Definitions and guidance in the SRB 2016 Contributions Reporting Form reporting form prevail over the information in the slides

Transcription

1 2016 ex-ante contributions to the SRF Additional guidance for the industry 30 November 2015 Definitions and guidance in the SRB 2016 Contributions Reporting Form reporting form prevail over the information in the slides

2 Agenda 1 The Single Resolution Fund 2 Principals of ex-ante contributions Reporting data of ex-ante contributions Calculation of ex-ante contributions 2

3 The Single Resolution Fund Objective of the Fund The Single Resolution Fund ( The Fund ) is an essential element of the Single Resolution Mechanism (SRM) which harmonises resolution of credit institutions and certain investment firms within the 19 participating Member States. The Fund will be built up during the first eight years ( ) and shall reach at least 1% of covered deposits (approx. 55bn in 2024). 3

4 The Single Resolution Fund Contributions to the Fund The Fund is financed from ex-ante contributions paid annually at individual (solo) level by all credit institutions and some investment firms established in the 19 Member States participating to the SRM. The SRB is responsible for the calculation of the ex-ante contributions. The NRAs are responsible for the collection and transfer of contributions from the entities located in their respective territories to the Fund. Where ex-ante contributions are insufficient to cover the losses or costs incurred by the use of the Fund, additional ex-post contributions should be collected. 4

5 1 The Single Resolution Fund 2 Principals of ex-ante contributions Reporting data of ex-ante contributions Calculation of ex-ante contributions 5

6 Principals of ex-ante contributions Harmonised rules for all the institutions contributing to the Fund The SRB is empowered to calculate the individual ex-ante contributions to the Fund annually due from credit institutions and some investment firms authorised in the 19 Member States participating to the SRM. For the purpose of calculating these contributions, the Board applies the methodology set out in Delegated Regulation (EU) 2015/63 and Implementing Regulation 2015/81, which ensure harmonised calculation rules for all the institutions in scope. The calculation of ex-ante contributions is based on the latest available reported data, in majority of cases: for contributions calculated in year N (e.g. 2016) the reference date is 31 December N-2 (e.g. 2014). 6

7 Principals of ex-ante contributions Contributions to the Fund take into account the annual target level as well as the size and the risk profile of institutions. Annual target level Distribute the target among the institutions Non-risky / small institutions Lump-sum treatment Risky / large institutions Base/size of institution and risk of all institutions under the SRF x Risk of institution Total base/size and risk of all institutions under the SRF Calculation of base/size of institution: Total Liabilities - - Derivative Own funds Covered Deposits - - Intra-group adjustment liabilities -+ Institution s specific deductions X Risk factor adjustment 7

8 Principals of ex-ante contributions Data necessary for calculation (summarized view) Medium and large institution Small (non-risky) institutions 1. Basic Annual Contribution: Total Liabilities (= Total Balance Sheet) Source Annual financial statements Own Funds EU COREP (Capital) Covered Deposits DGSs / Institution Accounting on-balance sheet derivative liabilities Annual financial statements + Derivative liabilities (leverage methodology) after floor Institution Deductions (if any) Institution 2. Risk adjustment: i. Risk Exposure: a) MREL Not reported in all MS for 2014 b) Leverage Ratio EU COREP (Leverage) c) Common Equity Tier 1 Capital (CET1) Ratio EU COREP (Capital) d) Total Risk Exposure (TRE) EU COREP (RWAs) e) Total Assets (TA) Annual financial statements ii. NSFR & LCR Not reported in all MS for 2014 iii. Interbank loans and deposits Not reported in all MS for 2014 iv. a) Risk exposure on traded debt and equity (out of TRE, CET1, TA) EU COREP (manual if IRB) Off-balance sheet nominal (out of TRE, CET1, TA) EU COREP (Leverage) Derivative exposure (out of TRE, CET1, TA) EU COREP (Leverage) Of which: CCP exposure (risk reducing) Institution Complexity of business model (Y/N) Not reported in all MS for 2014 b) IPS membership and authorisation (Y/N) Institution c) Extent of previous extraordinary public financial support (Y/N) Institution 8

9 Principals of ex-ante contributions Timeline for 2016 contributions Ongoing Institutions are being requested data 1 February 24:00 Deadline for institutions to submit data 1 May Institutions are notified of annual contribution amounts 30 June Deadline for institutions to pay annual contribution amounts Oct Nov Dec Jan Feb Mar Apr May Jun Jul National Resolution Authorities are: First contact point for institutions in case of any questions or need of clarification Collecting the data and contributions for the SRF Single Resolution Board is: Applying harmonised rules Giving guidance for data collection and calculations to the NRAs 9

10 Principals of ex-ante contributions What happens if (some) data are not submitted by 1 February 2016 Where an institution does not submit the data by 1 February 2016: the Board will use estimates or its own assumptions in order to calculate the annual contribution of the institution. the Board may assign the institution concerned to the highest risk adjusting multiplier, i.e. 1.5 Institutions shall submit all the data required by the National Resolution Authorities by 1 February :00 at the latest. 10

11 1 The Single Resolution Fund 2 Principals of ex-ante contributions Reporting data of ex-ante contributions Calculation of ex-ante contributions 11

