Commission Implementing Regulation (EU) 2021/451 of 17 December 2020 laying down implementing technical standards for the application of Regulation (EU) No 575/2013 of the European Parliament and of the Council with regard to supervisory reporting of institutions and repealing Implementing Regulation (EU) No 680/2014 (Text with EEA relevance)

• 44.‘Gains or losses on financial assets and liabilities designated at fair value through profit or loss’ shall include also the amount recognised in the statement of profit or loss for the own credit risk of liabilities designated at fair value where recognising own credit risk changes in other comprehensive income creates or enlarges an accounting mismatch (IFRS 9.5.7.8). This item shall include also gains and losses on the hedged instruments that are designated as measured at fair value through profit or loss where the designation is used to manage credit risk, as well as interest income and expense on financial assets and liabilities designated at fair value through profit or loss where the dirty price is used.

• 45.‘Gains or (-) losses on derecognition of financial assets and liabilities not measured at fair value through profit or loss’ shall not include gains on equity instruments that a reporting entity choses to measure at fair value through other comprehensive income (IFRS 9.5.7.1(b)).

• 46.Where a change in business model leads to the reclassification of a financial asset into a different accounting portfolio, the gains or losses from the reclassification shall be reported in the relevant rows of the accounting portfolio in which the financial asset is reclassified, in accordance with the following:

• (a) where a financial asset is reclassified out of the amortised cost measurement category and into the fair value through profit or loss accounting portfolio (IFRS 9.5.6.2), gains or losses due to the reclassification shall be reported in ‘Gains or (-) losses on financial assets and liabilities held for trading, net’ or ‘Gains or (-) losses on non-trading financial assets mandatorily at fair value through profit or loss, net’, as applicable;

• (b) where a financial asset is reclassified out of the fair value through other comprehensive income measurement category and into the fair value through profit or loss measurement category (IFRS 9.5.6.7), the cumulative gains or losses previously recognised in other comprehensive income reclassified to profit or loss shall be reported in ‘Gains or (-) losses on financial assets and liabilities held for trading, net’ or ‘Gains or (-) losses on non-trading financial assets mandatorily at fair value through profit or loss, net’, as applicable.

• 47.‘Gains or (-) losses from hedge accounting, net’ shall include gains and losses on hedging instruments and on hedged items, including those on hedged items measured at fair value through other comprehensive income other than equity instruments, in a fair value hedge in accordance with IFRS 9.6.5.8. It shall also include the ineffective part of the variation of the fair value of the hedging instruments in a cash flow hedge. The reclassifications of the cash flow hedges reserve or of the reserve for hedges of net investment in a foreign operation shall be recognised in the same rows of the ‘Statement of profit or loss’ as those impacted by the cash flows from the hedged items. ‘Gains or (-) losses from hedge accounting, net’ shall include also the gains and losses from hedges of net investment in foreign operations. This item shall also include gains on hedges of net positions.

• 48.‘Gains or losses on derecognition of non-financial assets’ shall include the gains and losses on derecognition of non-financial assets, except where classified as held for sale or as investments in subsidiaries, joint ventures and associates.

• 48i.‘Cash contributions to resolution funds and deposit guarantee schemes’ shall include the amounts of contributions to resolution funds and deposit guarantee schemes where they are paid in the form of cash. Where the contribution is made in the form of a payment commitment, this payment commitment shall be included in ‘provisions or (-) reversal of provisions’, if the payment commitment gives rise to a liability in accordance with the applicable accounting standard.

• 49.‘Modification gains or (-) losses, net’ shall include the amounts arising from adjusting the gross carrying amounts of financial assets to reflect the renegotiated or modified contractual cash flows (IFRS 9.5.4.3 and Appendix A). The modification gains or losses shall not include the impact of modifications on the amount of expected credit losses, which shall be reported in ‘Impairment or (-) reversal of impairment on financial assets not measured at fair value through profit or loss’.

• 50.‘Provisions or (-) reversal of provisions. Commitments and guarantees given’ shall include the net charges in the ‘Statement of profit or loss’ for provisions on all commitments and guarantees in the scope of IFRS 9, IAS 37 or IFRS 4 in accordance with paragraph 11 of this Part, or under national GAAP based on BAD. Under IFRS, any change in the fair value of commitments and financial guarantees measured at fair value shall be reported in ‘Gains or (-) losses on financial assets and liabilities designated at fair value through profit or loss, net’. Provisions therefore include the impairment amount for commitments and guarantees for which impairment is determined in accordance with IFRS 9 or their provisioning follows IAS 37 or they are treated as insurance contracts under IFRS 4.

• 51.Under IFRS, ‘Impairment or (-) reversal of impairment on financial assets not measured at fair value through profit or loss’ shall include all impairment gains or losses for debt instruments arising from the application of the impairment rules in IFRS 9.5.5, regardless of whether the expected credit losses in accordance with IFRS 9.5.5 are estimated over a 12-month or a lifetime period, and including the impairment gains or losses for trade receivables, contract assets and lease receivables (IFRS 9.5.5.15).

• 52.Under national GAAP based on BAD ‘Impairment or (-) reversal of impairment on financial assets not measured at fair value through profit and loss’ shall include all allowances and reversal of allowances of financial instruments measured at cost based methods due to the change in creditworthiness of the debtor or issuer, as well as, depending on the specifications of the national GAAP, the allowances due to the impairment of financial instruments measured at fair value through equity and other measurement methods, including LOCOM.

• 53.‘Impairment or (-) reversal of impairment on financial assets not measured at fair value through profit or loss’ shall also include the amounts written off – as defined in paragraph 72, 74 and 165(b) of this Part of this Annex- that exceed the amount of the loss allowance at the date of write-off and are therefore recognised as a loss directly in profit or loss, as well as recoveries of previously written-off amounts recorded directly to the statement of profit or loss.

• 54.The share of profit or loss from subsidiaries, associates and joint ventures which are accounted for under the equity method in the regulatory scope of consolidation shall be reported within ‘Share of the profit or (-) loss of investments in subsidiaries, joint ventures and associates accounted for using the equity method’. According to IAS 28.10, the carrying amount of the investment shall be reduced by the amount of dividends paid by those entities. The impairment on those investments shall be reported in ‘(Impairment or (-) reversal of impairment of investments in subsidiaries, joint ventures and associates)’. Gains or losses on derecognition of these investments shall be reported in accordance with paragraph 55 and 56of this Part.

• 55.‘Profit or loss from non-current assets and disposal groups classified as held for sale not qualifying as discontinued operations’ shall include profit or loss generated by non-current assets and disposal groups classified as held for sale not qualifying as discontinued operations.

• 56.Under IFRS, the gains or losses on derecognition of investments in subsidiaries, joint ventures and associates shall be reported within ‘Profit or (-) loss before tax from discontinued operations’ where they are considered discontinued operations under IFRS 5. Where investments in subsidiaries, joint ventures and associates are derecognised without being previously classified as held for sale and without being qualified as discontinued operations under IFRS 5, any gains or losses on derecognition of these investments shall be reported in ‘Gains or (-) losses on derecognition of investments in subsidiaries, joint ventures and associates, net’, irrespective of the consolidation method applied. Under national GAAP based on BAD, all gains and losses on derecognition of investments in subsidiaries, joint ventures and associates shall be reported in ‘Gains or (-) losses on derecognition of investments in subsidiaries, joint ventures and associates, net’.

