Question
Under to Article 467 and 468 of Regulation (EU) No 575/2013 (CRR), what is the appropriate level of aggregation with respect to unrealised gains or losses at which the percentages have to be applied respectively? Please indicate the appropriate level of application.
Background on the question
According to Article 467 and 468 of CRR, during the period from 1 January 2014 to 31 December 2018 institutions shall include in the calculation of their CET1 items only the applicable percentages of unrealised gains and losses related to assets or liabilities measured at fair value, and reported on the balance sheet. During 2014, the applicable percentage of unrealised losses to be included is between 20% and 100%. The applicable percentage of gains is 0% (equals removing 100% of unrealised gains according to Article 468 of Regulation 575/2013). Consequently, there are two positions to be considered in COREP: {CA5.1;r120;c060} and {CA5.1;r130;c060}.
Answer
The level of application of unrealised gains and losses - i.e. whether to apply the percentages of unrealised gains and losses under Articles 467 (2) and 468 (2) and determined by competent authorities according to Articles 467 (3) and 468 (3) on a portfolio basis (for instance distinguishing between categories of assets or liabilities) or on an item by item basis- is not specified as part of Regulation (EU) No 575/2013 (CRR). For the transitional arrangements the level of application is expected to follow current national practices applied for prudential filters (based on the Guidelines on Prudential Filters for Regulatory Capital established by the former Committee of European Banking Supervisors in 2004). Reporting of unrealised losses and unrealised gains in CA1 and CA5.1: In CA1, all capital items and deductions shall be reported without effects of transitional provisions. The adjustment effects of the transitional provisions are shown only in the nine rows in aggregated terms (see instructions for CA templates, ANNEX II of instructions on own funds, part II, 1.1, explanation in paragraph 13). The adjustments to be made according to the transitional provisions shall be reported in CA5.1. The EBA will look more closely into this issue as part of its mandate to provide by 1 January 2014 a technical advice to the European Commission on unrealised gains in accordance with article 80 (4).