EAD for over-collateralised securities financing transactions under the Financial Collateral Comprehensive Method

COREP template C 07.00 (CR SA) of Annex I to Regulation (EU) No 2021/451 (ITS on Supervisory Reporting) provides information on own fund requirements for credit and counterparty credit risk and free deliveries with regard to the standardised approach. According to paragraph 51 of Annex II of the ITS on Supervisory Reporting, the scope of the above mentioned template are “all exposures for which the own funds requirements are calculated according to part 3 title II chapter 2 of CRR in conjunction with part 3 title II chapter 4 and 6 of CRR”, regardless whether the own fund requirement to be reported is zero. Having said that, Article 271 of Regulation (EU) No 575/2013 (CRR) provides a discretion for institutions to determine the exposure value of securities financing transactions (“SFTs”) either in accordance with Part Three, Title II, chapter 6 (i.e. counterparty credit risk - CCR) or with Part Three, Title II, chapter 4 (i.e. credit risk mitigation - CRM). In the light of the above discretion, if the institution applies financial collateral simple method (Article 222 CRR), it has to report exposures value of securities financing transactions in COREP template C 07.00 (CR SA), columns 050 to 100. If the institution, instead, applies financial collateral comprehensive method (Article 223 CRR), it has to report exposures value of securities financing transactions in COREP template C 07.00 (CR SA), columns 120 to 140. With specific reference to the submitted example, in the case of the financial collateral comprehensive method, where the adjusted value of the collateral is bigger than the adjusted value of the exposure, the fully adjusted exposure value (column 150) shall be floored to zero, while the adjusted value of the collateral (column 130) shall be reported as calculated in accordance with Articles 223 (2) and 239(2) CRR, however capped at the volatility adjusted value EVA according to Article 223 CRR and in line with validation rule v0307_m. The instructions for column 0130 will be amended however to reflect that the reported value should be capped. In the light of the above, the correct figures that should be included in template C 07.00 (CR SA) for the example mentioned are the following ones: Net exposure after CRM substitutions effects pre conversion factors (c110) = 100 Volatility adjustment to the exposure (c120) = 5 (-) Financial collateral adjusted value (CVAM) (c130) = - 105 (-) Volatility and maturity adjustments (c140) = - 10 Fully adjusted exposure value (E*) (c150) = 0. See also Q&A 2017_3349 for IRB approach.