C08.01 - EBA VR v4757_m

The EBA Validation Rule v4757_m applicable to the C08.01 template states that the column c0280 (Expected loss) shall be lower or equal to the column 0020 (Gross exposure).

The EBA Validation Rule v4757_m states that the column c0280 (Expected loss) shall be lower or equal to the c0020 (Gross exposure). This breach relates to exposures for which, in a specific exposure class, only inflows amounts are applied (following a  substitution of the exposure due to CRM effect). The c0020 "Original exposure pre conversion factors” is reported in the exposure class of the obligor, while the c0090 "Exposure after substitution affects pre conversion factors”, the c0110 "Exposure value ”, the c0280 "Expected loss amount” are reported in the exposure class of the protection provider. Therefore, the c0020 "Original exposure pre conversion factors" of the protection provider is equal to zero, while Expected Loss reflects the risk parameters of the guarantor. This leads mechanically that c0280 "Expected loss amount”  > c0020 "Original exposure pre conversion factors” although the exposure is correctly treated according to CRR and ITS Supervisory reportings requirements. Given this, should this control be applicable?