3. STATEMENT OF COMPREHENSIVE INCOME (3)

• 57.‘Gains or (-) losses from hedge accounting of equity instruments at fair value through other comprehensive income’ shall include the change in the accumulated hedge ineffectiveness in fair value hedges in which the hedged item is an equity instrument measured at fair value through other comprehensive income. The change in accumulated hedge ineffectiveness reported in this row shall be the difference between the changes in the variation of the fair value of the equity instrument reported in ‘Fair value changes of equity instruments measured at fair value through other comprehensive income (hedged item)’ and the changes in the variation of the fair value of the hedging derivative reported in ‘Fair value changes of equity instruments measured at fair value through other comprehensive income (hedging instrument)’.

• 58.‘Hedge of net investments in foreign operations (effective portion)’ shall include the change in the accumulated foreign currency translation reserve for the effective portion of both on-going and discontinued hedges of net investments in foreign operations.

• 59.For hedges of net investment in foreign operations and cash flow hedges, the respective amounts reported in ‘Transferred to profit or loss’ shall include amounts transferred because the hedged flows have occurred and are no longer expected to occur.

• 60.‘Hedging instruments (not designated elements)’ shall include changes in the accumulated changes in fair value of all of the following where they are not designated as a hedging component:

• (a) time value of options;

• (b) forward elements of forward contracts;

• (c) foreign exchange basis spread of financial instruments.

• 61.For options, the amounts reclassified to profit or loss and reported in ‘Transferred to profit or loss’ shall include reclassifications due to options that hedge a transaction-related hedged item and options that hedge a time-period related hedge item.

• 62.‘Debt instruments at fair value through other comprehensive income’ shall include gains or losses on debt instruments measured at fair value through other comprehensive income other than impairment gains or losses and foreign exchange gains and losses, that shall respectively be reported in ‘(Impairment or (-) reversal of impairment on financial assets not measured at fair value through profit or loss)’ and in ‘Exchange differences (gain or (-) loss), net’ in template 2. ‘Transferred to profit or loss’ in particular shall include the transfer to profit or loss due to derecognition or reclassification into the fair value through profit or loss measurement category.

• 63.Where a financial asset is reclassified out of the amortised cost measurement category and into the fair value through other comprehensive income measurement category (IFRS 9.5.6.4), the gains or losses arising due to the reclassification shall be reported in ‘Debt instruments at fair value through other comprehensive income’.

• 64.Where a financial asset is reclassified out of the fair value through other comprehensive income measurement category and into the fair value through profit or loss measurement category (IFRS 9.5.6.7) or into the amortised cost measurement category (IFRS 9.5.6.5), the reclassified cumulative gains and losses previously recognised in other comprehensive income shall be respectively reported in ‘Transferred to profit or loss’ and in ‘Other reclassifications’, adjusting in the latter case the carrying amount of the financial asset.

• 65.For all components of the other comprehensive income, ‘Other reclassifications’ shall include transfers other than the reclassifications from the other comprehensive income to the profit or loss or to the initial carrying amount of hedged items in the case of cash flow hedges.

• 66.Under IFRS ‘Income tax relating to items that will not be reclassified’ and ‘Income tax relating to items that may be reclassified to profit or (-) loss’ (IAS 1.91 (b), IG6) shall be reported as separate line items.

4. BREAKDOWN OF FINANCIAL ASSETS BY INSTRUMENT AND BY COUNTERPARTY SECTOR (4)

• 67.Financial assets shall be broken down by accounting portfolio and instrument and – where required – by counterparty. For debt instruments measured at fair value through other comprehensive income and at amortised cost, the gross carrying amount of assets and accumulated impairments shall be broken down by impairment stages, except where they are purchased or originated financial assets that are credit-impaired at initial recognition as defined in IFRS 9 Appendix A. For these assets, the gross carrying amount and accumulated impairment shall be separately reported, outside the impairment stages, in templates 4.3.1 and 4.4.1.

• 68.Derivatives reported as trading financial assets under GAAP based on BAD include instruments measured at fair value as well as instruments measured at cost-based methods or LOCOM.

• 69.For the purposes of Annexes III and IV as well as this Annex, ‘accumulated negative changes in fair value due to credit risk’ means, for non-performing exposures, accumulated changes in fair value due to credit risk where the accumulated net change is negative. The accumulated net change in fair value due to credit risk shall be calculated by adding all negative and positive changes in fair value due to credit risk that have occurred since recognition of the debt instrument. That amount shall only be reported where the addition of positive and negative changes in fair value due to credit risk results in a negative amount. The valuation of the debt instruments shall be performed on the level of single financial instruments. For each debt instrument, ‘Accumulated negative changes in fair value due to credit risk’ shall be reported until the derecognition of the instrument.

• 70.For the purposes of Annexes III and IV as well as this Annex, ‘accumulated impairment’ shall have the following meaning:

• (a) for debt instruments measured at amortised cost or at a cost-based method, that are not purchased or originated credit-impaired financial assets, accumulated impairment is the cumulative amount of impairment losses, net of use and reversals that has been recognised, where appropriate for each of the impairment stages. Accumulated impairment reduces the carrying amount of the debt instrument through the use of an allowance account under IFRS and national GAAP based on BAD, or via direct reductions that do not constitute a derecognition event under national GAAP based on BAD;

• (b) for debt instruments measured at fair value through other comprehensive income under IFRS that are not purchased or originated credit-impaired financial assets, accumulated impairment is the sum of expected credit losses and their variations recognised as a reduction of fair value on a given instrument since initial recognition;

• (c) for debt instruments at fair value through equity under national GAAP based on BAD subject to impairment, accumulated impairment is the cumulative amount of impairment losses, net of use and reversals that has been recognised. The reduction in the carrying amount is either made through use of an allowance account or via direct reductions that do not constitute a derecognition event.

• (d) for purchased or originated credit-impaired financial assets, the initial estimate of lifetime expected credit losses is incorporated into the calculation of the credit-adjusted effective interest rate and accumulated impairment is the sum of subsequent changes in lifetime expected credit losses since initial recognition that are recognized as a variation of carrying amount/fair value on a given instrument. Accumulated impairment for purchased or originated credit-impaired financial assets can be positive in case of impairment gains exceeding any previously recognised impairment losses (IFRS 9.5.5.14).

• 71.Under IFRS, accumulated impairment shall include the allowance for expected credit losses for financial assets under each of the impairment stages specified by IFRS 9 and the allowance for purchased or originated credit-impaired financial assets. Under national GAAP based on BAD, it shall include specific and general allowance for credit risk, as well as the general allowance for banking risk where it reduces the carrying amount of debt instruments. Accumulated impairment shall also include the credit risk-induced value adjustments on financial assets under LOCOM.

