Question ID
2024_7016
Legal act
Regulation (EU) No 575/2013 (CRR)
Topic
Supervisory reporting - COREP (incl. IP Losses)
Article
430
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
Regulation (EU) 2021/451 – ITS on supervisory reporting of institutions (repealed)
Article/Paragraph
annex xv
Type of submitter
Credit institution
Subject matter
Taxonomy 3.2: Is the validation rules v6576_s consistent for fair-value in short position disclosed in the cell C32.03, row 0010, 0020 and 0030, columns 0220 ?
Question

Taxonomy 3.2: Is the validation rule v6576_s consistent for fair-value in short position reported in the cells C 32.02, rows 0010, 0020 and 0030, column 0220 ?

Background on the question

Refer the annex XV of the Regulation (EU) 2021/451, the corresponding validation rules are defined in the taxonomy 3.2 like this:
The CFV v6576_s has been set up with the taxonomy 2.8.0 and qualifies as warning {C 32.02.c} >= 0 for rows (0010;0020;0030) and columns (0210;0220).

The column 0220 of C32.02 is defined as : "Adjustment applied in the institution’s fair value to compensate where valuation models do not fully reflect the funding cost that market participants would factor into the exit price for a position or portfolio (i.e. total Funding Valuation Adjustment at institution level where an institution computes such adjustment, or alternatively, equivalent adjustment)."

Since the fair value should reflect the actual value of the investment cost, it should be negative for short position.

Submission date
Final publishing date
Final answer

In accordance with the instructions for columns 0170 to 0250 of template C 32.02 of Annex I to Regulation (EU) 2021/451 (ITS on Supervisory Reporting, ITS), the columns 0170 to 0250, including column 0220, are to be used to report those fair value adjustments that can be identified as addressing the same source of valuation uncertainty as the relevant AVA.

In accordance with Article 8(3) of Regulation (EU) 2016/101 (RTS on Prudent Valuation, RTS), and the annex to that Regulation, fair value adjustments can be taken into consideration in the calculation of the AVA, if they can be identified as addressing the same source of valuation uncertainty as the relevant AVA and are calculated at the same level at which the relevant AVAs are calculated.

Where a fair value adjustment meets these criteria, it would lead to a lower AVA, compared to a situation where no fair value adjustment was taken into consideration in the AVA calculation, irrespective of whether the valuation position that the AVA is calculated for is a long position or a short position.

Columns 0170 to 0250 of template C 32.02 should be filled in, bearing in mind the role that the fair value adjustment has in the AVA calculation. As a convention, they shall all be reported with a positive sign, as required by v6576_s.

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

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