Validation rule v7349_m_0 requires that:
{C 14.00, c0140} ≤ {C 14.00, c0230} +{C 14.00, c0240} +{C 14.00, c0250}
However, the validation rule does not take into account amounts reported in column c0254 (Overcollateralization and funded reserve accounts).
At the same time, the reporting framework distinguishes overcollateralization and funded reserve accounts from the amounts reported in the senior, mezzanine and junior tranche columns. Furthermore, EBA Q&A 2023_6694 clarified that where an overcollateralization position meets the definition of a tranche it should be reported in the relevant tranche columns, whereas overcollateralization that does not meet the definition of a tranche should be reported in column c0254.
In a securitization transaction where a portion of the credit enhancement is appropriately reported in column c0254 and does not constitute a tranche, the amount reported in column c0140 may exceed the sum of columns c0230, c0240 and c0250 solely because the amount reported in c0254 is excluded from validation rule v7349_m_0 which would result in the validation rule v7349_m_0 failing.
Could the EBA clarify the intended application of validation rule v7349_m_0 in such cases?
In particular:
Should amounts reported in column c0254 be considered for the purposes of validation rule v7349_m_0, despite not being explicitly included in the formula?
Alternatively, does the validation rule reflect the assumption that any overcollateralization relevant for this comparison should be reported within the tranche columns (c0230-c0250)?
Where overcollateralization reported in c0254 does not meet the definition of a tranche, what is the expected reporting treatment considering in this instance that compliance with validation rule v7349_m_0 cannot be achieved?
- Legal act: Regulation (EU) No 575/2013 (CRR)
- COM Delegated or Implementing Acts/RTS/ITS/GLs: Regulation (EU) No 680/2014 - ITS on supervisory reporting of institutions (repealed)
