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List of Q&A's

C.34.07 invalid validation rule EGDQ_0802 and EGDQ_0803

The validation ruleEGDQ_0802: The total exposure value ({c0010}) and RWEA ({c0060}) with own estimates of LGD and/or conversion factors ({s0001}) should be equal to the sum of all portfolios with own estimates of LGD and/or conversion factors. and EGDQ_0803: The total exposure value ({c0010}) and RWEA ({c0060}) with own estimates of LGD and/or conversion factors ({s0002}) should be equal to the sum of all portfolios with own estimates of LGD and/or conversion factors.Are incorectly implemented resulting in wrong validation error messages.EGDQ_0802 and EGDQ_0803 have to be looked at simultaneously. Both checks seem to be ''intertwined', resulting in a wrong comparison. The sum over all sheets 'with own estimates of LGD' is compared with the total sheet for 'without own estimates of LGD', and vice versa. The first check I would expect is to sum over all sheets 'with own estimates of LGD' , and compare it with the total sheet for 'with own estimates of LGD'The second check I would expect is to sum over all sheets 'without own estimates of LGD' , and compare it with the total sheet for 'without own estimates of LGD'.

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

Ability of the Share Premium to absorb losses

Can the Share Premium be recognised as CET1 capital if there are features preventing its use to absorb losses?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

Card data (PAN) to be returned in AISP calls

Does the ASPSP have to return the card number (PAN) attached to a fetched payment account in case the user can access this data during a standard session with its ASPSP in the direct internet banking interface? In case of "YES", does the TPP that is fetching this data have to be PCI DSS certified, since this data has to be encrypted based on the PCI DSS requirements? Moreover, could be the "card number (PAN)" considered sensible, since it could be potentially used for fraud?

  • Legal act: Directive 2015/2366/EU (PSD2)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Regulation (EU) 2018/389 - RTS on strong customer authentication and secure communication

Share-linked instruments

Is it possible for listed institutions to award variable remuneration under a prospective remuneration plan in share-linked instruments which are priced based on their fair value, applying certain value tunings to the underlying share price due to regulatory availability constraints, including an adjustment to the market value of the share considering that the market value reflects a full entitlement to all expected future dividends?

  • Legal act: Directive 2013/36/EU (CRD)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: EBA/GL/2021/04 - Guidelines on sound remuneration policies under CRD (repealing EBA/GL/2015/22)

Prospective remuneration plan for variable remuneration

What requirements must a remuneration plan fulfil in order to fall under the concept of “prospective remuneration plan for variable remuneration, including LTIPs, […] exclusively based on future performance conditions”, as per para. 139 of the EBA Guidelines, so that instruments awarded under then plan should exceptionally be valued for the purpose of the calculation of the ratio between variable and fixed components of the total remuneration with the market price or fair value at the time the prospective remuneration plan was granted? In particular, can an incentive plan which combines both short-term and long-term performance conditions fulfil the requirements of a “prospective remuneration plan” within the meaning of para. 139 of the EBA Guidelines?

  • Legal act: Directive 2013/36/EU (CRD)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: EBA/GL/2021/04 - Guidelines on sound remuneration policies under CRD (repealing EBA/GL/2015/22)

Mandatory substitution approach according to Article 403 when applying the CCR exposure value calculation as set out in Sections 3 to 5 of Chapter 6 of Title II of Part Three of Regulation (EU) No 575/2013 (Derivatives and Long Settlement Transactions)

Is the mandatory substitution approach according to Article 401 (4) detailed in Article 403 of the CRR to be applied when an institution uses SA-CCR, Simplified SA-CCR or OEM for the derivative business?If yes, what is the amount that the institution shall assign to the protection provider/collateral issuer? Also, what will be considered as original direct exposure value to be reduced by the amount assigned to the protection provider/collateral issuer? 

