- Regulation
- Regulation (EU) No 575/2013 (CRR)
- Article
- 99
- Topic
- Supervisory reporting - FINREP (incl. FB&NPE)
- Submitted by
- Consultancy firm
- Submitted
- 2014-03-20
- Answered
- 2015-07-31
- Answer provided by
- ESAs (EBA, ESMA, EIOPA)
Question
In Table 16.7, Additions (010) and Reversals (c020) of impairment on financial and non-financial assets is required to be reported. In accordance with ITS 2. 102, “Additions” shall be reported when, for the accounting portfolio or main category of assets, the estimation of the impairment for the period results in recognition of net expenses. “Reversals” shall be reported when, for the ac-counting portfolio or main category of assets, the estimation of the impairment for the period result in the recognition of net income. We interpret the rule above as the additions and reversals (columns 010 and 020 re-spectively) shall be reported NET, NOT gross (for the accounting portfolio or main category of assets). This means that, if the net of the asset impairment for the period is positive (net income) it should be listed as a reversal, and, if negative (net expense), it should be listed as additions. Does it imply, for example for T 16,7 row 030 (Available-for-sale financial assets), if for all available for sale fin assets held by the reporting entity, the impairments for the period exceeded reversals, only net impairment (net of reversals) are to be recorded (and the reversals will be reported blank)? Or is the netting rule only applicable to a sub-portfolio of assets within Available-for-sale financial assets class (e.g. municipal bonds). If the netting rule is applicable for an entire fin asset class group (e.g. Available-for-sale financial assets), the reporting in table 16,7 should equal to the reporting in Table 2, row 480. Please clarify.
Background
In accordance with ITS 2. 102, “Additions” shall be reported when, for the accounting portfolio or main category of assets, the estimation of the impairment for the period results in recognition of net expenses. “Reversals” shall be reported when, for the ac-counting portfolio or main category of assets, the estimation of the impairment for the period result in the recognition of net income.
Answer
As indicated in Template F 02.00 of Regulation (EU) No 680/2014 - ITS on Supervisory Reporting of institutions (ITS), Template F 16.07 provides the breakdown for the impairment or (-) reversal of impairment on financial assets not measured at fair value through profit or loss. The relevant value per group of financial assets in Template F 02.00 is thus equal to the additions plus the negatively reported reversals in that group of financial assets in F 16.07. The same is true for the items impairment or (-) reversal of impairment of investments in subsidiaries, joint ventures and associates and impairment of(-) reversal of impairment on non-financial assets. In accordance with Annex V Part 2.102, "Additions" shall be reported when, for the accounting portfolio or main category of assets, the estimation of the impairment for the period results in recognition of net expenses. "Reversals" shall be reported when, for the accounting portfolio or main category of assets, the estimation of the impairment for the period results in the recognition of net income. Additions and reversals shall thus be reported on a net basis. However, this would lead to a duplication of reporting data in different tables which should be avoided. Thus the instructions in Annex V paragraph 102 should be amended so that in F 16.07 gross additions and gross reversals will be shown by category (if not greyed out). This is reflected in the validation rules e.g. v1329_m to v1336_m and v1925_h to v1928_h of Annex XV.
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