Question ID:
2020_5082
Legal Act:
Regulation (EU) No 575/2013 (CRR)
Topic:
Supervisory reporting - COREP (incl. IP Losses)
Article:
99
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations:
Regulation (EU) No 680/2014 - ITS on supervisory reporting of institutions (as amended)
Article/Paragraph:
Annex II point 5.7.1. General Remarks
Disclose name of institution / entity:
No
Type of submitter:
Credit institution
Subject Matter:
EBA validation rule v4859_m: [C 24.00 (c030;040;050;060)] {r100} <= {r030} + {r060} + {r080} + {r090}
Question:

The prevailing implementing technical standards (Commission Implementing Regulation (EU) No 680/2014 of 16th April 2014 as amended by Commission Implementing Regulation (EU) No 2018/1627 of 9th October 2018 provide guidance, about the breakdown of figures relevant for the calculation of market risk, when using internal models.
In the Annex II point 5.7.1 - General Remarks, is stated: "142. Generally, the reporting depends on the structure of the model of the institutions whether they report the figures for general and specific risk separately or together. The same holds true for the decomposition of the VAR /Stress-Var into the risk categories (interest rate risk, equity risk, commodities risk and foreign exchange risk). An institution can resign to report the decompositions mentioned above if it proves that a reporting of these figures would be unduly burdensome".
Considering that the separate reporting of specific and generic risk, for equity instruments, would be unduly burdensome and low material, it is not foreseen by the structure of the model applied, therefore we judge that total amounts for general and specific risk should be checked against total positions only.
This feature has never been reviewed during the assessments and extensions of the model.

Background on the question:

EBA validation rule v4859 requires that detailed requirements for general risk should be more or equal to total requirement for general risk. For the risk category of equity instruments we report only one aggregate requirement both for general and specific risk, therefore we are unable to comply with the rule.

Date of submission:
15/01/2020
Published as Final Q&A:
04/12/2020
EBA Answer:

The severity status ‘error’ implies that reporting entities must comply with validation rule v4859_m.
However, paragraph 154 of Annex II to Implementing Regulation (EU) No 680/2014 (ITS on Supervisory Reporting) allows institutions to refrain from reporting the decomposition under certain circumstances. Institutions making use of this derogation cannot meet the validation rule.
The severity level of validation rule v4859_m will be amended in a future framework release.

Status:
Final Q&A
Answer prepared by:
Answer prepared by the EBA.
Image CAPTCHA