Question ID
2014_1657
Legal act
Regulation (EU) No 575/2013 (CRR)
Topic
Supervisory reporting - COREP (incl. IP Losses)
Article
99
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
Regulation (EU) No 680/2014 - ITS on supervisory reporting of institutions (repealed)
Article/Paragraph
Annexes I and II, C 05.01
Type of submitter
Competent authority
Subject matter
Reporting transitional adjustments to RWA in C 05.01
Question

We observe different treatments in practice on how transitional adjustments to RWA are reported in template C 05.01. From the reporting instructions we find two interpretations possible: that the whole amount of RWAs is reported or that only the adjustment compared to a fully loaded approach, per se, is reported.

Background on the question

There are some assumptions to be made when calculating the adjustments to the RWA in order to calculate their “fully-loaded” amount. In theory it should be as:

RWA Fully Loaded = {C 02.00;r010;c010} - {C 05.01;r100;c040}

The item {C 05.01;r100;c040}, which is deducted from RWA, is the transitional adjustments to RWA, reported as the memo item. For most banks, these adjustments primarily reflect the transitional treatments for DTAs and Significant Investments in Financial Sector Entities, sub-item {C 05.01;r380;c040}.

For this data point, Annex II of the ITS on supervisory reporting currently only has as a reference “Article 470 CRR”. In practice, we see that banks may take two different approaches to calculating this item:

A.    Gross approach:
Banks report in {C_05.01; r380; c040} the full amount of RWA for DTAs and Significant Investments in Financial Sector Entities.

B.    Net approach:
Banks report in {C_05.01;r380;c040} the difference between the Article 470 treatment and the RWA that would have resulted in case Article 48 was applied without the transitional provisions specified in Article 470.

Submission date
Final publishing date
Final answer

Column 040 of template C 05.01 of Annex I of Regulation (EU) No 680/2014 (ITS on Supervisory Reporting) includes the relevant amounts adjusting the total risk exposure amount of Article 92 (3) of Regulation (EU) No 575/2013 (CRR) due to transitional provisions for own funds (Part 10, Title I, Chapters 1 and 2 of CRR). The amounts reported shall consider the application of provisions of Chapter 2 or 3 of Title II of Part Three or of Title IV of Part Three in accordance with Art. 92 (4) CRR.

This means that transitional amounts subject to provisions of Chapter 2 or 3 of Title II of Part Three of CRR should be reported as risk weighted exposure amounts, whereas transitional amounts subject to Title IV of Part Three should represent the own funds requirements multiplied by 12,5.

With regard to row 380 of template C 05.01, column 040 should be used to report the difference between the treatment of Article 470 CRR and the amounts that would have resulted if Article 48 CRR was applied without the transitional provisions specified in Article 470 CRR, as only this difference adjusts the total risk weighted exposure amounts of Art. 92 (3) CRR.

Therefore, during the transitional period and with the constraint that only the transitional provisions of Part 10, Title I, Chapters 1 and 2 of CRR are taken into account, it is possible to calculate the total risk exposure amount fully loaded as difference between the data points {C 02.00; r010; c010} and {C 05.01; r100; c040} of templates C 02.00 and C 05.01 of Annex I the ITS on Supervisory Reporting.

Status
Final Q&A
Answer prepared by
Answer prepared by the EBA.

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