EBA · 2017_3087 Final Q&A

C 69.00, Prices for various lengths of funding - Spreads calculated in different currencies

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
415, para. 3
Topic
Supervisory reporting - Liquidity (LCR, NSFR, AMM)
Submitted by
Other
Submitted
2017-01-09
Answered
2018-01-12
Answer provided by
ESAs (EBA, ESMA, EIOPA)
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Question

The EBA Q&A 2015_2204 confirms that funding spreads must be calculated for all the funding products irrespective of the related currency of issuance. However, the methodology that needs to be applied in order to convert funding spreads calculated in foreign currencies to the reporting currency is not clear. This concept is relevant for funding having an original maturity of both longer and shorter than 1 year.

Background

According to Article 415 (1) CRR: ‘Institutions shall report in a single currency, regardless of their actual denomination, to the competent authorities the items referred to in Titles II and III and their components, including the composition of their liquid assets in accordance with Article 416’. Whilst the methodology for calculating the volume amounts on aggregated basis can be considered straightforward, it is not clear how to account in this calculation for funding spreads in different currencies. As a matter of fact, a weighted average of spreads computed in different currencies could lead to distorted results if no conversion factor (like cross currency basis spread) is applied.

Answer

For the purposes of reporting template C 69.00 of Annex XVIII to Regulation (EU) No 680/2014 (ITS on Supervisory Reporting), average funding spreads for products denominated in different currencies shall be calculated as weighted averages of those spreads without any kind of transformation or normalisation (i.e. without the application of any kind of ‘conversion factor’).

Original source: European Banking Authority, Q&A ID 2017_3087

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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