How should non-performing interdependent assets be allocated in the NSFR template for required stable funding?
Following a literal reading of Part Six, Title IV of amended Regulation (EU) No 575/2013 (CRR2), non-performing promotional loans which are eligible for being treated as interdependent pursuant to Article 428f of the CRR2 should be treated and reported in COREP template C 80.00 as interdependent (i.e., ID 1.5) rather than non-performing (i.e., ID 1.9.3). This is because:
The implicit hierarchy embedded in the level 1 text (Article 428ah(1)(b) of amended Regulation (EU) No 575/2013: ‘assets other than those referred to in Articles 428r to 428ag […], including […], non-performing exposures, […]’) implies the treatment / reporting of the relevant non-performing promotional loans as interdependent assets (rather than ‘non-performing exposures’) following Article 428r(1)(f) of amended Regulation (EU) No 575/2013. The literal reading may also be supported from an economic perspective as assets with interdependent liabilities (in the scope of Article 428f of amended Regulation (EU) No 575/2013) are effectively excluded from the NSFR calculation (which is achieved by being subject to a required stable funding factor of 0%) because the reporting institution is acting as a simple intermediary and does not incur any funding risk. This should conceptually apply as well where the institution is reporting non-performing promotional loans that are (still) in the scope of being included under Article 428f of amended Regulation (EU) No 575/2013.
At the same time, rigorously applying the decision tree provided in the ITS on supervisory reporting (Annex XIII of Regulation (EU) 2021/451) implies the opposite conclusion: non-performing promotional loans should be treated and reported in COREP template C 80.00 as non-performing (i.e., ID 1.9.3) rather than interdependent (i.e., ID 1.5). Non-performing exposures could never reach the decision tree corresponding to the reporting of interdependent assets (to be reported under ID 1.5).
Non-performing assets which are, despite being non-performing, eligible for being treated as interdependent pursuant to Article 428f of Regulation (EU) No 575/2013 as amended by Regulation (EU) No 876/2019 (hereinafter ‘CRR’) shall be treated as interdependent, thus to be reported under row 850 (ID 1.5) (as well as under the subordinate rows, as applicable) of supervisory reporting template 80.00. This is because of the implicit hierarchy embedded in the level 1 text. More specifically: