EBA · 2018_4336 Final Q&A

FINREP Locom valued debt instruments: Reporting of "Accumulated negative value adjustments on LOCOM assets - credit risk induced"

Regulation
Directive 2013/36/EU (CRD)
Article
na
Topic
Supervisory reporting - FINREP (incl. FB&NPE)
Submitted by
Credit institution
Submitted
2018-10-23
Answered
2019-06-07
Answer provided by
ESAs (EBA, ESMA, EIOPA)
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Question

Could it be that the following validation rules 5319_m until v5331_m are not correct for LOCOM valuated debt instruments. Should  "Accumulated negative value adjustments on LOCOM assets - credit risk induced"  be reported under accumalated impairment and not under "Accumulated negative changes in fair value due to credit risk on non-performing exposures"?

Background

According to the Finrep guidelines (Annex 5,69, 71), Definition of "Accumulated impairment" is provided. "Under IFRS, accumulated impairment shall include the allowance for expected credit losses for financial assets under each of the impairment stages specified by IFRS 9. Under national GAAP based on BAD, it shall include specific and general allowance for credit risk, as well as the general allowance for banking risk where it reduces the carrying amount of debt instruments. Accumulated impairment shall also include the credit risk-induced value adjustments on financial assets under LOCOM." I interprete that the "Accumulated negative value adjustments on LOCOM assets - credit risk induced" should be represented in the column accumlated impairment and not the column "Accumulated negative changes in fair value due to credit risk on non-performing exposures".

Answer

According Part 2, paragraph 71 of Annex V to Regulation (EU) No 680/2014 (ITS on Supervisory Reporting), ”Accumulated impairment shall also include the credit risk-induced value adjustments on financial assets under LOCOM.” Therefore, this element shall be reported in F 20.4 under column 031. Additionally, column 040 will not show any accumulated negative changes in fair value due to credit risk on non-performing LOCOM exposures. F 18.00 covers “ Accumulated impairment , accumulated negative changes in fair value due to credit risk and provisions ” whereas in F 20.4 column 040 “Accumulated negative changes in fair value due to credit risk on non-performing exposures ” have to be reported. The data points in the two templates cover potentially different content. Therefore, the validation rule v5319_m and the analogous further rules v5320_m to v5331_m should be deactivated.

Original source: European Banking Authority, Q&A ID 2018_4336

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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