Template C 17.00 (OPR Details) - Reporting on loss adjustments

How should we interpret and treat the negative loss adjustment within the total loss amount? How should we treat the total loss amounts compared to the top loss events and the max single loss?

There are some validation rules which say that the ‘total loss amount’ should be higher or equal to the ‘sum of the five largest losses’. However, following the instructions, the total loss amount should be the sum of positive loss adjustment but also the negative loss adjustment due to decrease of provisions (see here below). The total loss can then be lower than the top five largest losses. The Annex 2 of EC Implementing Act on Reporting states the following: The Total loss amount is the algebraic sum of the following elements: The gross loss amounts pertinent to operational risk events “accounted for the first time” within the reporting period (e.g. direct charges, provisions, settlements); the gross loss amounts pertinent to positive loss adjustments made within the reporting period (e.g. increase of provisions, linked loss events, additional settlements) of operational risk events ‘accounted for the first time’ in previous reporting periods; and the gross loss amounts pertinent to negative loss adjustments made within the reporting period - due to decrease of provisions - of operational risk events ‘accounted for the first time’ in previous reporting periods. We have also another difference in the interpretation for the ‘total loss’ vs the ‘max single loss’. In some cases it is possible that the total is smaller than the maximum single loss and / or the Top 5. For example: Maximum single loss: 1.000.000 Top 5: 1.250.000 (1.000.000 + 100.000 + 75.000 + 50.000 + 25.000) Total loss amount: 750.000 (6 events = Top 5 and a decrease of provision of 500.000). As a consequence, the total loss is lower than the maximum single loss, which is possible, but not allowed by several validation rules. Validation rules to be reviewed: Comparison between total loss amount and the sum of the five largest losses: v4864_m, v4866_m, v4868_m, v4870_m, v4872_m, v4874_m, v4876_m, v4878_m, v4880_m, v4882_m Comparison between total loss amount and the maximum single loss: v4865_m, v4867_m, v4869_m, v4871_m, v4873_m, v4875_m, v4877_m, v4879_m, v4881_m