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)

2. GROUP SOLVENCY: INFORMATION ON AFFILIATES (GS)

2.1.   GENERAL REMARKS

• 27.Templates C 06.01 and C 06.02 shall be reported if own funds requirements are calculated on a consolidated basis. Template C 06.02 consists of four parts in order to gather different information on all individual entities (including the reporting institution) included in the scope of consolidation.

• (a) Entities within the scope of consolidation;

• (b) Detailed group solvency information;

• (c) Information on the contribution of individual entities to group solvency;

• (d) Information on capital buffers;

• 28.Institutions that obtained a waiver in accordance with Article 7 of Regulation (EU) No 575/2013 shall only report the columns 0010 to 0060 and 0250 to 0400.

• 29.The figures reported take into account all applicable transitional provisions of Regulation (EU) No 575/2013 which are applicable at the respective reporting date.

2.2.   DETAILED GROUP SOLVENCY INFORMATION

• 30.The second part of template C 06.02 (detailed group solvency information) in columns 0070 to 0210 is designed to gather information on credit and other regulated financial institutions which are effectively subject to particular solvency requirements on individual basis. It provides, for each of those entities within the scope of the reporting, the own funds requirements for each risk category and the own funds for solvency purposes.

• 31.In the case of proportional consolidation of participations, the figures related to own funds requirements and own funds shall reflect the respective proportional amounts.

2.3.   INFORMATION ON THE CONTRIBUTIONS OF INDIVIDUAL ENTITIES TO GROUP SOLVENCY

• 32.The objective of the third part of template C 06.02 and template C 06.01 (information on the contributions of all entities within Regulation (EU) No 575/2013 scope of consolidation to group solvency), including those that are not subject to particular solvency requirements on an individual basis, in columns 0250 to 0400, is to identify which entities within the group generate the risks and raise own funds from the market, based on data that are readily available or can easily be reprocessed, without having to reconstruct the capital ratio on a solo or sub-consolidated basis. At the entity level, both risk and own fund figures are contributions to the group figures and not elements of a solvency ratio on a solo basis and as such must not be compared to each other.

• 33.The third part also includes the amounts of minority interests, qualifying AT1, and qualifying T2 eligible in the consolidated own funds.

• 34.As this third part of the template refers to ‘contributions’, the figures to be reported herein shall defer, when applicable, from the figures reported in the columns referring to detailed group solvency information.

• 35.The principle is to delete the cross-exposures within the same groups in a homogeneous way both in terms of risks or own funds, in order to cover the amounts reported in the group’s consolidated CA template by adding the amounts reported for each entity in ‘Group Solvency’ template. A direct link to the CA template is not possible where the 1 % threshold is not exceeded.

• 36.The institutions shall define the most appropriate breakdown method between the entities to take into account the possible diversification effects for market risk and operational risk.

• 37.It is possible for one consolidated group to be included within another consolidated group. That means that the entities within a subgroup shall be reported entity-by-entity in the GS of the entire group, even if the sub-group itself is subject to reporting requirements. A subgroup that is subject to reporting requirements shall also report the GS template on an entity-by-entity basis, although those details are included in the GS template of a higher consolidated group.

• 38.An institution shall report data of the contribution of an entity when its contribution to the total risk exposure amount exceeds 1 % of the total risk exposure amount of the group or when its contribution to the total own funds exceeds 1 % of the total own funds of the group. That threshold does not apply in the case of subsidiaries or subgroups that provide own funds (in the form of minority interests or qualifying AT1 or T2 instruments included in own funds) to the group.

2.4.   C 06.01 – GROUP SOLVENCY: INFORMATION ON AFFILIATES – TOTAL (GS TOTAL)

2.5.   C 06.02 – GROUP SOLVENCY: INFORMATION ON AFFILIATES (GS)

3. CREDIT RISK TEMPLATES

3.1.   GENERAL REMARKS

• 39.There are different sets of templates for the Standardised approach and the IRB approach for credit risk. Additionally, separate templates for the geographical breakdown of positions subject to credit risk shall be reported if the relevant threshold set out in Article 5(5) of this Implementing Regulation is exceeded.

3.1.1.   Reporting of CRM techniques with substitution effect

• 40.Exposures to obligors (immediate counterparties) and guarantors which are assigned to the same exposure class shall be reported as an inflow as well as an outflow to the same exposure class.

• 41.The exposure type shall not change because of unfunded credit protection.

• 42.If an exposure is secured by an unfunded credit protection, the secured part shall be assigned as an outflow e.g. in the exposure class of the obligor and as an inflow in the exposure class of the guarantor. However, the type of the exposure shall not change due to the change of the exposure class.

