rows 080, 100 and 120 of C 03.00, only the minimum requirements of Article 92 CRR and the Pillar II add-on is considered, while the capital conservation buffer requirement is disregarded.

Question 4)

In accordance with the answer to question 2), in case the Competent Authority requires the institution :

  1. to meet specific target ratios according to Article 104 (2) CRD, these target ratios should be reported in C 03.00 rows 080, 100 and 120 and nothing should be reported in C 04.00, row 820;
  2. to calculate additional own funds requirements for Pillar II pursuant to Article 104 (2) CRD, this amount should be included in the solvency ratios reported in C 03.00 rows 070, 090, 110 and, furthermore, included in row 820.
Status:
Final Q&A
Answer prepared by:
Answer prepared by the EBA.
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