• 72.‘Accumulated partial write-offs’ and ‘Accumulated total write-offs’ shall include, respectively, the accumulated partial and total amount as at the reference date of principal and accrued past due interest and fees of any debt instrument that has been de-recognised to date using either of the methods described in paragraph 74 because the institution has no reasonable expectations of recovering the contractual cash flows. Those amounts shall be reported until the total extinguishment of all the reporting institution’s rights by expiry of the statute-of-limitations period, forgiveness or other causes, or until recovery. Therefore, where the written-off amounts are not recovered, they shall be reported while they are subject to enforcement activities.

• 73.Where a debt instrument is eventually totally written-off because of successive partial write-offs, the cumulative amount written-off shall be reclassified from the ‘Accumulated partial write-offs’ into the ‘Accumulated total write-offs’ column.

• 74.Write-offs shall constitute a derecognition event and relate to a financial asset in its entirety or to a portion of it, including where the modification of an asset leads the institution to give up its right of collecting cash flows on a portion or the entirety of this asset as further explained in paragraph 72. Write-offs shall include amounts caused by both reductions of the carrying amount of financial assets recognised directly in profit or loss and reductions in the amounts of the allowance accounts for credit losses taken against the carrying amount of financial assets.

• 75.The column ‘of which: Instruments with low credit risk’ shall include instruments that are determined to have low credit risk at the reporting date and for which the institution assumes that the credit risk has not increased significantly since initial recognition in accordance with IFRS 9.5.5.10.

• 76.Trade receivables within the meaning of IAS 1.54(h), contract assets and lease receivables for which the simplified approach of IFRS 9.5.5.15 for the estimation of loss allowances has been applied, shall be reported within loans and advances in template 4.4.1. The corresponding loss allowance for those assets that are not purchased or originated credit-impaired financial assets shall be reported in either ‘Accumulated impairment on assets with significant increase in credit risk since initial recognition but not credit-impaired (Stage 2)’ or ‘Accumulated impairment on credit-impaired assets (Stage 3)’, depending on whether trade receivables, contract assets or lease receivables under the simplified approach are considered as credit-impaired assets.

• 78.In template 4.5, institutions shall report the carrying amount of ‘Loans and advances’ and ‘Debt securities’ that fall within the definition of ‘subordinated debt’ in paragraph 100 of this Part.

• 79.In template 4.8, information to be reported depends on whether Non-trading non-derivative financial assets measured at fair value to equity can be subject to impairment requirements in application of the national GAAP based on BAD. Where those financial assets are subject to impairment, institutions shall report information in this template that relates to the carrying amount, the gross carrying amount of unimpaired assets and impaired assets, accumulated impairment and accumulated write-offs. Where those financial assets are not subject to impairment, institutions shall report the accumulated negative changes in fair value due to credit risk for non-performing exposures.

• 80.In template 4.9, financial assets measured under moderate LOCOM and their associated value adjustments shall be identified separately from other financial assets measured at a cost-based method and their associated impairment. Financial assets under a cost-based method, including financial assets under moderate LOCOM, shall be reported as unimpaired assets where they have no value adjustments or impairment associated with them, and as impaired assets in case they have value adjustments that qualify as impairment or impairment associated with them. Value adjustments that qualify as impairment shall be credit risk-induced value adjustments reflecting the deterioration of the creditworthiness of the counterparty. Financial assets under moderate LOCOM with market-risk induced value adjustments reflecting the impact of changes in the market conditions on the value of the asset shall not be considered as impaired. Accumulated credit-risk induced and market-risk induced value adjustments shall be reported separately.

• 81.In template 4.10, assets measured at strict LOCOM as well as their associated value adjustments shall be reported separately from assets under other measurement methods. Financial assets under strict LOCOM and financial assets under other measurement methods shall be reported as impaired assets in case they have credit-risk induced value adjustments as defined in paragraph 80 or impairment associated with them. Financial assets under strict LOCOM with market risk induced value adjustments as defined in paragraph 80 shall not be considered as impaired. Accumulated credit-risk induced and market-risk induced value adjustments shall be reported separately.

• 82.Under national GAAP based on BAD, the amount of general allowances for banking risk to be reported in the applicable templates shall only be the part that affects the carrying amount of debt instruments (BAD Article 37.2).

5. BREAKDOWN OF NON-TRADING LOANS AND ADVANCES BY PRODUCT (5)

• 83.Loans and advances other than those held for trading, trading assets or held for sale assets shall be broken down by type of product and by counterparty sector for the carrying amount and by type of products only for the gross carrying amount.

• 84.Balances receivable on demand classified as ‘Cash, cash balances at central banks and other demand deposits’ shall also be reported in this template independently of how they are measured.

• 85.Loans and advances shall be allocated to the following products:

• (a) ‘on demand (call) and short notice (current account)’ shall include balances receivable on demand (call), at short notice (by close of business on the day following that on which the demand was made), current accounts and similar balances including loans that are overnight deposits for the borrower (loans to be repaid by close of business on the day following that in which it was granted), regardless of their legal form. It shall also include ‘overdrafts’ that are debit balances on current account balances and compulsory reserves held at the central bank;

• (b) ‘Credit card debt’ shall include credit granted either via delayed debit cards or via credit cards as defined in the Table of Part 2 of Annex II to the ECB BSI Regulation;

• (c) ‘Trade receivables’ shall include loans to other debtors granted on the basis of bills or other documents that give the right to receive the proceeds of transactions for the sale of goods or provision of services. That item shall include all factoring and similar transactions, like acceptances, outright purchase of trade receivables, forfaiting, discounting of invoice, bills of exchange, commercial papers and other claims where the reporting institution buys the trade receivables (both with and without recourse);

• (d) ‘Finance leases’ shall include the carrying amount of finance lease receivables. Under IFRS, ‘finance lease receivables’ are as defined in IAS 17;

• (e) ‘Reverse repurchase loans’ shall include finance granted in exchange for securities or gold bought under repurchase agreements or borrowed under securities lending agreements as defined in paragraphs 183 and 184 of this Part;

• (f) ‘Other term loans’ shall include debit balances with contractually fixed maturities or terms that are not included in other items;

• (g) ‘Advances that are not loans’ shall include advances that cannot be classified as loans in accordance with the Table of Part 2 of Annex II to the ECB BSI Regulation. That item shall include, among others, gross amounts receivable in respect of suspense items (such as funds that are awaiting investment, transfer, or settlement) and transit items (such as cheques and other forms of payment that have been sent for collection).

• 86.Loans and advances shall be classified on the basis of the collateral received as follows:

• (a) ‘Loans collateralized by immovable property’ shall include loans and advances formally secured by residential or commercial immovable property collateral, regardless of their loan/collateral ratio (commonly referred as ‘loan-to-value’) and the legal form of the collateral;

• (b) ‘Other collateralized loans’ shall include loans and advances formally secured by collateral, regardless of their loan/collateral ratio (commonly referred to as ‘loan-to-value’ (LTV) ratio) and the legal form of the collateral, other than ‘Loans collateralised by immovable property’. That collateral shall include pledges of securities, cash, and other collateral, regardless of the legal form of the collateral.

