EBA · 2023_6927 Rejected question

Categorisation of indirect exposures to collateral issuers

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
430
Topic
Supervisory reporting - Large Exposures
Submitted by
Investment firm
Submitted
2023-11-03
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Question

The guidance for c120 to c170 states "The institution shall report the original amount of the indirect exposures in the column that corresponds to the type of direct exposure guaranteed or secured by collateral such as, when the direct exposure guaranteed is a debt instrument, the amount of ‘Indirect exposure’ assigned to the guarantor shall be reported under the column ‘Debt instruments’" This example makes intuitive sense for guarantees as the nature of the indirect exposure is based upon the form of the exposure which has been guaranteed and through substitution effect transferred to the guarantor. However should the same logic also apply to exposures secured by collateral where the indirect exposure is based upon a reduction in exposure of the collateral received rather than through a substitution effect to the original type of exposure? For example, if i have a derivative exposure for which i have reduced the original exposure to the client through receipt of a debt instrument as collateral should the indirect exposure arising to the issuer of the collateral be reported in c120 for debt instrument or c140 for derivative?

Background

The reporting guidance is not clear how to report indirect exposures to collateral issuers given the structure of the CRR and guidance was designed for substitution based approaches only and only Q&A 2020_5496 makes it explicitly clear that indirect exposures are required to all collateral received even when used to reduce exposures rather than substitution of exposures.
No answer published yet.

Original source: European Banking Authority, Q&A ID 2023_6927

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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