Is it possible to include the positive impacts of operational risk errors in template C 17.00?

Related to validation V5836_M.

Possibility of consider operational risk errors with positive P/L impact in the C17 state if they have the same origin that other with negative P/L impact that are included.

In order to complete the C 17.00 state, and referring to the “execution, delivery, and process…” risk category, we take into account the cash unbalances as part of the operational events.

The cash unbalances could cause a loss (negative unbalance) or a profit (positive unbalance). In order to offer a complete economic view of our operational risk, we have always considered both kind of unbalances in our management and regulatory reporting, because they are caused or originated in the same processes, operations, and conditions. It’s important to explain that positive unbalances are not recuperations, they are the result of an operational error (similar to the negative ones), but with a positive cash consequence.

Taking into account the positive unbalances has triggered a non-restrictive error in the C17 validations, because the total amount of the positive unbalances is included in the total amount of losses of the category. In consequence, the total amount of losses is smaller than the addition of the buckets (10k-20k, 20k-100k, 100k-1M, >1M), given that this buckets only include the negative unbalances (the positive have a minus sign).

Events (e.g. errors) that lead to gains are irrelevant for rows 0920 to 0924 of template C 17.01 of Annex I to Regulation (EU) No 680/2014 (ITS on Supervisory Reporting). In these rows only events that cause losses can be recognized. Thus, the validation rule v5836_m is correct. Notwithstanding the positive unbalances should be collected and be used in the qualitative management of operational risk.