• 43.The substitution effect in the COREP reporting framework shall reflect the risk weighting treatment effectively applicable to the covered part of the exposure. As such, the covered part of the exposure shall be risk weighted in accordance with the Standardised approach and shall be reported in the CR SA template.

3.1.2.   Reporting of Counterparty Credit Risk

• 44.Exposures stemming from Counterparty Credit Risk positions shall be reported in templates CR SA or CR IRB independent from whether they are Banking Book items or Trading Book items.

3.2.   C 07.00 - CREDIT AND COUNTERPARTY CREDIT RISKS AND FREE DELIVERIES: STANDARDISED APPROACH TO CAPITAL REQUIREMENTS (CR SA)

3.2.1.   General remarks

• 45.The CR SA templates provide the necessary information on the calculation of own funds requirements for credit risk in accordance with the Standardised approach. In particular, they provide detailed information on:

• a) the distribution of the exposure values according to the different, exposure types, risk weights and exposure classes;

• b) the amount and type of credit risk mitigation techniques used for mitigating the risks.

3.2.2.   Scope of the CR SA template

• 46.In accordance with Article 112 of Regulation (EU) No 575/2013 each SA exposure shall be assigned to one of the 16 SA exposure classes to calculate the own funds requirements.

• 47.The information in CR SA is required for the total exposure classes and individually for each of the exposure classes under the Standardised approach. The total figures as well as the information of each exposure class are reported in a separate dimension.

• 48.However the following positions are not within the scope of CR SA:

• (a) Exposures assigned to exposure class ‘items representing securitisation positions’ as referred to in Article 112, point (m), of Regulation (EU) No 575/2013, which shall be reported in the CR SEC templates.

• (b) Exposures deducted from own funds.

• 49.The scope of the CR SA template shall cover the following own funds requirements:

• (a) Credit risk in accordance with Chapter 2 (Standardised approach) of Part Three, Title II of Regulation (EU) No 575/2013 in the banking book, among which Counterparty credit risk in accordance with Part Three, Title II, Chapters 4 and 6 of that Regulation in the banking book;

• (b) Counterparty credit risk in accordance with Part Three, Title II, Chapters 4 and 6 of Regulation (EU) No 575/2013 in the trading book;

• (c) Settlement risk arising from free deliveries in accordance with Article 379 of Regulation (EU) No 575/2013 in respect of all the business activities.

• 50.The template shall include all exposures for which the own funds requirements are calculated in accordance with Part Three, Title II, Chapter 2 of Regulation (EU) No 575/2013 in conjunction with Part Three, Title II, Chapters 4 and 6 of Regulation (EU) No 575/2013. Institutions that apply Article 94(1) of Regulation (EU) No 575/2013 also need to report their trading book positions referred to in Article 92(3), point (b), of that Regulation in this template when they apply Part Three, Title II, Chapter 2 of that Regulation to calculate the own funds requirements thereof (Part Three, Title II, Chapters 2 and 6 and Part Three, Title V of that Regulation). Therefore the template shall not only provide detailed information on the type of the exposure (e.g. on balance sheet/ off balance sheet items), but also information on the allocation of risk weights within the respective exposure class.

• 51.In addition, CR SA includes memorandum items in rows 0290 to 0320 to collect further information about exposures secured by mortgages on immovable property and exposures in default.

• 52.Those memorandum items shall only be reported for the following exposure classes:

• (a) Central governments or central banks (Article 112, point (a), of Regulation (EU) No 575/2013 of Regulation (EU) No 575/2013);

• (b) Regional governments or local authorities (Article 112, point (b), of Regulation (EU) No 575/2013);

• (c) Public sector entities (Article 112, point (c), of Regulation (EU) No 575/2013);

• (d) Institutions (Article 112, point (f), of Regulation (EU) No 575/2013);

• (e) Corporates (Article 112, point (g), of Regulation (EU) No 575/2013);

• (f) Retail (Article 112, point (h), of Regulation (EU) No 575/2013).

• 53.The reporting of the memorandum items shall affect neither the calculation of the risk weighted exposure amounts of the exposure classes referred to in Article 112, points (a) to (c) and (f) to (h), of Regulation (EU) No 575/2013 nor of the exposure classes referred to in Article 112, points (i) and (j), of that Regulation reported in template CR SA.

