According to Article 500 CRR , an IRB institution, which has received permission of the competent authority with respect to replacement of the Basel I floor by Basel II standardized approach based floor, should hold own funds which are at all times more than or equal to the higher of:
a) the level required by the Art. 92,
b) 80 % of the own funds that the institution would be required to hold under Article 92 calculating risk-weighted exposure amounts in accordance with the standardized method.

Assuming that the amount in point b is higher than the one in point a, how should such situation be presented in COREP reporting?

Should the difference: amount b minus amount a, be presented as an additional capital requirement (template CA 2) and consequently included in capital adequacy ratio calculation in template CA3?

Or is it only required to be presented in template CA4, an approach that is in our view clarified in Q&A 2014_1011?

Under the local interpretation of COREP rules that can be inferred from the communication of a local EU regulator to banks, especially in response to questions posed by local banks regarding the manner of presenting Basel I floor (regulatory floor), the regulator clearly indicates and requires local IRB institutions to recognize an additional capital requirement resulting from Article 500 CRR (Transitory Basel I floor) covering the IRB floor requirements and to include it in the denominator of the capital adequacy ratio. The capital adequacy ratio modified in such a way by incorporating impact of Basel I floor, following this interpretation, needs to be reported in template CA3.

Such an approach seems to contradict CRR provisions, COREP instructions provided in the ITS and the current market practices in other EU countries according to which the IRB floor stemming from the Article 500 CRR should be reported in CA4 template only. It affects also comparability of the Pillar I approaches to capital calculation across EU banks.

In addition, as we understand the current legal regulatory framework, the competent authorities do not have legal powers to define instructions on COREP reporting or interpret how COREP templates should be presented because this area is directly regulated by the ITS issued in the form of directly binding regulation of the European Commission (i.e. Commission Implementing Regulation (EU) No 680/2014 of 16 April 2014 laying down implementing technical standards with regard to supervisory reporting of institutions according to Regulation (EU) No 575/2013 of the European Parliament and of the Council with further amendments, Annex I and Annex II).

This question is related to another question uploaded in the Q&A 2017_3227 (Application of IRB floor).