EBA · 2013_381 Rejected question

Netting Methodologies

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
415, para. 1
Topic
Supervisory reporting
Submitted by
Industry association
Submitted
2013-10-10
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Question

Does the EBA intend to issue guidance on the appropriate netting methodologies to be applied. For example, should netting take into account criteria such as currency, cash flow date, product etc. or should a more simplistic approach be used, e.g. adding all the inflows and outflows occurring within the 30 day timeframe to produce a net figure to be reported either as payable to receivable.

Background

We have applied different netting criteria on the example trades below to obtain very different results: Trade 1: - Cash Inflow $100m - USD day 1 Trade 2: - Cash Outflow ($100m) - USD day 1 Trade 3: - Cash Inflow $100m - GBP day 1 Trade 4: - Cash Inflow $100m - USD day 2 Trade 5: - Cash Outflow ($100m) - GBP day 3 Trade 6: - Cash Inflow $100m - EUR day 3 Trade 7: - Cash Outflow ($100M) - USD day 3 Simple Methodology (total inflows less total outflows) = Inflows $100m and Outflows $0m Netting by day = Inflows $200m & Outflows $100m: Net Day 1 = Inflow $100m, Net Day 2 = Inflow $100m Net Day 3 = Outflow ($100m) Netting by day and currency = Inflows $300m & Outflows $200m Net USD Day 1 = Inflow $0m Net GBP Day 1 = Inflow $100m Net USD Day 2= Inflow $100m Net GBP Day 3 = Outflow ($100m) Net EUR Day 3 = Inflow $100m Net USD Day 3 = Outflow ($100m)
No answer published yet.

Original source: European Banking Authority, Q&A ID 2013_381

This Q&A is published by European Banking Authority and is non-binding. It does not constitute legal advice. Updated weekly from official ESA sources.

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