• 87.Loans and advances shall be classified based on the collateral and irrespective of the purpose of the loan. The carrying amount of loans and advances secured by more than one type of collateral shall be classified and reported as collateralised by immovable property where those loans and advances are secured by immovable property regardless of whether they are also secured by other types of collateral.

• 88.Loans and advances shall be classified on the basis of their purpose as:

• (a) ‘Credit for consumption’ shall include loans granted mainly for the personal consumption of goods and services, as defined in the Table of Part 2 of Annex II to the ECB BSI Regulation;

• (b) ‘Lending for house purchase’ shall include credit extended to households for the purpose of investing in houses for own use or rental, including building and refurbishments, as defined in the Table of Part 2 of Annex II to the ECB BSI Regulation.

• 89.Loans shall be classified on the basis of how they can be recovered. ‘Project finance loans’ shall include loans that meet the characteristics of specialised lending exposures as referred to in Article 147(8) CRR.

6. BREAKDOWN OF NON-TRADING LOANS AND ADVANCES TO NON-FINANCIAL CORPORATIONS BY NACE CODES (6)

• 90.Gross carrying amount of loans and advances to non-financial corporations other than those included in the held for trading, trading or held for sale portfolios shall be classified by sector of economic activities using NACE Codes on the basis of the principal activity of the counterparty.

• 91.The classification of the exposures incurred jointly by more than one obligor shall be done in accordance with paragraph 43 of Part 1 of this Annex.

• 92.Reporting of NACE codes shall be done with the first level of disaggregation (by ‘section’). Institutions shall report loans and advances to non-financial corporations which engage in financial or insurance activities in ‘K – Financial and insurance activities’.

• 93.Under IFRS, financial assets subject to impairment are those included in the following accounting portfolios: (i) financial assets at amortised cost, and (ii) financial assets at fair value through other comprehensive income. Under national GAAP based on BAD, financial assets subject to impairment shall include financial assets measured at a cost-based method, including under LOCOM. Depending on the specifications in each national GAAP, they may include (i) financial assets measured at fair value through equity, and (ii) financial assets under other measurement methods.

7. FINANCIAL ASSETS SUBJECT TO IMPAIRMENT THAT ARE PAST DUE (7)

• 94.The carrying amount of debt instruments that are included in the accounting portfolios subject to impairment shall be reported in template 7.1 only where they are past due. Past-due instruments shall be allocated to the corresponding past-due buckets on the basis of their individual situation.

• 95.Accounting portfolios subject to impairment shall be financial assets subject to impairment, as defined as in paragraph 93 of this Part.

• 96.Financial assets shall qualify as past due where any amount of principal, interest or fee has not been paid at the date it was due. Past due exposures shall be reported for their entire carrying amount and broken down according to the number of days of the oldest past due amount unpaid at the reference date. Under IFRS, the carrying amounts of assets that are not purchased or originated credit-impaired financial assets shall be reported by impairment stages; the carrying amount of purchased or originated credit-impaired financial assets shall be separately reported. Under national GAAP based on BAD, past-due assets shall be reported by impairment status in accordance with the applicable accounting standards.

8. BREAKDOWN OF FINANCIAL LIABILITIES (8)

• 97.‘Deposits’ and the product breakdown shall be defined in accordance with the Table of Part 2 of Annex II to the ECB BSI Regulation. Regulated savings deposits shall be classified in accordance with the ECB BSI Regulation and distributed according to the counterparty. In particular, non-transferable sight savings deposits, which although legally redeemable at demand are subject to significant penalties and restrictions and have features that are very similar to overnight deposits, shall be classified as deposits redeemable at notice.

• 98.‘Debt securities issued’ shall be disaggregated into the following type of products:

• (a) ‘Certificates of deposits’ shall be securities that enable the holders to withdraw funds from an account;

• (b) ‘Asset backed securities’ shall be securities derived from securitisation transactions as defined in point (61) of Article 4(1) CRR;

• (c) ‘Covered Bonds’ as referred to in Article 129(1) CRR;

• (d) ‘Hybrid contracts’ shall comprise contracts with embedded derivatives that are not included in the products referred to in points (b) and (c) or classified as convertible compound financial instruments under point (e);

• (e) ‘Other debt securities issued’ shall be debt securities that are not included in the products referred to in points (a) to (d) and shall distinguish between convertible compound financial instruments and non-convertible instruments.

• 99.‘Subordinated financial liabilities’ issued shall be treated in the same way as other financial liabilities incurred. Subordinated liabilities issued in the form of securities shall be classified as ‘Debt securities issued’ and subordinated liabilities in the form of deposits are classified as ‘Deposits’.

• 100.Template 8.2 shall include the carrying amount of ‘Deposits’ and ‘Debt securities issued’ that shall be subordinated debt, as determined in Table of Part 2 of Annex II to the ECB BSI Regulation, classified by accounting portfolios. ‘Subordinated debt’ instruments provide a subsidiary claim on the issuing institution that can only be exercised after all claims with a higher status have been satisfied.

• 101.‘Accumulated changes in fair value due to changes in own credit risk’ shall include all the said accumulative changes in fair value, regardless of whether they are recognised in profit or loss or in the other comprehensive income.

9. LOAN COMMITMENTS, FINANCIAL GUARANTEES AND OTHER COMMITMENTS (9)

• 102.Off-balance sheet exposures shall include the off-balance sheet items listed in Annex I to CRR. In templates 9.1, 9.1.1 and 9.2, all off-balance sheet exposures listed in Annex I to CRR shall be broken down in loan commitments, financial guarantees, and other commitments.

• 103.Information on loan commitments, financial guarantees and other commitments given and received shall include both revocable and irrevocable commitments.

• 104.Loan commitments, financial guarantees and other commitments given listed in Annex I to CRR may be instruments that are in the scope of IFRS 9 where they are measured at fair value through profit or loss, or where they are subject to the impairment requirements of IFRS 9, as well as instruments that are within the scope of IAS 37 or IFRS 4.

• 105.Under IFRS, loan commitments, financial guarantees and other commitments given shall be reported in template 9.1.1 where any of the following conditions are met:

• (a) they are subject to impairment requirements of IFRS 9;

• (b) they are designated at fair value through profit or loss under IFRS 9;

• (c) they are within the scope of IAS 37 or IFRS 4.

• 106.Liabilities that shall be recognised as credit losses for the financial guarantees and commitments given referred to under points (a) and (c) of paragraph 105 of this Part of this Annex shall be reported as provisions regardless of the measurement criteria applied.

• 107.Institutions under IFRS shall report the nominal amount and provisions of instruments that are subject to the impairment requirements of IFRS 9, including those measured at initial cost less cumulative income recognised, broken down by impairment stages, except where they are deemed credit-impaired at initial recognition consistently with the definition of purchased or originated financial assets of IFRS 9 Appendix A. For these exposures, the nominal amount and provisions shall be separately reported, outside the impairment stages in template 9.1.1.