• 54.The memorandum rows provide additional information about the obligor structure of the exposure classes ‘in default’ or ‘secured by immovable property’. Exposures shall be reported in these rows where the obligors would have been reported in the exposure classes ‘Central governments or central banks’, ‘Regional governments or local authorities’, ‘Public sector entities’, ‘Institutions’, ‘Corporates’ and ‘Retail’ of CR SA, if those exposures were not assigned to the exposure classes ‘in default’ or ‘secured by immovable property’. The figures reported, however, are the same as used to calculate the risk weighted exposure amounts in the exposure classes ‘in default’ or ‘secured by immovable property’.

• 55.E.g. if an exposure, the risk exposure amounts of which are calculated in accordance with Article 127 of Regulation (EU) No 575/2013and the value adjustments are less than 20 %, then that information shall be reported in CR SA, row 0320 in the total and in the exposure class ‘in default’. If this exposure, before it defaulted, was an exposure to an institution, then that information shall also be reported in row 0320 of exposure class ‘institutions’.

3.2.3.   Assignment of exposures to exposure classes under the Standardised approach

• 56.In order to ensure a consistent categorisation of exposures into the different exposure classes referred to in Article 112 of Regulation (EU) No 575/2013 the following sequential approach shall be applied:

• (a) In a first step, the Original exposure pre-conversion factors shall be classified into the corresponding (original) exposure class referred to in Article 112 of Regulation (EU) No 575/2013, without prejudice to the specific treatment (risk weight) that each specific exposure shall receive within the assigned exposure class.

• (b) In a second step the exposures may be redistributed to other exposure classes due to the application of credit risk mitigation (CRM) techniques with substitution effects on the exposure (e.g. guarantees, credit derivatives, financial collateral simple method) via inflows and outflows.

• 57.The following criteria shall apply to for the classification of the Original exposure pre-conversion factors into the different exposure classes (first step) without prejudice to the subsequent redistribution caused by the use of CRM techniques with substitution effects on the exposure or to the treatment (risk weight) that each specific exposure shall receive within the assigned exposure class.

• 58.For the purpose of classifying the original exposure pre-conversion factor in the first step, the CRM techniques associated to the exposure shall not be considered (note that they shall be considered explicitly in the second phase) unless a protection effect is intrinsically part of the definition of an exposure class as it is the case in the exposure class referred to in Article 112, point (i), of Regulation (EU) No 575/2013 (exposures secured by mortgages on immovable property).

• 59.Article 112 of Regulation (EU) No 575/2013 does not provide criteria for disjoining the exposure classes. This might imply that one exposure could potentially be classified in different exposure classes if no prioritisation in the assessment criteria for the classification is provided. The most obvious case arises between exposures to institutions and corporate with a short-term credit assessment (Article 112, point (n), of Regulation (EU) No 575/2013) and exposures to institutions (Article 112, point (f), of Regulation (EU) No 575/2013)/ exposures to corporates ( Article 112, point (g), of Regulation (EU) No 575/2013). In that case, it is clear that there is an implicit prioritisation in that Regulation since it shall be assessed first if a certain exposure is fit for being assigned to Short-term exposures to institutions and corporates and only afterwards assessed if it fits for being assigned to exposures to institutions or exposures to corporates. Otherwise it is obvious that the exposure class referred to in Article 112, point (n), of Regulation (EU) No 575/2013 shall never be assigned an exposure. The example provided is one of the most obvious examples but is not the only one. It is worth noting that the criteria used for establishing the exposure classes under the Standardised approach are different (institutional categorisation, term of the exposure, past due status, etc.) which is the underlying reason for non-disjoint groupings.

• 60.For a homogeneous and comparable reporting it is necessary to specify prioritisation assessment criteria for the assignment of the Original exposure pre-conversion factor by exposure classes, without prejudice to the specific treatment (risk weight) that each specific exposure shall receive within the assigned exposure class. The prioritisation criteria presented below, using a decision tree scheme, are based on the assessment of the conditions explicitly laid down in Regulation (EU) No 575/2013 for an exposure to fit in a certain exposure class and, if that is the case, on any decision on the part of the reporting institutions or the supervisor on the applicability of certain exposure classes. Therefore, the outcome of the exposure assignment process for reporting purposes shall be in line with Regulation (EU) No 575/2013 provisions. That does not prohibit institutions from applying other internal assignment procedures that may also be consistent with all relevant Regulation (EU) No 575/2013 provisions and its interpretations issued by the appropriate fora.

• 61.An exposure class shall be given priority to others in the assessment ranking in the decision tree (i.e. it shall be first assessed if an exposure can be assigned to an exposure class, without prejudice to the outcome of that assessment) if otherwise no exposures would potentially be assigned to it. That will be the case where in the absence of prioritisation criteria one exposure class is a subset of others. Therefore, the criteria graphically depicted in the following decision tree would work on a sequential process.

