Question
Where should the cash collateral receivables on derivative transactions be disclosed in template C43
Background on the question
EBA Q&A 2016 2982 (Published Feb’ 17) states that the deductions of cash variation margin receivables are to be reported in C 43 row 80-300 (banking book sub part of the template) as part of the on balance sheet exposure. The response further draws reference to the Data Point Model (DPM) and requires the deduction to be reported in accordance with the main category of “assets other than derivatives and securities financing transactions”, which implies that the whole of cash collaterals receivables including the deductions are required to be reported in row 80-300 of the template. Regarding the corresponding RWA to be reported in the template, the guidance per Annex XI states that the RWA under counterparty credit risk of derivatives (including cash collateral) shall be reported in row 40-50 of the template. The guidance is not clear on the disclosure of the related leverage exposure. Based on the above, there would be inconsistency in reporting of leverage exposures and RWA related to derivative cash collaterals
Answer
In line with Article 429a(3) of Regulation (EU) No 575/2013 as amended by Commission Delegated Regulation (EU) 2015/62, superseded by Articles 429a(1)(l) and 429c(3) of Regulation (EU) No 575/2013 as amended by Regulation (EU) 2019/876, EBA Q&A 2016 2982 clarifies that receivables for cash variation margin provided in derivatives transactions may only be excluded from the leverage ratio exposure measure where the institution has to recognise the variation margin paid in cash to the counterparty as a receivable asset. Therefore, the respective deductions should be reported as part of the on-balance sheet exposures ({C 43.00; r0080 to r0300; c0010 or c0020}). In {C 43.00; r0040; c0010} the leverage ratio exposure value of derivatives and SFTs subject to a cross-product is reported; in {C 43.00; r0050; c0010} the leverage ratio exposure value of derivatives not subject to a cross-product netting agreement is reported. The calculation of these exposures includes cash variation margined provided in accordance with the applicable regulation.