- Question ID
-
2015_1716
- Legal act
- Regulation (EU) No 575/2013 (CRR)
- Topic
- Large exposures
- Article
-
389
- COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
- Not applicable
- Article/Paragraph
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na
- Type of submitter
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Competent authority
- Subject matter
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Large AFS exposures and accounting for OCI unrealised gains
- Question
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The question is regarding the ‘’exposures’’ definition (article 389 of CRR IV) and how to deal with assets on the Available For Sale (AFS) accounting portfolio (and hence valued at fair value through Other Comprehensive Income (OCI)) during the transitional period to a ‘’fully-loaded CRR IV’’. More specifically: If the 2014 transitional arrangements include 0% (exclude 100%) of OCI-unrealised gains from CET1 capital (and thus from ‘’eligible capital’’), would it be admissible for the sake of ‘’numerator-denominator consistency’’ to deduct those OCI-unrealised gains from the ‘’exposure’’ value, under the large exposures framework? Considering the above, what would be the approach for the following year (2015) with a transitional arrangement of 20% inclusion (80% exclusion) of OCI-unrealised gains? What would the treatment for OCI-unrealised losses be? How would this issue be dealt with in the capital requirements framework under the standardised approach for credit risk?
- Background on the question
-
Economic rationale behind the question: A loss in value of the OCI unrealised gains in the large exposure would not result in a loss of CET1 capital for those parts of the unrealised gains not included in CET1 capital. The question came up for a Spanish bank.
- Submission date
- Final answer
-
The exposure value for the purpose of large exposures is defined in Article 389 of Regulation (EU) No 575/2013 (CRR), which refers to exposures calculated under the standardised approach, without applying risk weights or degrees of risk. The exposure value for the standardised approach is defined in Article 111 of the CRR and, unless otherwise specified, is based on the accounting value of the asset.
In accordance with Q&A 716, in case filters are applied to other comprehensive income (OCI) unrealised gains or losses in accordance with Articles 467 and 468 of the CRR, the exposure value of the related assets will need to be adjusted by the amount of the corresponding unrealised gains or losses which have been filtered out from own funds. In the example above, if 80% of unrealised gains are filtered from own funds, the corresponding amount should not be included in the exposure value. Likewise, for unrealised losses, if 80% of amounts are filtered from own funds, the corresponding amount would not be reflected in the exposure value.
As the exposure value for the purpose of large exposures is based on the exposures calculated under the standardised approach, the treatment applied for the calculation of capital requirements under the standardised approach for credit risk applies by analogy to the large exposures framework.
- Status
-
Archive
- Answer prepared by
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Answer prepared by the EBA.
- Note to Q&A
-
Update 26.03.2021: This Q&A has been archived in light of the change(s) of Regulation (EU) No 575/2013 (CRR), as the Q&A refers to transitional arrangements that have expired, as well as to the "available for Sale" terminology, that does no longer exists in the IFRS standard.