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  1. Home
  2. Single Rulebook Q&A
  3. 2021_6047 Validation Rules v6205_m and v6206 in respect of portfolios with only Unfunded Credit Protection
Question ID
2021_6047
Legal act
Directive 2013/36/EU (CRD)
Topic
Supervisory reporting - Supervisory Benchmarking
Article
Portfolio_ID C102 C103
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
Draft ITS on Supervisory Reporting of Institutions
Article/Paragraph
Portfolio_ID C102 C103 Annex 1
Type of submitter
Credit institution
Subject matter
Validation Rules v6205_m and v6206 in respect of portfolios with only Unfunded Credit Protection
Question

How the two blocking Validation Rules v6205_m and v6206_m in current DPM, applicable to Supervisory Benchmarking reporting, shall be managed in light of the regulatory provisions of Article 158(5) of Regulation EU 575-2013 (CRR) allowing portfolios to have Expected Loss equal to zero and PD, LGD, EAD all greater than zero?

Background on the question
  1. The Validation Rules v6205_m and v6206_m, respectively for templates C 102.00 and C 103.00, produce an Error in the submission phase in case of portfolios with Expected Loss equal to zero, though having PD, LGD and EAD all greater than zero.

The formula of the VRs and the related Narrative Explanation, taken from the DPM 3.1 EBA Validation Rules file, are reported below. They are the same for the two Validation Rules in question.

Formula: if ({c0060} > 0 and {c0110} > 0 and {c0130} > 0) then {c0150} > 0.

Narrative Explanation: If the PD>0 and EAD>0 and LGD>0 then EL>0.

  1. Article 158(5) of Regulation EU 575-2013 prescribes that “For exposures subject to the treatment set out in Article 153(3), EL shall be 0 %”, irrespective of the risk parameters PD, LGD and EAD.

For sake of clarity, Article 153(3) makes reference to exposures which meet the requirements set out in Articles 202 and 217, namely in case of eligible providers of unfunded credit protection.

For instance, Portfolio_IDs based on field 0120 equal to "Unfunded Credit Protection" in Annex I of ITS on Supervisory Benchmarking (C 102.00 and C 103.00), which could include only exposures as described in bullet 2 above, treated in accordance with Article 153(3) of CRR, cause the failure of the Validation Rules in bullet 1, which are blocking for the submission.

Submission date
22/06/2021
Rejected publishing date
28/03/2022
Rationale for rejection

This question has been rejected because the matter it refers to has already been identified and will be considered for a forthcoming version of the Reporting framework / release of the respective validation rules.

Status
Rejected question

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