Question
Assume the following data for a puttable bond: Origination date: 30.08.2018 First investors’ put optionality: 15.02.2019 Second investors’ put optionality: 15.05.2019 Final maturity: 30.10.2020 From our point of view, the instructions of annex XXII (reference 1.1.4) and annex XXIII (paragraph 12) in combination with the answers to the question 2 in EBA/ITS/2017/01 suggest this bond should be assigned with original (OM) and residual maturities (RM), both in days, for illustrative reporting dates as shown below: Reporting date: 31.08.2018: OM 169; RM 168 Reporting date: 30.09.2018: OM 169; RM 138 Reporting date: 30.12.2018: OM 169; RM 47 Reporting date: 31.03.2019: OM 169; RM 45 Reporting date: 30.06.2019: OM 169; RM 488 Reporting date: 30.09.2019: OM 169; RM 396
Background on the question
The instructions for calculating original and residual maturities in the context of the changed requirements for ALMM appear technically as transparent. However, as the given definition of original maturity is kind of unexpected, the further clarification by an illustrative example is highly appreciated.
Answer
In accordance with paragraph 2 of Part I of Annex XXIII to Regulation (EU) No 680/2014 (ITS on Supervisory Reporting) as amended by Regulation (EU) 2017/2114, reporting of template C 66.01 refers to the residual maturity of contractual flows resulting from legally binding agreements. The flows are to be reported according to their residual maturity in the relevant time bucket. Flows with optionality should be reported on the basis of a conservative approach according to Part I, paragraph 12 of Annex XXIII. With regard to the example above, the flows of a puttable bond are to be reported as follows: If the reporting reference date is 31/08/2018 and the first investor’s put optionality is 15/02/2019, the relevant outflow shall be assigned to the time bucket of the first possible put optionality (greater than 5 month up to 6 month). For the reporting reference dates after the first investor’s optionality date, the option should be presumed to be exercised at the second investor’s put optionality and accordingly assigned to the relevant time bucket. For the reporting dates after the second investor’s optionality date it has to be assumed that the repayment takes place at the maturity date, thus the outflow has to be assigned to the relevant time bucket of the maturity date.