Question ID:
2020_5634
Legal Act:
Regulation (EU) No 575/2013 (CRR)
Topic:
Supervisory reporting - FINREP (incl. FB&NPE)
Article:
99
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations:
Regulation (EU) No 680/2014 - ITS on supervisory reporting of institutions (as amended)
Article/Paragraph:
Annex V
Disclose name of institution / entity:
No
Type of submitter:
Credit institution
Subject Matter:
v3078_m - Maximum Amount of Guarantee Given
Question:

Should the maximum amount of guarantee given reported in F_09.02 be capped at the carrying amount or nominal amount after deduction of provisions of the related exposure?

Background on the question:

Validation v3078_m compares the values in F_09.02 (r080, c010) with F_18.00.C (c205, c210, r330, r550). The guidelines for F_09.02 (Annex V para 119) require that "for financial guarantees received, the ‘maximum amount of the guarantee that can be considered’ shall be the maximum amount the counterparty could have to pay if the guarantee is called on." In the case of an exposure fully covered by a guarantee, the maximum amount the counterparty would pay if the guarantee is called on would be the gross amount.

The guidelines for F_18.00.C (Annex V para 239) require that "the sum of the amounts reported for both collateral and guarantees shall be capped at the carrying amount or nominal amount after deduction of provisions of the related exposure." In practice, a credit institution would still take impairment measures on a guarantee that covers an exposure in full. This impairment would be taken in order to cover the counterparty credit risk of the guarantor. Therefore, the carrying amount of the exposure would be less than the maximum amount the counterparty could have to pay if the guarantee is called on (gross amount). Validation v3078_m would therefore fail.

Date of submission:
27/11/2020
Published as Final Q&A:
30/04/2021
EBA Answer:

For reporting the maximum amount of guarantee received (we assume the submitter meant “received” and not “given”, otherwise the question is inconsistent) the definition set out in Annex V (paragraph 119) to Regulation (EU) No 680/2014 (ITS on Supervisory Reporting) applies: "for financial guarantees received, the ‘maximum amount of the guarantee that can be considered’ shall be the maximum amount the counterparty could have to pay if the guarantee is called on."

The amount of guarantee received reported in template F 09.02 should not be capped at the carrying amount or nominal amount after deduction of provisions of the related exposure.

Indeed, in line with validation rule v3078, the capped amount in F18.00 can be inferior to the maximum amount in F09.02 so the 2 amounts do not have to be identical and the validation rule v3078 can be met without a full equality. There is consequently no reason to amend the definition in F09.02 with the introduction of a cap.

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