Single Rulebook Q&A

Question ID: 2018_3664
Legal act : Regulation (EU) No 575/2013 (CRR) as amended
Topic : Accounting and auditing
Article: 473a
Paragraph: 7
Subparagraph: b
Article/Paragraph : 473a
COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
Type of submitter: Individual
Subject matter : IFRS 9 transitional provisions – Calculation of the increased amount of risk-weighted assets (RWA) in the standardised approach
Question:

Should the RWA correction (also with regard to the presentation in the Corep template 5.1) according the details in the background be calculated as follows: total amount of provisions multiplied by the scaling factor and then finally weighted by the risk weightings for each of the exposures for which these provisions were calculated?

 

***

Muß nun die RWA-Korrektur (auch in Hinblick auf die Darstellung im Corep Template 5.1.) wie folgt berechnet werden: Gesamtbetrag der Risikovorsorgen multipliziert um den Faktor und schlussendlich versehen mit den jeweiligen finalen Risikogewichten jener Exposures, für die diese Risikovorsorgen gebildet wurden?

 

 

Background on the question:

Pursuant to Regulation (EU) 2017/2395 of 12 December 2017 in connection with the introduction of IFRS 9 and the increased expected credit loss provisions linked to this, institutions may, on the one hand and taking account of the factors listed therein, include a portion of these provisions in their CET1 capital. On the other hand, exposures are increased by the scaling factor to be calculated on the basis of Article 473(a)(7)(b) CRR.

We are asking the question to better assess the effort needed to calculate the transitional effect.

 

***

Gemäß Verordnung (EU) 2017/2395 vom 12.Dezember 2017 im Zusammenhang mit der Einführung von IFRS 9 und den damit verbundenen höheren Risikovorsorgen, dürfen Institute einerseits unter Berücksichtigung der dort gelisteten Faktoren anteilig in das harte Kernkapital einbeziehen. Andererseits werden die Risikopositionsbeträge um den zu errechnenden Skalierungsfaktor (473a.7.b.) erhöht.

Die Frage stellt sich, um den Aufwand zu Berechnung des Übergangseffekts besser einschätzen können.

Date of submission: 12/01/2018
Published as Final Q&A: 25/05/2018
EBA answer:

The question is about the calculation and application of the scaling factor according to Article 473a(7)(b) of CRR. The scaling factor adjusts the specific credit risk adjustment, not directly the exposure value.

The scaling factor (sf) is calculated as specified in Article 473a(7)(b) of CRR: sf = 1 – (ABSA/RASA), where

ABSA= the amount calculated in accordance with point (a) in the second subparagraph of paragraph 1 of Article 473a of CRR, i.e. the amount added back to CET1 capital due to exposures subject to the standardized approach;

RASA= the total amount of specific credit risk adjustments for those exposures.

It follows that the scaling factor is calculated based on total amounts for the add back and specific credit risk adjustments, not at an exposure-by-exposure level. There is only one single scaling factor to be calculated for all exposures at each reporting date. The scaling factor is not fixed but recalculated at each reporting date. Risk weights are assigned to exposure values after deduction of the credit risk adjustments (which themselves are reduced by multiplication by the scaling factor) at an exposure-by-exposure level.

The impact of the application of Article 473a of CRR is reported in template C 05.01 of Annex I to Regulation (EU) No 680/2014 (ITS on Supervisory Reporting) as a memo item. Furthermore, institutions must disclose capital ratios with and without application of transitional arrangements under Article 473a(8) of CRR. Hence, in order to be able to do so, institutions must calculate the capital requirements twice at each reporting date: one time applying the transitional arrangements (these figures are reported in COREP Templates C 02.00 and 07.00) and one time without applying the transitional arrangements.

Status: Final Q&A
Permanent link: link