The disclosure templates and related EBA instructions regarding EU LI1 and EU LI2 address the reconciliation between accounting carrying values and regulatory exposures, including the explanation of differences between amounts under the scope of prudential consolidation and amounts considered for regulatory purposes. 

In particular, the applicable instructions seem to exclude from the template EU LI2 exposures not subject to risk-weighting or subject to capital deductions, including by reference to the relationship between EU LI1 and EU LI2 (e.g., where EU LI1 column g is populated).

As stated in the EBA instructions, excludes column “a” for rows “1 (Assets)” and “2 (Liabilities)” of table EU LI2 from the equality condition against the “Assets” and “Liabilities” rows of table EU LI1 (column “b”):

However, under the current Pillar 3 Data Hub (P3DH) taxonomy/modelling (Reporting Framework 4.1 and 4.2), the affected rows/cells appear to be linked to the same data point identifier, meaning only one value can be stored for the module. This creates a practical implementation issue with respect to the EBA Implementing Technical Standard (ITS) logic. since the structured submission to the EBA P3DH cannot technically accept different values.

We would therefore appreciate clarification on:

• the expected disclosure approach for the structured submission (XBRL/CSV) in this situation, and
• how any resulting differences between the structured submission and the official EBA ITS instructions should be addressed.

Basel Framework references

DIS30 - Links between financial statements and regulatory exposures

LI1: Instructions

Columns

If a bank's scope of accounting consolidation and its scope of regulatory consolidation are exactly the same, columns (a) and (b) should be merged.

The breakdown of regulatory categories (c) to (f) corresponds to the breakdown prescribed in the rest of DIS, ie column (c) corresponds to the carrying values of items other than off-balance sheet items reported in DIS40; column (d) corresponds to the carrying values of items other than off-balance sheet items reported in DIS42, column (e) corresponds to carrying values of items in the banking book other than off-balance sheet items reported in DIS43; and column (f) corresponds to the carrying values of items other than off-balance sheet items reported in DIS50.

Column (g) includes amounts not subject to capital requirements according to the Basel framework or subject to deductions from regulatory capital.

Note: Where a single item attracts capital charges according to more than one risk category framework, it should be reported in all columns that it attracts a capital charge. As a consequence, the sum of amounts in columns (c) to (g) may not equal the amounts in column (b) as some items may be subject to regulatory capital charges in more than one risk category.

For example, derivative assets/liabilities held in the regulatory trading book may relate to both column (d) and column (f). In such circumstances, the sum of the values in columns (c)-(g) would not equal to that in column (b). When amounts disclosed in two or more different columns are material and result in a difference between column (b) and the sum of columns (c)-(g), the reasons for this difference should be explained by banks in the accompanying narrative.

L2: Instructions

Amounts in rows 1 and 2, columns (b)-(e) correspond to the amounts in columns (c)-(f) of Template LI1.

Row 1 of Template LI2 includes only assets that are risk-weighted under the Basel framework, while row 2 includes liabilities that are considered for the application of the risk weighting requirements, either as short positions, trading or derivative liabilities, or through the application of the netting rules to calculate the net position of assets to be risk-weighted. These liabilities are not included in column (g) in Template LI1. Assets that are risk-weighted under the Basel framework include assets that are not deducted from capital because they are under the applicable thresholds or due to the netting with liabilities.

Off-balance sheet amounts include off-balance sheet original exposure in column (a) and the amounts subject to regulatory framework, after application of the credit conversion factors (CCFs) where relevant in columns (b)-(d).

Column (a) is not necessarily equal to the sum of columns (b)-(e) due to assets being risk-weighted more than once (see Template LI1). In addition, exposure values used for risk weighting may differ under each risk framework depending on whether standardised approaches or internal models are used in the computation of this exposure value. Therefore, for any type of risk framework, the exposure values under different regulatory approaches can be presented separately in each of the columns if a separate presentation eases the reconciliation of the exposure values for banks.

The breakdown of columns in regulatory risk categories (b)-(e) corresponds to the breakdown prescribed in the rest of the document, ie column (b) credit risk corresponds to the exposures reported in DIS40, column (c) corresponds to the exposures reported in DIS43, column (d) corresponds to exposures reported in DIS42, and column (e) corresponds to the exposures reported in DIS50.

Differences due to consideration of provisions: The exposure values under row 1 are the carrying amounts and hence net of provisions (ie specific and general provisions, as set out in CAP10.18). Nevertheless, exposures under the foundation internal ratings-based (F-IRB) and advanced internal ratings-based (A-IRB) approaches are risk-weighted gross of provisions. Row 7 therefore is the re-inclusion of general and specific provisions in the carrying amount of exposures in the F-IRB and A-IRB approaches so that the carrying amount of those exposures is reconciled with their regulatory exposure value. Row 7 may also include the elements qualifying as general provisions that may have been deducted from the carrying amount of exposures under the standardised approach and that therefore need to be reintegrated in the regulatory exposure value of those exposures. Any differences between the accounting impairment and the regulatory provisions under the Basel framework that have an impact on the exposure amounts considered for regulatory purposes should also be included in row 7.

Exposure amounts considered for regulatory purposes: The expression designates the aggregate amount considered as a starting point of the RWA calculation for each of the risk categories. Under the credit risk framework this should correspond either to the exposure amount applied in the standardised approach for credit risk (see CRE20) or to the exposures at default (EAD) in the IRB approach for credit risk (see CRE32.29); securitisation exposures should be defined as in the securitisation framework (see CRE40.4 and CRE40.5); and counterparty credit exposures are defined as the EAD considered for counterparty credit risk purposes (see CRE51).

Linkages across templates

Template LI2 is focused on assets in the regulatory scope of consolidation that are subject to the regulatory framework. Therefore, column (g) in Template LI1, which includes the elements of the balance sheet that are not subject to the regulatory framework, is not included in Template LI2. The following linkage holds: column (a) in Template LI2 = column (b) in Template LI1 - column (g) in Template LI1.