What spread must be used for a ‘roll-over’ in ALMM table C 69.00?
Referring to Annex XIX -INSTRUCTIONS FOR COMPLETING THE ADDITIONAL MONITORING TOOLS TEMPLATE OF ANNEX XVIII, it is stated in part 1.4 in paragraph 10 that “For funding that has rolled-over during the reporting period that is still outstanding at the end of the reporting period the average of spreads applying at that time (i.e. end of reporting period) shall be reported. For the purposes of C69.00, funding that rolled-over and is still there at the end of the reporting period shall be considered to represent new funding”. It seems contradictory to ask for an average of spreads while referring to the end of the reporting period. For a roll-over, should we take into account the spread which was: • highest during the reporting period; • OR the spread which was applicable at the end of the reporting period (thus taking the reference rate at the end of the reporting period and the last fixing of rate of contract) • OR an average spread during the reporting period (only applicable if roll-overs within the reporting period should be taken into account)? Should we calculate the “average of spreads applying at that time” as stated in paragraph 10, as a weighted average? Is it possible to provide a clear and detailed example?
For the purpose of template C 69.00, the spread to be reported for roll-over funding shall be calculated according to section 1.4 para. 10 of Annex XIX. The paragraph requires institutions to report in ‘spread’ columns of each time bucket the average of spreads applying at the end of the reporting date, i.e. the ones resulting from the latest fixing of rate of the reporting period. The spread to be reported shall be calculated as a weighted average.
Consider an institution that has obtained three deposits of 100 €, 200 € and 300 € at the beginning of the reporting period; the three deposits have all the same maturity of one week. Suppose that the deposits have been always rolled-over during the reporting period and in the latest roll-over event the following rates have been fixed:
• 1,5% for the 100 € deposit;
• 1,6% for the 200 € deposit;
• 1,7% for the 300 € deposit.
The spread to be reported in C 69.00 for the time bucket ‘1 week’ should be calculatedas follows:
average spread= (100/600) * 1,5% + (200/600) * 1,6% + (300/600) * 1,7%