Question
Within the general instructions of Annex IV it is explicitly mentioned that for portfolios, which are defined with a specific rating grade in Annex I, information on the PD shall be reported for the entire rating scale, even if no IRB exposure exists for the respective portfolio at the reporting reference date for each rating grade. In this case, the EAD shall be reported as zero and information on the other columns shall not be submitted. The definition of the EAD in template C 101.00 states in turn that the exposure value shall be left blank if the institution has no IRB exposure for a given counterparty. In our opinion these two specifications are contradictory. Please clarify, if the exposure should be left blank or should be reported as “0” if no IRB exposure exists for the given counterparty/portfolio.
Background on the question
See above
Answer
In accordance with paragraphs 1 and 2 of Part I of Annex IV to the Draft ITS for the benchmarking exercise 2018 (applicable for the reference date end-2017 data) (Draft ITS on supervisory benchmarking), counterparties shall only be reported in template C 101.00 of Annex III to the Draft ITS on Supervisory Benchmarking, if an actual exposure or a rating exists which is valid to be used in the calculation risk-weighted assets (‘RWA’) and if it the exposure is within the scope of an approved model. This is in line with the instructions on column 110 of template C 101.00, which state that exposure value shall be left blank where the institution has no IRB exposure for a given counterparty. Paragraph 4 of Part I of Annex IV to the Draft ITS on supervisory benchmarking clarifies that, for the purposes of templates C 102.00 and C 103.00 of Annex III to the Draft ITS on Supervisory Benchmarking, in those cases where the portfolio definition includes a reference to a specific rating grade, an EAD of zero (0) shall be reported if no exposure exists for the portfolio at the reporting reference date for this specific rating grade. In contrast to this, where the portfolio definition does not include a reference to a specific rating grade, the portfolio shall not be submitted at all if no exposure exists (see paragraphs 3 and 5 of Part I of Annex IV). Disclaimer The present Q&A on Supervisory reporting is provisional. It will be reviewed after the Implementing Regulation is in force and published in the Official Journal. The text of the Implementing Regulation may differ from the text of the draft ITS to which this Q&A refers.