COREP CVA Risk reporting – exempted CCP-related transactions

In case of an institution that is also a clearing member to a QCCPs, for its CCP-related transactions that are exempted from CVA own funds requirements under CRR article 382(3), should these be reintegrated/reported in COREP template C25.01 row 0050?

In CRR article 300 points (2), (3) and (4) the definitions of respectively ‘client’, ‘clearing-member’ and of ‘CCP-related transaction’ are given. EBA Q&A 2016_3009 gives an explicit answer that the definitions of ‘client’ and ‘clearing member’ as set out in Article 300 should also apply for the purposes of Article 382(3) CRR. The Q&A also states explicitly that “centrally cleared clients’ trades should be exempted from both the perspective of the clearing member and the client, in particular when the client is subject to the CRR.”. The same OTC derivative transaction can, for the clearing member (that is also an institution) classify as CCP-related transaction, and for a client classify as ‘client’s transaction’ (as referred to in CRR Article 382(3)). Although CCP-related transaction are not mentioned by that name in CRR Article 382(3), based on the text of 382(3) together with EBA Q&A 2016_3009, our understanding is that also from the perspective of the clearing member (that is an institution) these CCP-related transactions (effectively the client’s transactions with the clearing member as described in CRR art. 382(3), from the perspective of the clearing member) are exempted from CVA Risk own funds requirements.  With the changes made by CRR3 to the CVA own funds requirements, also the reporting template in COREP was replaced. In template C25.01 that applies since EBA framework 4.0 most exempted transactions under CRR art. 382(3) and (4) need to be re-integrated into the template for reporting purposes as memorandum items. An exception to that reintegration appears to be OTC derivative transactions that are (directly) centrally cleared with a QCCP. In the reporting instruction from Annex II for C25.01 row 0050 “Client’s transactions” an instruction is given that clients should not re-integrate those transactions when the transaction meets the requirements in CRR Article 305(2), (3) and (4). From the perspective of a client (as defined in point (4) Article 300 CRR), when the requirements from CRR Article 305(2), (3) and (4) are met, for Counterparty Credit Risk purposes it would be treated as an exposure towards a QCCP. This instruction therefore appears consistent with not having to re-integrate (for reporting/memorandum items) transactions directly cleared with a QCCP.  The question is whether for the clearing member (that is an institution) whether it should re-integrate the exempted CCP-related transactions in C25.01 row 0050. From the conditions specified in CRR Article 305(2) points (a), (b) and (c), specifically the last one is specified as a requirement that applies to a client, not the clearing member. It is however unclear whether that means that CCP-related transactions that are exempted from CVA Risk own funds requirements under CRR art. 382(3) should always be re-integrated for reporting, or whether for a clearing member that is an institution it would be sufficient that the requirements from CRR Articles 305(2)(a) and (b), (3) and (4) are met.