Question ID
2021_6319
Legal act
Regulation (EU) No 2019/2033 (IFR)
Topic
Supervisory Reporting - IFR Reporting framework
Article
Annex II Reporting for Investment Firms Other Than Small and Non-Interconnected
Paragraph
Guidance on IF08.05 & IF08.06
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
Not applicable
Article/Paragraph
N/A
Type of submitter
Investment firm
Subject matter
Disclosures Relating to Trading and Non-Trading Book Clients
Question

When firms calculate exposure value in line with K-TCD, firms carry it out at client level, taking the replacement cost and PFE for each client and each product.  Firms then net exposures against collateral in line with Article 31 of IFR.   Assuming that an appropriate netting agreement is in place with the client, available collateral is deducted to arrive an exposure value for each client. Where clients have both trading book and non-trading book exposures, and the netting agreement in place provides that the collateral held is fungible i.e. there is no particular collateral assigned to the trading book or non-trading book contracts or transactions, for the above reporting schedules a methodology to apply the collateral between trading book and non-trading book exposures is required.  

Background on the question

We would like to draw attention to the guidance (Annex II Reporting for Investment Firms Other Than Small and Non-Interconnected) with respect to Regulation  (EU)  2019/2033 (‘IFR’) and the reporting for the following schedules that detail the top client exposures:.

  1. IF 08.05 Trading Book Exposures
  2. IF 08.06 Non-trading Book Exposures & Off Balance Sheet

 

The EBA guidelines require “exposures” to be reported in these schedules but the term exposure is not specifically defined.  In our opinion, the logical definition of “exposures” is the Exposure Value as defined in Article 27 of IFR i.e. the K-TCD approach to exposure. Can you please confirm.

 

If that is the case, the differentiation between Trading Book and Non-Trading Book required by the above reporting schedules presents complications.  A client of a firm may have an exposure to both the trading book and non-trading book, given the contracts and transactions entered into with that client.

Submission date
Status
Question under review
Answer prepared by
Answer prepared by the European Commission because it is a matter of interpretation of Union law.