• 108.Only the nominal amount of the commitment shall be reported in template 9.1.1 where a debt instrument includes both an on-balance sheet instrument and an off-balance sheet component. Where the reporting entity is unable to identify separately the expected credit losses on the on-balance sheet and off-balance components, the expected credit losses on the commitment shall be reported together with the accumulated impairment on the on-balance sheet component. Where the combined expected credit losses exceed the gross carrying amount of the debt instrument, the remaining balance of the expected credit losses shall be reported as a provision in the appropriate column in template 9.1.1 (IFRS 9.5.5.20 and IFRS 7.B8E).

• 109.A financial guarantee or a commitment to provide a loan at a below-market rate that is measured in accordance with IFRS 9.4.2.1(d) and for which its loss allowance is determined in accordance with IFRS 9.5.5 shall be reported in the appropriate column.

• 110.Where loan commitments, financial guarantees and other commitments are measured at fair value in accordance with IFRS 9, institutions shall report in template 9.1.1 the nominal amount and accumulated negative changes in fair value due to credit risk of those financial guarantees and commitments in dedicated columns. ‘Accumulated negative changes in fair value due to credit risk’ shall be reported applying the criteria of paragraph 69of this Part.

• 111.The nominal amount and provisions of other commitments or guarantees that are within the scope of IAS 37 or IFRS 4 shall be reported in dedicated columns.

• 112.Institutions under national GAAP based on BAD shall report in template 9.1 the nominal amount of commitments and financial guarantees referred to in paragraphs 102 and 103, as well as the amount of provisions required to be held against those off-balance sheet exposures.

• 113.‘Loan commitments’ shall be firm commitments to provide credit under pre-specified terms and conditions, except those that are derivatives because they can be settled net in cash or by delivering or issuing another financial instrument. The following items of Annex I to CRR shall be classified as ‘Loan commitments’:

• (a) ‘Forward deposits’;

• (b) ‘Undrawn credit facilities’, which comprise agreements to ‘lend’ or provide ‘acceptance facilities’ under pre-specified terms and conditions.

• 114.‘Financial guarantees’ shall be contracts that require the issuer to make specified payments to reimburse the holder of a loss it incurs, because a specified debtor fails to make payment where due in accordance with the original or modified terms of a debt instrument, including guarantees provided for other financial guarantees. Under IFRS, those contracts shall meet the definition of financial guarantee contracts in IFRS 9.2.1(e) and IFRS 4.A. The following items of Annex I to CRR shall be classified as ‘financial guarantees’:

• (a) ‘Guarantees having the character of credit substitute’;

• (b) ‘Credit derivatives’ that meet the definition of financial guarantee;

• (c) ‘Irrevocable standby letters of credit having the character of credit substitutes’.

• 115.‘Other commitments’ shall include the following items of Annex I to CRR:

• (a) ‘Unpaid portion of partly-paid shares and securities’;

• (b) ‘Documentary credits issued or confirmed’;

• (c) ‘Trade finance off-balance sheet items’;

• (d) ‘Documentary credits in which underlying shipment acts as collateral and other self-liquidating transactions’;

• (e) ‘Warranties and indemnities’ (including tender and performance bonds) and ‘guarantees not having the character of credit substitutes’;

• (f) ‘Shipping guarantees, customs and tax bonds’;

• (g) ‘Note issuance facilities’ (NIFs) and ‘Revolving underwritings facilities’ (RUFs);

• (h) ‘Undrawn credit facilities’ which comprise agreements to ‘lend’ or provide ‘acceptance facilities’ where the terms and conditions are not pre-specified;

• (i) ‘Undrawn credit facilities’ which comprise agreements to ‘purchase securities’ or ‘provide guarantees’;

• (j) ‘Undrawn credit facilities for tender and performance guarantees’;

• (k) ‘Other off-balance sheet items’ in Annex I to CRR.

• 116.Under IFRS, the following items are recognised in the balance sheet and, consequently, shall not be reported as off-balance sheet exposures:

• (a) ‘Credit derivatives’ that do not meet the definition of financial guarantees are ‘derivatives’ under IFRS 9;

• (b) ‘Acceptances’ are obligations by an institution to pay on maturity the face value of a bill of exchange, normally covering the sale of goods. Consequently, they are classified as ‘trade receivables’ on the balance sheet;

• (c) ‘Endorsements on bills’ that do not meet the criteria for derecognition under IFRS 9;

• (d) ‘Transactions with recourse’ that do not meet the criteria for derecognition under IFRS 9;

• (e) ‘Assets purchased under outright forward purchase agreements’ are ‘derivatives’ under IFRS 9;

• (f) ‘Asset sale and repurchase agreements as referred to in paragraphs 3 and 5 of Article 12 of Directive 86/635/EEC’. In those contracts, the transferee has the option, but not the obligation, to return the assets at a price agreed in advance on a date specified or on a date to be specified. Therefore, those contracts meet the definition of derivatives in Appendix A to IFRS 9.

• 117.The item ‘of which: non-performing’ shall include the nominal amount of those loan commitments, financial guarantees and other commitments given that are considered as non-performing in accordance with paragraphs 213 to 239 of this Part.

• 118.For financial guarantees, loan commitments and other commitments given, the ‘Nominal amount’ shall be the amount that best represents the institution’s maximum exposure to credit risk without taking account of any collateral held or other credit enhancements. In particular, for financial guarantees given, the nominal amount shall be the maximum amount the entity would have to pay if the guarantee is called on. For loan commitments, the nominal amount shall be the undrawn amount that the institution has committed to lend. Nominal amounts shall be the exposure values before applying conversion factors and credit risk mitigation techniques.

• 119.In template 9.2, for loan commitments received, the nominal amount shall be the total undrawn amount that the counterparty has committed to lend to the institution. For other commitments received, the nominal amount shall be the total amount committed by the other party in the transaction. For financial guarantees received, the ‘maximum amount of the guarantee that can be considered’ shall be the maximum amount the counterparty would have to pay if the guarantee is called on. Where a financial guarantee received has been issued by more than one guarantor, the guaranteed amount shall be reported only once in this template; the guaranteed amount shall be allocated to guarantor that is more relevant for the mitigation of credit risk.

10. DERIVATIVES AND HEDGE ACCOUNTING (10 AND 11)

• 120.For the purpose of templates 10 and 11, derivatives shall be considered either as hedging derivatives where they are used in a qualifying hedging relationship in accordance with IFRS or with the applicable national GAAP under BAD, or as held for trading in other cases.

• 121.The carrying amount and the notional amount of the derivatives held for trading, including economic hedges, as well as the derivatives held for hedge accounting shall be reported broken down by type of underlying risk, type of market and type of product in templates 10 and 11. Institutions shall report the derivatives held for hedge accounting also broken down by type of hedge. Information on non-derivative hedging instruments shall be reported separately and broken down by types of hedges.

• 122.Under the relevant national GAAP based on BAD, all derivatives shall be reported in these templates irrespective of whether they are or are not recognised on the balance sheet under the relevant national GAAP.

• 123.The breakdown of the carrying amount, fair value and notional amount of trading and hedging derivatives by accounting portfolios and types of hedges shall be implemented taking into consideration the accounting portfolios and types of hedges that are applicable in IFRS or national GAAP under BAD, whichever framework applies to the reporting entity.

