Question
What’s the appropriate definition of 'accounting value' of repos and reverse repos in UK, for NSFR reporting purposes? We have identified several potential interpretations, which include: 1) The cash nominal at the value date of the transaction (referred to as 'outstanding'). 2) The cash nominal at the value date, plus the accrued interests. 3) The outstanding value (as defined in point 1), plus all interests flows (both accrued and non-accrued). 4) The outstanding value (as defined in point 1) multiplied by a discount factor, plus the interests flows multiplied by a discount factor. This could be considered a form of cash fair value. When netting repos and reverse repos of the same counterparty together under the appropriate conditions, for NSFR purpose, should we use the same 'accounting value' to determine if the net position falls under a repo or a reverse? Any guidance you can provide on this matter would be greatly appreciated.
Background on the question
NSFR reporting instruction (Annex XIII) specifies the use of 'accounting value' as the reporting amount, except for derivative contracts which require fair value (according to Article 428d(2) CRR). We are seeking some clarity on how to define the 'accounting value' in the context of repos and reverse repos, particularly when these have been netted together under the appropriate conditions.
Answer
In accordance with Article 428c(2) of Regulation (EU) No 575/2013 as amended by Regulation (EU) No 2019/876 (CRR), for the purpose of calculating their net stable funding ratio (NSFR), institutions shall apply the appropriate stable funding factors set out in Chapters 3 and 4 to the accounting value of their assets, liabilities and off-balance-sheet items, unless otherwise specified in this Title. Consistent with Q&A 6026, unless otherwise specified in Part Six of Title IV of the CRR, for the purpose of the calculation of the NSFR, instruments should always be considered by the amount reported in the balance sheet under the applicable accounting standards. For the reporting of repos and reverse repos undertaken with the same counterparty, credit institutions should additionally consider the guidance referred to in paragraph 8 of Part 1 of Annex XIII of Regulation (EU) 2021/451.