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Draft ITS on Supervisory Reporting of Institutions

Template 4 - Exposures to top 20 carbon-intensive firms

Could you please provide a single list to identify the top 20 most carbon-intensive firms?If not possible, can you define the criteria to be considered to identify the top 20 most carbon-intensive firms? For instance: sector of the counterparty, emissions scope considered (1, 2, 3)?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Regulation (EU) 2022/2453 - ITS on ESG disclosures

Template 2 - Energy efficiency of the collateral without EPC label

Could you please clarify the objective of columns o and p in rows 5 and 10 as EPC label cannot be estimated and the total is already reported in column a?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Regulation (EU) 2022/2453 - ITS on ESG disclosures

Template 1 - exposures towards companies excluded from EU Paris-aligned Benchmarks

Should the EU Paris-aligned Benchmarks exclusion criteria be applied at consolidated group level and to that end, exclude the total gross carrying amount of the exposure towards the consolidated group level?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Regulation (EU) 2022/2453 - ITS on ESG disclosures

Treatment of credit institutions from the UK in terms of limits to large exposures

Is it possible to consider the prudential, supervisory, and regulatory requirements applied to credit institutions located in the UK as at least equivalent to those applied in EU for the purpose of Article 391 of Regulation (EU) No 575/2013?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

Misalignment between table 2 Annex XXXIX and Annex XL

The Pillar 3 DA foresees the publication of three qualitative sections which require the application, in particular, of Regulation (EU) no. 2022/2453. From the examination of this A discrepancy has been observed between the delegated regulation and its annexes I (which includes the text of the original annex XXXIX) and II (which contains the text of the original annex XL) regarding what is reported  in table 2 of the Annex XXXIX and what is described in the instructions for table 2 of Annex XL about letter d) relating to Governance on social risk. In particular:- In Annex XXXIX table 2 - Qualitative information on social risk in line d) for the Governance aspects, it is specified what information must be published: the "Responsibilities of the management body for setting the risk framework, supervising and managing the implementation of the objectives, strategy and policies in the context of social risk management covering counterparties' approaches to: (i) Activities towards the community and society, (ii) Employee relationships and labor standards, (iii) Customer protection and product responsibility, (iv) Human rights". The focus of the information appears to be on the approaches that the Bank's counterparties (customers and suppliers) take towards the community and society, its relationships with employees and compliance with labor standards, customer protection and product liability and human rights, posing an indirect risk for the financial institution.- In Annex XL the instructions for compiling the tables and models referred to in Annex XXXIX provide that "in accordance with Article 449a of Regulation (EU) No 575/2013, in conjunction with Article 435(1), point ( b), and Article 435(2), points (a), (b) and (c), of that Regulation, institutions shall describe how their management body is involved in the supervision and management of social risks. That information shall cover the rationale of the approach taken by the management body and take into account a number of social factors. Those factors include the institution’s engagement towards the community and society, its relationships with employees and compliance with labor standards, customer protection and product responsibility, and human rights.” In this case there would be a direct risk for the Bank. The art. 18 bis point 1 a) of Regulation (EU) 2022/2453 also establishes that, in relation to information on environmental, social and governance risks, entities (intended as financial institutions) publish "qualitative information on environmental, social and governance risks using tables 1, 2 and 3 set out in Annex XXXIX to this Regulation and following the instructions set out in Annex XL to this Regulation”.Should table 2 Annex XXXIX be filled reporting direct or indirect risks?   

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Regulation (EU) 2022/2453 - ITS on ESG disclosures

Corep reporting C 34.06 – Top 20 counterparties - validation rule EBA_v10236

Concerning the Corep reporting C 34.06 – Top 20 counterparties, further clarification is required for validation rule EBA_v10236.Row 0040 (Sector of the counterparty) specifies that one sector must be chosen for each counterparty based on the following FINREP economic sector classifications: (i) x10 Central Banks ; (ii) x1 General Governments; (iii) x12 Credit institutions; (iv) x599 Investment firms as defined in Article 4(1), point (2) of Regulation (EU) No 575/2013; (v) x598 Other financial corporations (excluding investment firms); (vi) x20 Non-financial corporations.However, some counterparties in our EQ options are individuals (households) and do not fall under any of the codes allowed . How to meet the requirements of validation rule EBA_v10236 for the household sector among the 20 largest exposures due to counterparty credit risk?which of the values ('x10', 'x1', 'x12', 'x598', 'x599', 'x20') should be used for physical persons as reporting 'x5-households'  defined in CT16_1 is not permitted?or maybe households are not in a scope of reporting and should be excluded from the table?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Regulation (EU) No 1423/2013 - ITS on disclosure of own funds requirements

