Question ID:
Legal Act:
Regulation (EU) No 575/2013 (CRR)
Supervisory reporting - Liquidity (LCR, NSFR, AMM)
ANNEX XXII of the Official European Journal
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations:
Draft ITS on Supervisory Reporting of Institutions
ANNEX XXII of the Official European Journal
Disclose name of institution / entity:
Type of submitter:
Credit institution
Subject Matter:
Treatment of margined Derivatives which are physically settled in the Maturity Ladder (C66) Template

The guidance suggests that all margined derivatives should not be reported in the return for lines: "1.5 Derivatives amount payables other than those reported in 1.4" and "2.4 Derivatives amount receivables other than those reported in 2.3". How would you suggest that firms should report the cash flows relating to margined derivatives which are physically settled by the delivery of a commodity and the exchange of cash?

Background on the question:

If a firm traded derivatives which were margined and were physically settled for which one leg is cash and the other is non cash, i.e. a commodity forward based on the delivery of Gold. Despite this trade being margined, the material cash flow will be the exchange of principal at maturity, with a corresponding exchange of non cash. The guidance is quoted as: "cash and securities flows related to derivatives for which there is a collateral agreement in place requiring full or adequate collateralisation of counterparty exposures, shall be excluded from the maturity ladder templates; all flows of cash, securities, cash collateral and securities collateral related to those derivatives shall be excluded from the templates". We interpret this guidance as such that the margining of these trades would not fully collateralise the exposure with the counterparty as the margining would only eliminate mark to market movements not exposure on principal cashflow. As there is still a transfer of cash and a commodity at maturity of this trade we would deduce that counterparty exposure is not adequately collateralised and these cash flows at maturity should be reported on lines 1.5 and 2.4.

Date of submission:
Published as Rejected Q&A
Rationale for rejection:

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Rejected question