• 124.Trading derivatives and hedging derivatives which, in accordance with national GAAP based on BAD, are measured at cost or LOCOM shall be identified separately.

• 125.Template 11 shall include hedging instruments and hedged items irrespective of the accounting standard used to recognise a qualifying hedge relationship, including where that qualifying hedge relationship concerns a net position. Where an institution has elected to keep applying IAS 39 for hedge accounting (IFRS 9.7.2.21), the references and names for the types of hedges and accounting portfolios shall be read as the relevant references and names in IAS 39.9: ‘Financial assets measured at fair value through other comprehensive income’ shall refer to ‘Available for sale assets’, and ‘Assets at amortised cost shall gather “Held to maturity” as well as ‘Loans and receivables’.

• 126.Derivatives included in hybrid instruments, which have been separated from the host contract, shall be reported in templates 10 and 11 according to the nature of the derivative. The amount of the host contract is not included in those templates. However, where the hybrid instrument is measured at fair value through profit or loss, the contract shall be reported as a whole and the embedded derivatives shall not be reported in templates 10 and 11.

• 127.Commitments considered as derivatives (IFRS 9.2.3(b)) and credit derivatives that do not meet the definition of a financial guarantee in paragraph 114 of this Part of this Annex shall be reported in template 10 and template 11 following the same breakdowns as the other derivative instruments, but not be reported in template 9.

• 128.The carrying amount of non-derivative financial assets or non-derivative financial liabilities that are recognised as hedging instrument in application of IFRS or the relevant national GAAP under BAD shall be reported separately in template 11.3.

10.1.   Classification of derivatives by type of risk

• 129.All derivatives shall be classified into one of the following risk categories:

• (a) interest rate: Interest rate derivatives shall be contracts related to an interest-bearing financial instrument the cash flows of which are determined by referencing interest rates or another interest rate contract such as an option on a futures contract to purchase a treasury bill. That category shall be restricted to those deals where all the legs are exposed to only one currency’s interest rate. It shall thus exclude contracts involving the exchange of one or more foreign currencies such as cross-currency swaps and currency options, and other contracts the predominant risk characteristic of which is foreign exchange risk, which are to be reported as foreign exchange contracts. The only exception is where cross-currency swaps are used as part of a portfolio hedge of interest rate risk, where they shall be reported in the dedicated rows for those types of hedges. Interest rate contracts shall include forward rate agreements, single-currency interest rate swaps, interest rate futures, interest rate options (including caps, floors, collars and corridors), interest rate swaps and interest rate warrants;

• (b) equity: Equity derivatives shall be contracts that have a return, or a portion of their return, linked to the price of a particular equity or to an index of equity prices;

• (c) foreign exchange and gold: These derivatives shall include contracts involving the exchange of currencies in the forward market and the exposure to gold. They shall therefore cover outright forwards, foreign exchange swaps, currency swaps (including cross-currency interest rate swaps), currency futures, currency options, currency swaps and currency warrants. Foreign exchange derivatives shall include all deals involving exposure to more than one currency, whether in exchange rates or in interest rates, except where cross-currency swaps are used as part of a portfolio hedge of interest rate risk. Gold contracts shall include all deals involving exposure to that commodity;

• (d) credit: Credit derivatives shall be contracts in which the payout is linked primarily to some measure of the creditworthiness of a particular reference credit and that do not meet the definition of financial guarantees (IFRS 9.4.2.1 (c)). The contracts shall specify an exchange of payments in which at least one of the two legs is determined by the performance of the reference credit. Payouts can be triggered by a number of events, including a default, a rating downgrade or a stipulated change in the credit spread of the reference asset. Credit derivatives that meet the definition of a financial guarantee in paragraph 114 of this Part of this Annex shall be reported only in template 9;

• (e) commodity: These derivatives shall be contracts that have a return, or a portion of their return, linked to the price of, or to a price index of, a commodity such as a precious metal (other than gold), petroleum, lumber or agricultural products;

• (f) other: those derivatives shall be any other derivative contracts, which do not involve an exposure to foreign exchange, interest rate, equity, commodity or credit risk such as climatic derivatives or insurance derivatives.

• 130.Where a derivative is influenced by more than one type of underlying risk, the instrument shall be allocated to the most sensitive type of risk. For multi-exposure derivatives, in cases of uncertainty, the deals shall be allocated according to the following order of precedence:

• (a) commodities: All derivatives transactions involving a commodity or commodity index exposure, whether or not they involve a joint exposure in commodities and any other risk category which may include foreign exchange, interest rate or equity, shall be reported in this category;

• (b) equities: With the exception of contracts with a joint exposure to commodities and equities, which are to be reported as commodities, all derivatives transactions with a link to the performance of equities or equity indices shall be reported in the equity category. Equity deals with exposure to foreign exchange or interest rates shall be included in this category;

• (c) foreign exchange and gold: This category shall include all derivatives transactions (with the exception of those already reported in the commodity or equity categories) with exposure to more than one currency, be it pertaining to either interest-bearing financial instruments or exchange rates, except where cross-currency swaps are used as part of a portfolio hedge of interest rate risk.

10.2.   Amounts to be reported for derivatives

• 131.Under IFRS, the ‘carrying amount’ for all derivatives (hedging or trading) shall be the fair value. Derivatives with a positive fair value (above zero) shall be ‘financial assets’ and derivatives with a negative fair value (below zero) shall be ‘financial liabilities’. The ‘carrying amount’ shall be reported separately for derivatives with a positive fair value (‘financial assets’) and for those with a negative fair value (‘financial liabilities’). At the date of initial recognition, a derivative shall be classified as ‘financial asset’ or ‘financial liability’ according to its initial fair value. After initial recognition, as the fair value of a derivative increases or decreases, the terms of the exchange may become either favourable to the institution (and the derivative is classified as ‘financial asset’) or unfavourable (and the derivative is classified as ‘financial liability’). The carrying amount of hedging derivatives shall be their entire fair value, including, where applicable, the components of this fair value that are not designated as hedging instruments.

• 132.In addition to carrying amounts as defined in paragraph 27 of Part 1 of this Annex, fair values shall be reported by reporting institutions under national GAAP based on BAD for all derivative instruments, whether required to be booked on-balance sheet or off-balance sheet by the national GAAP based on BAD.

• 133.The ‘Notional amount’ shall be the gross nominal of all deals concluded and not yet settled at the reference date, regardless of whether those deals lead to derivative exposures being booked on-balance sheet. In particular, the following shall be taken into account to determine the notional amount:

• (a) for contracts with variable nominal or notional principal amounts, the basis for reporting shall be the nominal or notional principal amounts at the reference date;

• (b) the notional amount value to be reported for a derivative contract with a multiplier component shall be the contract effective notional amount or par value;

• (c) swaps: The notional amount of a swap shall be the underlying principal amount upon which the exchange of interest, foreign exchange or other income or expense is based;

• (d) equity and commodity-linked contracts: The notional amount to be reported for an equity or commodity contract shall be the quantity of the commodity or equity product contracted for purchase or sale multiplied by the contract price of a unit. The notional amount to be reported for commodity contracts with multiple exchanges of principal shall be the contractual amount multiplied by the number of remaining exchanges of principal in the contract;

• (e) credit derivatives: The contract amount to be reported for credit derivatives shall be the nominal value of the relevant reference credit;

• (f) digital options have a predefined payoff, which can be either a monetary amount or a number of contracts of an underlying. The notional amount for digital options shall be either the predefined monetary amount or the fair value of the underlying at the reference date.

