Question ID
2021_5822
Legal act
Regulation (EU) No 575/2013 (CRR)
Topic
Supervisory reporting - Liquidity (LCR, NSFR, AMM)
Article
415
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
Regulation (EU) No 680/2014 - ITS on supervisory reporting of institutions (repealed)
Article/Paragraph
Annex XIII, Part II
Type of submitter
Competent authority
Subject matter
Allocation of non-performing interdependent assets for NSFR purposes
Question

How should non-performing interdependent assets be allocated in the NSFR template for required stable funding?

Background on the question

Following a literal reading of Part Six, Title IV of amended Regulation (EU) No 575/2013 (CRR2), non-performing promotional loans which are eligible for being treated as interdependent pursuant to Article 428f of the CRR2 should be treated and reported in COREP template C 80.00 as interdependent (i.e., ID 1.5) rather than non-performing (i.e., ID 1.9.3). This is because:

  • In accordance with Article 428r(1)(f) of the CRR2, assets that are categorised as being interdependent with liabilities in accordance with Article 428f are subject to a required stable funding factor of 0%. The ITS provides a dedicated reporting line for such assets (ID 1.5).
  • In accordance with Article 428ah(1)(b) of the CRR2, assets other than those referred to in Articles 428r to 428ag, including (among others) non-performing exposures shall be subject to a required stable funding factor of 100%. Non-performing exposures in the scope of Article 428ah(1)(b) of amended Regulation (EU) No 575/2013 would need to be reported under ID 1.9.3.

The implicit hierarchy embedded in the level 1 text (Article 428ah(1)(b) of amended Regulation (EU) No 575/2013: ‘assets other than those referred to in Articles 428r to 428ag […], including […], non-performing exposures, […]’) implies the treatment / reporting of the relevant non-performing promotional loans as interdependent assets (rather than ‘non-performing exposures’) following Article 428r(1)(f) of amended Regulation (EU) No 575/2013. The literal reading may also be supported from an economic perspective as assets with interdependent liabilities (in the scope of Article 428f of amended Regulation (EU) No 575/2013) are effectively excluded from the NSFR calculation (which is achieved by being subject to a required stable funding factor of 0%) because the reporting institution is acting as a simple intermediary and does not incur any funding risk. This should conceptually apply as well where the institution is reporting non-performing promotional loans that are (still) in the scope of being included under Article 428f of amended Regulation (EU) No 575/2013.

At the same time, rigorously applying the decision tree provided in the ITS on supervisory reporting (Annex XIII of Regulation (EU) 2021/451) implies the opposite conclusion: non-performing promotional loans should be treated and reported in COREP template C 80.00 as non-performing (i.e., ID 1.9.3) rather than interdependent (i.e., ID 1.5). Non-performing exposures could never reach the decision tree corresponding to the reporting of interdependent assets (to be reported under ID 1.5).

Submission date
Final publishing date
Final answer

Non-performing assets which are, despite being non-performing, eligible for being treated as interdependent pursuant to Article 428f of Regulation (EU) No 575/2013 as amended by Regulation (EU) No 876/2019 (hereinafter ‘CRR’) shall be treated as interdependent, thus to be reported under row 850 (ID 1.5) (as well as under the subordinate rows, as applicable) of supervisory reporting template 80.00. This is because of the implicit hierarchy embedded in the level 1 text. More specifically:

  • While non-performing exposures are mentioned in Article 428ah(1)(b) CRR, the scope of the latter provision is limited to assets other than those referred to in Articles 428r to 428ag CRR. Since assets categorized as being interdependent with liabilities in accordance with Article 428f CRR are, however, explicitly referred to in Article 428r(1)(f) CRR, non-performing assets which are eligible for being treated as interdependent are not in the scope of Article 428ah(1)(b) CRR.

  • The supervisory reporting derives from the prudential treatment specified above. More precisely, as per the instructions for the ITS on Supervisory Reporting (see Annex XIII of Regulation (EU) 2021/451), assets that are eligible for being treated as interdependent are to be reported under row 850 (ID 1.5) (as well as under the subordinate rows, as applicable) of supervisory reporting template 80.00.

  • While the decision tree may indeed suggest a different interpretation, it should be kept in mind that, as per the instructions for the ITS on Supervisory Reporting, the decision tree alone is not deemed sufficient to categorise assets as institutions must also comply with the rest of the instructions. The decision tree will however be amended at the first opportunity to avoid any misunderstanding going forward.
Status
Final Q&A
Answer prepared by
Answer prepared by the EBA.

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