Automatic cancellation of commitments qualified as unconditionally cancellable commitments (UCC)

If contractual arrangements of a commitment provide for automatic cancellation due to deterioration in a borrower’s creditworthiness, but the cancellation is not always automatic considering client relationship, can this commitment be considered as an unconditionally cancellable commitment (UCC)?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

rho_delta used for aggregation non GIRR Vega sensitivities

In cases where the dimensions of the volatility curve and the underlying curve is not aligned, what should be used a rho_delta for aggregation of Vega sensitivities in such cases? 

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

Validation rules v11886_m and v11887_m

v11886_m states that with regard to C 08.03 {c0050, s0001} = emptyv11887_m states that with regard to C 08.03 {c0070, s0001} = emptyIs it correct that the validation rules v11886_m and v11887_m are only applicable for s0001 (AIRB) at total level and that there are no such validation rules for s0002 (FIRB) at total level?When the validation rules v11886_m and v11887_m are only applicable for s0001 (AIRB), why is this validation rule not applicable to C34.07 as well as there the same information is requested? In other words, are the validation rules with regard to the exposure weighted average PD %) and exposure weighted average LGD (%) consistently applied throughout the DPM?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Regulation (EU) 2021/451 – ITS on supervisory reporting of institutions

ESG P3 - Template 2 and 5 - Sectors to be included for loans collateralized by RRE/CRE

In DPM 3.3 table layout for ESG template 2 (D 02.00a and D02.00b) the information on Energy efficiency associated to real estate collateral is limited to loans&Advances belonging to counterparty sector "Non-financial corporations", which would mean that Loans&Advances to households, or any other sector, collateralized by immovable property would not be included in this template.However, In DPM 3.3 table layout for ESG template for ESG template 5 (D 05.00a), the information related to real estate collateral is not limited to counterparty sector "Non-financial corporations", which would meand that all sectors can be included, generating a difference between what would be published in the two templates.Is this correct?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Regulation (EU) 2022/2453 - ITS on ESG disclosures

Determination of exposure value cap for netting sets subject to a margin agreement.

CRR Art. 274 (3) states that the exposure value of a netting set that is subject to a margin agreement may be capped at the exposure value of the same netting set assuming it would not be subject to a margin agreement. In this context the question arises if variation margin that the institution has already received or posted should be disregarded in order to determine this cap.  

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

Template 3, Climate Change Alignment Metrics

Regarding the data requirement, should all companies falling under the NACE codes defined in Template 3 be included, or can practicality be applied to specifically target companies for whom the transition risk metric is relevant?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Regulation (EU) 2022/2453 - ITS on ESG disclosures

Template 3, Climate Change Alignment Metrics

Does IEA NZE 2050 explicitly provide alignment metrics, including intensity targets for every relevant sector? Furthermore, are these applicable metrics listed, documented and accessible somewhere? If a metric can be determined from IEA NZE 2050, would one metric be adequate per sector?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Regulation (EU) 2022/2453 - ITS on ESG disclosures

Treatment of RNIME (Risks not in the model engine) in COREP reporting

What COREP template should be used for the reporting of RNIME? Our NCA has advised us to report RNIME in COREP C02.00 (Own Funds Requirements) row 760, according to Article 3 CRR and the ECB Guidance on Internal Models (chapter Market Risk, page 176, footnote 90), instead of the Market Risk template C 24 MKR IM in accordance with Article 92 (3)(c) CRR.

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Regulation (EU) 2021/451 – ITS on supervisory reporting of institutions