• 134.The column ‘Notional amount’ of derivatives shall include, for each line item, the sum of the notional amounts of all contracts in which the institution is counterparty, irrespective of whether the derivatives are considered assets or liabilities on the face of the balance sheet or are not booked on-balance sheet. All notional amounts shall be reported, regardless of whether the fair value of derivatives is positive, negative or equal to zero. Netting among the notional amounts shall not be allowed.

• 135.The ‘Notional amount’ shall be reported by ‘total’ and by ‘of which: sold’ for the line items: ‘OTC options’, ‘Organised market options’, ‘Credit’, ‘Commodity’ and ‘Other’. The item ‘of which sold’ shall include the notional amounts (strike price) of the contracts in which the counterparties (option holders) of the institution (option writer) have the right to exercise the option, and for the items related to credit risk derivatives, the notional amounts of the contracts in which the institution (protection seller) has sold (gives) protection to its counterparties (protection buyers).

• 136.The allocation of a transaction as ‘OTC’ or ‘Organized market’ shall be based on the nature of the market where the transaction takes place and not on whether there is a mandatory clearing obligation for that transaction. An ‘Organised market’ is a regulated market in the meaning of point (92) of Article 4(1) CRR. Therefore, where a reporting entity enters into a derivative contract in an OTC market where central clearing is compulsory, it shall classify that derivative as ‘OTC’ and not as ‘Organised market’.

10.3.   Derivatives classified as ‘economic hedges’

• 137.Derivatives that are held for hedging purposes but which do not meet the criteria to be effective hedging instruments in accordance with IFRS 9, with IAS 39 where IAS 39 is applied for hedge accounting purposes or with the accounting framework under national GAAP based on BAD, shall be reported in template 10 as ‘economic hedges’. This shall apply also to all of the following cases:

• (a) derivatives hedging unquoted equity instruments for which cost may be an appropriate estimate of fair value;

• (b) credit derivatives measured at fair value through profit or loss used to manage the credit risk of all, or part of, a financial instrument that is designated as measured at fair value through profit or loss at, or subsequent to, initial recognition, or while it is unrecognised in accordance with IFRS 9.6.7.;

• (c) derivatives that are classified as ‘held for trading’ in accordance with Appendix A to IFRS 9 or classified as trading assets in accordance with the national GAAP based on BAD but are not part of the trading book as defined in point (86) of Article 4(1) CRR.

• 138.‘Economic hedges’ shall not include derivatives for proprietary trading.

• 139.Derivatives that meet the definition of ‘economic hedges’ shall be reported separately in template 10 for each type of risk.

• 140.Credit derivatives used to manage the credit risk of all, or part of, a financial instrument that is designated as measured at fair value through profit or loss at, or subsequent to, initial recognition, or while it is unrecognised in accordance with IFRS 9.6.7, shall be reported in a dedicated row in template 10 within credit risk. Other economic hedges of credit risk for which the reporting entity does not apply IFRS 9.6.7 shall be reported separately.

10.4.   Breakdown of derivatives by counterparty sector

• 141.The carrying amount and the total notional amount of derivatives held for trading, and also of derivatives held for hedge accounting, which are traded in the OTC market, shall be reported by counterparties using the following categories:

• (a) ‘credit institutions’;

• (b) ‘other financial corporations’;

• (c) ‘rest’ comprising all other counterparties.

• 142.All OTC derivatives, irrespective of the type of risk to which they are related, shall be broken down by those counterparties.

10.5.   Hedge accounting under national GAAP (11.2)

• 143.Where national GAAP under BAD require the allocation of hedging derivatives across categories of hedges, the hedging derivatives shall be separately reported for each of the applicable categories: ‘fair-value hedges’, ‘cash flow hedges’, ‘cost-price hedges’, ‘hedge in net investments in a foreign operation’, ‘portfolio fair value hedges of interest rate risk’ and ‘portfolio cash flow hedges of interest rate risk’.

• 144.Where applicable in accordance with national GAAP based on BAD, ‘Cost price hedges’ shall refer to a hedging category in which the hedging derivative is generally measured at cost.

10.6.   Amount to be reported for non-derivative hedging instruments (11.3 and 11.3.1)

• 145.For non-derivative hedging instruments, the amount to be reported shall be the carrying amount of those non-derivative hedging instruments according to the applicable measurement rules in IFRS or in GAAP based on BAD for the accounting portfolios to which they belong. No ‘notional amount’ shall be reported for non-derivative hedging instruments.

10.7.   Hedged items in fair value hedges (11.4)

• 146.The carrying amount of hedged items in a fair value hedge recognised on the statement of financial position shall be broken down by accounting portfolio and type of hedged risk for hedged financial assets and hedged financial liabilities. Where a financial instrument is hedged for more than one risk, it shall be reported in the type of risk in which the hedging instrument shall be reported in accordance with paragraph 129.

• 147.‘Micro-hedges’ shall be hedges other than portfolio hedge of interest rate risk in accordance with IAS 39.89 A. Micro-hedges shall include hedges of nil net positions as referred to in accordance with IFRS 9.6.6.6.

• 148.‘Hedge adjustments on micro-hedges’ shall include all hedge adjustments for all the micro-hedges as defined in paragraph 147.

• 149.‘Hedge adjustments included in the carrying amount of assets/liabilities’ shall be the accumulated amount of the gains and losses on the hedged items that have adjusted the carrying amount of those items and been recognised in profit or loss. Hedge adjustments for the hedged items that are equities measured at fair value through other comprehensive income shall be reported in template 1.3. Hedge adjustments for unrecognised firm commitments or a component thereof shall not be reported.

• 150.‘Remaining adjustments for discontinued micro-hedges including hedges of net positions’ shall include those hedge adjustments which, following the discontinuation of the hedge relationship and the end of the adjustment of hedged items for hedging gains and losses, remain to be amortised to the profit or loss via a recalculated effective interest rate for hedged items measured at amortised cost, or to the amount that represents the previously recognised cumulative hedging gain or loss for hedged assets measured at fair value through other comprehensive income.

• 151.Where a group of financial assets or financial liabilities, including a group of financial assets or financial liabilities that constitute a net position, is eligible as a hedged item, financial assets and financial liabilities constituting that group shall be reported at their carrying amount on a gross basis, before netting between instruments within the group, in ‘Assets or liabilities included in hedge of a net position (before netting)’.

• 152.‘Hedged items in portfolio hedge of interest rate risk’ shall include financial assets and financial liabilities included in a fair value hedge of the interest rate exposure of a portfolio of financial assets or financial liabilities. Those financial instruments shall be reported at their carrying amount on a gross basis, before netting between instruments within the portfolio.

