2021_6118 C34.08 report - the collaterals which are related to derivatives, long settlement transactions and SFTs and which are not initial or variation margins should be reported in the Initial margin columns

Question ID:

2021_6118

Legal Act:

Regulation (EU) No 575/2013 (CRR)

Topic:

Supervisory reporting - COREP (incl. IP Losses)

Article:

Paragraph:

140

COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations:

Regulation (EU) 2021/451 – ITS on supervisory reporting of institutions

Article/Paragraph:

n.a.

Disclose name of institution / entity:

Yes

Name of institution / submitter:

Wolters Kluwer

Country of incorporation / residence:

Romania

Type of submitter:

Consultancy firm

Subject Matter:

C34.08 report - the collaterals which are related to derivatives, long settlement transactions and SFTs and which are not initial or variation margins should be reported in the Initial margin columns

Question:

Considering the definition of the initial margin which is provided in CRR, Article 4, paragraph 140, the collaterals posted or received which are related to a SFT transaction / derivative transaction / long settlement transaction and are not initial or variation margin should be reported in the C34.08 report Composition of collaterals for CCR exposures, column 0010 / column 0030 / column 0050 / column 0070 / column 0090 / column 0110 / column 0140 / column 0160 Initial margin?

Background on the question:

In accordance with the requirements which are presented in Annex II Reporting on own funds and own funds requirements, the C34.08 report Composition of collaterals for CCR exposures highlights the fair values of collateral (posted or received) used in CCR exposures related to derivative transactions, long settlement transaction or to SFTs, whether or not the transactions are cleared through a CCP and whether or not collateral is posted to a CCP.

In the C34.08 report Composition of collaterals for CCR exposures institutions should provide evidence for the collateral (including the initial margin and variation margin collateral) that is used in CCR exposures related to derivative transactions, long settlement transactions and SFTs.

In accordance with Article 4, paragraph 140, ‘initial margin’ or ‘IM’ means any collateral, other than variation margin, collected from or posted to an entity to cover the current and potential future exposure of a transaction or of a portfolio of transactions in the time period needed to liquidate those transactions, or to re-hedge their market risks, following the default of the counterparty to the transaction or portfolio of transactions.

Date of submission:

28/07/2021

Published as Final Q&A:

10/03/2023

Final Answer:

According to Article 4, paragraph 140 of CRR ‘initial margin’ or ‘IM’ means any collateral, other than variation margin, collected from or posted to an entity to cover the current and potential future exposure of a transaction or of a portfolio of transactions in the period needed to liquidate those transactions, or to re-hedge their market risk, following the default of the counterparty to the transaction or portfolio of transactions.

According to the Implementing Regulation (UE) 451/2021, Annex II, for columns 0010, 0030, 0050, 0070, 0090, 0110, 0140, 0160, Institutions shall report the fair values of collateral received or posted as initial margin (defined in point (140) of Article 4(1) CRR). Hence, relying on this definition, only IM collateral amounts shall be reported in the respective columns.

Status:

Final Q&A

Answer prepared by:

Answer prepared by the EBA.