• 62.With this background the assessment ranking in the decision tree mentioned below shall follow the following order:

• 1. Securitisation positions;

• 1. Items associated with particular high risk;

• 1. Equity exposures

• 1. Exposures in default;

• 1. Exposures in the form of units or shares in collective investment undertakings (‘CIU’)/ Exposures in the form of covered bonds (disjoint exposure classes);

• 1. Exposures secured by mortgages on immovable property;

• 1. Other items;

• 1. Exposures to institutions and corporates with a short-term credit assessment;

• 1. All other exposure classes (disjoint exposure classes) which include Exposures to central governments or central banks; Exposures to regional governments or local authorities; Exposures to public sector entities; Exposures to multilateral development banks; Exposures to international organisations; Exposures to institutions; Exposures to corporate and Retail exposures.

• 63.In the case of exposures in the form of units or shares in collective investment undertakings and where the look through approach or the mandate-based approach (Article 132a, points (1) and (2), of Regulation (EU) No 575/2013) is used, the underlying individual (in the case of the look through approach) and individual group of (in the case of the mandate-based approach) exposures shall be considered and classified into their corresponding risk weight line according to their treatment. However, all the individual exposures shall be classified within the exposure class of Exposures in the form of units or shares in collective investment undertakings (‘CIU’).

• 64.‘nth’ to default credit derivatives, as specified in Article 134(6) of Regulation (EU) No 575/2013 that are rated shall be directly classified as securitisation positions. If they are not rated, they shall be considered in the ‘Other items’ exposure class. In that latter case, the nominal amount of the contract shall be reported as the Original exposure pre-conversion factors in the line for ‘Other risk weights’ (the risk weight used shall be that specified by the sum indicated under Article 134(6) of Regulation (EU) No 575/2013.

• 65.In a second step, as a consequence of credit risk mitigation techniques with substitution effects, exposures shall be reallocated to the exposure class of the protection provider.

DECISION TREE ON HOW TO ASSIGN THE ORIGINAL EXPOSURE PRE-CONVERSION FACTORS TO THE EXPOSURE CLASSES OF THE STANDARDISED APPROACH IN ACCORDANCE WITH REGULATION (EU) No 575/2013

3.2.4.   Clarifications on the scope of some specific exposure classes referred to in Article 112 of Regulation (EU) No 575/2013

3.2.4.1.   Exposure Class ‘Institutions’

• 66.Intra-group exposures referred to in Article 113, paragraphs 6 and 7 of Regulation (EU) No 575/2013 shall be reported as follows:

• 67.Exposures which fulfil the requirements of Article 113(7) of Regulation (EU) No 575/2013 shall be reported in the respective exposure classes where they would be reported if they were not intra-group exposures.

• 68.According to Article 113, paragraphs 6 and 7 of Regulation (EU) No 575/2013 an institution may, subject to the prior approval of the competent authorities, decide not to apply the requirements of paragraph 1 of that Article to the exposures of that institution to a counterparty which is its parent undertaking, its subsidiary, a subsidiary of its parent undertaking or an undertaking linked by a relationship within the meaning of Article 12(1) of Directive 83/349/EEC. That means that intra-group counterparties are not necessarily institutions but also undertakings which are assigned to other exposure classes, e.g. ancillary services undertakings or undertakings within the meaning of Article 12(1) of Council Directive 83/349/EEC (¹⁸). Therefore intra-group exposures shall be reported in the corresponding exposure class.

3.2.4.2.   Exposure Class ‘Covered Bonds’

• 69.SA exposures shall be assigned to the exposure class ‘covered bonds’ as follows:

• 70.Bonds referred to in Article 52(4) of Directive 2009/65/EC of the European Parliament and of the Council (¹⁹) shall fulfil the requirements of Article 129, paragraphs 1 and 2 of Regulation (EU) No 575/2013 to be classified in the exposure class ‘Covered Bonds’. The fulfilment of those requirements has to be checked in each case. Nevertheless, bonds referred to in Article 52(4) of Directive 2009/65/EC and issued before 31 December 2007 shall also be assigned to the exposure class ‘Covered Bonds’ pursuant to Article 129(6) of Regulation (EU) No 575/2013.

3.2.4.3.   Exposure class ‘Collective Investment Undertakings’

• 71.Where the possibility referred to in Article 132a (2) of Regulation (EU) No 575/2013 is used, exposures in the form of units or shares in CIUs shall be reported as on balance sheet items in accordance with the first sentence in Article 111(1) of Regulation (EU) No 575/2013.

3.2.5.   Instructions concerning specific positions