11. MOVEMENTS IN ALLOWANCES AND PROVISIONS FOR CREDIT LOSSES (12)

11.1.   Movements in allowances for credit losses and impairment of equity instruments under national GAAP based on BAD (12.0)

• 153.Template 12.0 contains a reconciliation of the opening and closing balances of the allowance account for financial assets measured under cost-based methods, as well as for financial assets under other measurement methods or measured at fair value through equity where the national GAAP under BAD require those assets to be subject to impairment (including cash balances at central banks and other demand deposits). Value adjustments on assets measured at the lower of cost or market shall not be reported in template 12.0.

• 154.‘Increases due to amounts set aside for estimated loan losses during the period’ shall be reported where, for the main category of assets or the counterparty, the estimation of the impairment for the period results in the recognition of net expenses; that is, for the given category or counterparty, the increases in the impairment for the period exceed the decreases. ‘Decreases due to amounts reversed for estimated loan losses during the period’ shall be reported where, for the main category of assets or counterparty, the estimation of the impairment for the period result in the recognition of net income; that is, for the given category or counterparty, the decreases in the impairment for the period exceed the increases.

• 155.Changes in the allowance amounts due to repayment and disposals of financial assets shall be reported in ‘Other adjustments’. Write-offs shall be reported in accordance with paragraphs 72 to 74.

11.2.   Movements in allowances and provisions for credit losses under IFRS (12.1)

• 156.Template 12.1 contains a reconciliation of the opening and closing balances of the allowance account for financial assets measured at amortised cost and at fair value through other comprehensive income broken down by impairment stages, by instrument (including cash balances at central banks and other demand deposits) and by counterparty. A separate reconciliation for purchased or originated credit-impaired financial assets shall be reported in the template.

• 157.The provisions for off-balance sheet exposures that are subject to the impairment requirements of IFRS 9 shall be reported by impairment stages and separately for purchased or originated credit-impaired exposures. Impairment for loan commitments shall be reported as provisions only where they are not considered together with the impairment of on-balance sheet assets in accordance with IFRS 9.7.B8E and paragraph 108 of this part. Movements in provisions for commitments and financial guarantees measured under IAS 37 and financial guarantees treated as insurance contracts under IFRS 4 shall not be reported in this template but in template 43. Changes in the fair value due to credit risk of commitments and financial guarantees measured at fair value through profit or loss in accordance with IFRS 9 shall not be reported in this template but in item ‘Gains or (-) losses on financial assets and liabilities designated at fair value through profit or loss, net’ in accordance with paragraph 50 of this Part.

• 158.The items ‘of which: collectively measured allowances’ and ‘of which: individually measured allowances’ shall include the movements in the cumulative amount of impairment related to financial assets which have been measured on a collective or individual basis.

• 159.‘Increases due to origination and acquisition’ shall include the amount of increases in expected losses accounted for on the initial recognition of financial assets originated or acquired. That increase of the allowance shall be reported at the first reporting reference date following the origination or acquisition of those financial assets. Increases or decreases in the expected losses on those financial assets after their initial recognition shall be reported in other columns. Originated or acquired assets shall include assets resulting from the drawdown of off-balance sheet commitments given.

• 160.‘Decreases due to derecognition’ shall include the amount of changes in allowances due to financial assets de-recognised totally in the reporting reference period for reasons other than write-offs, which include transfers to third parties or the expiry of the contractual rights due to full repayment, disposal of those financial assets or their transfer in another accounting portfolio. The change in allowance shall be recognised in this column at the first reporting reference date following the repayment, disposal or transfer. For off-balance sheet exposures, this item shall also include the decreases in the impairment due to the off-balance sheet item becoming an on-balance sheet asset.

• 161.‘Changes due to change in credit risk (net)’ shall include the net amount of changes in expected losses at the end of the reporting reference period due to an increase or decrease in credit risk since initial recognition, irrespective of whether those changes led to a transfer of the financial asset to another stage. The impact on the allowance due to the increase or decrease of the amount of financial assets as a consequence of the interest income accrued and paid shall be reported in this column. This item shall also include the impact of the passing of time on the expected losses calculated in accordance with IFRS 9.5.4.1(a) and (b). The changes in estimates due to updates or review of risk parameters as well as changes in forward-looking economic data shall also be reported in this column. Changes in expected losses due to partial repayment of exposures via instalments shall be reported in this column with the exception of the last instalment, which shall be reported in the column ‘Decreases due to derecognition’.

• 162.All changes in expected credit losses related to revolving exposures shall be reported in ‘Changes due to change in credit risk (net)’, except for those changes related to write-offs and updates in the institution’s methodology for estimation of credit losses. Revolving exposures shall be those for which customers’ outstanding balances are permitted to fluctuate based on their decisions to borrow and repay up to a limit established by the institution.

• 163.‘Changes due to an update in the institution’s methodology for estimation (net)’ shall include changes due to updates in the institution’s methodology for estimation of expected losses due to changes in the existing models or establishment of new models used to estimate impairment. Methodological updates shall also encompass the impact of the adoption of new standards. Changes in methodology that trigger an asset to change impairment stage shall be considered for a model change in its entirety. The changes in estimates due to updates or review of risk parameters as well as changes in forward-looking economic data shall not be reported in this column.

• 164.The reporting of the changes in the expected losses related to modified assets (IFRS 9.5.4.3 and Appendix A) shall depend on the feature of the modification in accordance with the following:

• (a) where the modification results in the partial or total derecognition of an asset due to a write-off as defined in paragraph 74, the impact on expected losses due to this derecognition shall be reported in ‘Decrease in allowance account due to write-offs’, and any other impact from modification on expected credit losses in other appropriate columns;

• (b) where the modification results in the complete derecognition of an asset for reasons other than a write-off as defined in paragraph 74 and its substitution by a new asset, the impact of modification on expected credit losses shall be reported in ‘Changes due to derecognition’ for the changes due to the asset derecognised, and in ‘Increases due to origination and acquisition’ for the changes due to the newly recognised modified asset. Derecognition for reasons other than write-offs shall include derecognition where the terms of the modified assets have been subject to substantial changes;

• (c) where the modification does not result in derecognition of all or part of the modified asset, its impact on expected losses shall be reported in ‘Changes due to modifications without derecognition’.

• 165.Write-offs shall be reported in accordance with paragraphs 72 to 74 of this Part of this Annex and in accordance with the following:

• (a) where the debt instrument is partially or totally derecognised because there is no reasonable expectation of recovery, the decrease in the loss allowance reported due to the amounts written off shall be reported in: ‘Decrease in allowance account due to write-offs’;

• (b) ‘Amounts written-off directly to the statement of profit or loss’ shall be the amounts of financial assets written-off during the reporting reference period that exceed any allowance account of the respective financial assets at the derecognition date. They shall include all amounts written-off during the reporting reference period and not only those which are still subject to enforcement activity.

• 166.‘Other adjustments’ shall include any amount not reported in the previous columns, including the adjustments on expected losses due to foreign exchange differences where it is consistent with the reporting of the impact of foreign exchange in template 2.