Question ID
2014_1354
Legal act
Regulation (EU) No 575/2013 (CRR)
Topic
Supervisory reporting - COREP (incl. IP Losses)
Article
99
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
Regulation (EU) No 680/2014 - ITS on supervisory reporting of institutions (repealed)
Article/Paragraph
Annexes I and II, C 09.01
Name of institution / submitter
BSM GmbH (Steffen Graef)
Country of incorporation / residence
Germany
Type of submitter
Consultancy firm
Subject matter
Immediate obligor and ultimate obligor concerning exposures secured by mortgages on immovable property
Question

In ‘Annex II – Reporting on own funds and own funds requirements’ we find the following instructions:

‘3.4. Credit and counterparty credit risks and free deliveries: Information with geographical breakdown (CR GB)

  1. The term ‘residence of the obligor’ refers to the country of incorporation of the obligor. This concept can be applied on an immediate-obligor basis and on an ultimate-risk basis. Hence, CRM techniques can change the allocation of an exposure to a country. (…) 
  2. Data regarding ‘original exposure pre conversion factors’ shall be reported referring to the country of residence of the immediate obligor. Data regarding ‘exposure value’ and ‘Risk weighted exposure amounts’ shall be reported as of the country of residence of the ultimate obligor.’

What does this mean for an exposure secured by mortgage on immovable property where obligor and immovable property are located in different countries?

Background on the question

E.g. we have an exposure where the obligor is a corporate located in Germany (1000 Euro exposure value) and the immovable property is located in the Netherlands (400 Euro collateral value).

Do we have to report as described below in solution I or solution II?

Solution I

CR GB1 Germany:

Row 70 Column 10 (Corporates): 600 Euro

Row 90 Column 10 (Secured by mortgages on immovable property): 400 Euro

Row 70 Column 75 (Corporates): 600 Euro

CR GB1 Netherlands

Row 90 Column 75 (Secured by mortgages on immovable property) 400 Euro

Solution II

CR GB1 Germany

Row 70 Column 10 (Corporates): 600 Euro

Row 70 Column 75 (Corporates): 600 Euro

CR GB1 Netherlands

Row 90 Column 10 (Secured by mortgages on immovable property): 400 Euro

Row 90 Column 75 (Secured by mortgages on immovable property): 400 Euro 

Submission date
Final publishing date
Final answer

Paragraphs 79 and 80 of Annex II to Regulation (EU) No. 680/2014 (ITS on Supervisory Reporting) are only applicable to exposures where CRM techniques with substitution effects are considered. If other CRM techniques are used, the exposure shall always be assigned to the country where the immediate obligor of the exposure is located.

For the example provided in the background to the question, this means that neither solution I nor II are correct. Assuming that the part of 400 Euro is assigned to the exposure class according to Article 112 (i) of Regulation (EU) No 5752013 (CRR), all parts of the exposure are reported in template C 09.01 (CR GB1) of Annex I to the ITS on Supervisory Reporting in the sheet for Germany:

CR GB1 Germany:

Row 070 (Corporates), column 010 (original exposure pre conversion factors): 600 Euro

Row 070 (Corporates), column 075 (exposure value):                                         600 Euro

Row 090 (Secured by mortgages on immovable property), column 010:             400 Euro

Row 090 (Secured by mortgages on immovable property), column 075:             400 Euro. 

Status
Final Q&A
Answer prepared by
Answer prepared by the EBA.

Disclaimer

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