12 Reporting data of ex-ante contributions The following slides complement the definitions and guidance included in the reporting form (especially in tab 5) developed for 2016 ex-ante contributions to the Single Resolution Fund, by providing: Key messages by main building blocks of the reporting form; Illustrations, especially for the derivative adjustment and deductions; Additional guidance on specific topics. 12

13 Reporting data of ex-ante contributions Overview of the building blocks of the reporting form for 2016 contributions Small (non-risky) institutions Medium and large institution Tab 1 Tab 2 Tab 3 Tab 4 Identification Base Deductions Total Liabilities Own Funds Covered deposits Derivatives Risk Adjustment CCPs & CSDs Investment firms Promotional loans Risk Exposure IPS & Intragroup Additional indicators Identifies the institution and its characteristics Collects data for the basic annual contribution Determines if the institution qualifies for a simplified calculation method Collects data to adjust derivatives (except credit derivatives), when applicable Collects data for the deduction of qualifying items from the basic annual contribution, where applicable Collects data regarding the risk profile of the institution in order to apply the risk adjustment Field filled in by the institution Field automatically generated in the reporting form 13

14 Reporting data of ex-ante contributions Functionalities integrated in the reporting form for 2016 contributions The reporting form allows to identify if the small institution qualifies for the lump sum approach so that it does not have to fill in the derivative adjustment, deductions and risk adjustment data. Tab 5. Definitions and guidance It also provides guidance for each data to be reported (tab 5), for deductions (tab 3) and for institutions with individual waiver for own funds and leverage ratio (tab 4). Tab 6. Validation rules It automatically consolidates in the tab 6 all the data reported by the institution with: Automatic completeness checks; Automatic consistency checks. 14

15 Reporting data of ex-ante contributions Read me tab of the reporting form for 2016 contributions Before filling in the reporting form, all institutions shall read the general instructions listed in the Section B of the Read me tab. This tab also contains information regarding: The submission deadline for the reporting form; Next steps for the institution; The scope of application of 2016 ex-ante contributions to the SRF; Legal references. 15

16 Reporting data of ex-ante contributions Tab 1 identifies characteristics for potential deductions and specific treatments Field ID 1C1 1C2 1C3-4 1C5 1C6 1C7 1C8 1C9 1C10 1D2 Field (rephrased here below) If the institution is a credit institution If the institution is a central body If the institution is a member of a qualifying Institutional Protection Scheme (IPS) If the institution is a central counterparty (CCP) If the institution is a central securities depository (CSD) If the institution is an investment firm If the institution is an investment firm authorized to carry out only limited services and activities If the institution operates promotional loans If the institution is a mortgage credit institution financed by covered bonds If the institution has merged with another institution after 2014 Impact Potential deduction of covered deposits All the data to be reported on a consolidated basis Potential deduction of qualifying IPS liabilities Potential deduction of qualifying clearing liabilities Potential deduction of qualifying CSD liabilities Potential deduction of qualifying liabilities that arise by virtue of holding client assets or client money It qualifies for a specific simplified approach Potential deduction of qualifying liabilities related to promotional loans It can qualify for a simplified calculation method Two reporting forms for the post-merger institution 1E1 Reference date for the data reported: Date of the latest approved annual financial statements available before 31 December 2015 (mainly 31 December 2014) 16

17 Reporting data of ex-ante contributions (Section A) collects data for the basic annual contribution. Calculation of base/size of institution: Total Liabilities - - Own funds Covered Deposits 2A1 Total liabilities = total balance sheet (sum of liabilities and equity items) at the reference date and as reported in the annual financial statements of the institution. 2A2 Own Funds = sum of Tier 1 and Tier 2 capital (EU COREP, Annex I, Template n.1, code c 01.00, row 010) 2A3-2A6 Covered Deposits (This field only applies to credit institutions) = As defined in the Deposit Guarantee Scheme Directive 2014/49/EU Guidance to be provided by each NRA Covered deposits (2014) Covered deposits (2015) Basic Annual Contribution Annual Target level No additional data is required if the institution qualifies for a simplified method!!!!!! (Section B.i and B.ii) 17

18 Reporting data of ex-ante contributions (Section C) adjusts derivative liabilities. Derivative adjustment intends to ensure a harmonised treatment of derivatives in the determination of the basic annual contribution allowing for the comparability of their valuation between institutions and for a level playing field across the Union. Credit derivative contracts are not adjusted. In order to adjust derivative liabilities in total liabilities, the following 5 steps should be performed Financial Statements (BS) A L 1 Identification of the "liabilities arising from derivatives" -excluding credit derivatives- in the total liabilities reported in the annual financial statements 2C2 2 Identification of the recognised netting agreements (except cross-product netting) under the CRR 575/ Application of the leverage ratio methodology (netting recognised in step 2 can be applied) to derivatives with negative replacement costs or market values. (*) 2C1 75% FLOOR Accounting value 4 Application of the floor; calculation of the floor amount (75% of accounting measure -fair value- for derivative liabilities held on- and off-balance sheet; accounting netting can be applied); the floor amount replaces the amount calculated in step 3 if it is higher. 2C3 2C4 2C5 5 Adjustment of total liabilities: Total Liabilities - Reported on-balance sheet derivatives (step 1) + Derivatives under leverage methodology after floor (steps 2 to 4) 2C6 (*) DATA FREQUENCY: According to the DR, the leverage ratio methodology should be applied as "the yearly average amount, calculated on a quarterly basis". If this same value is only available for one or some quarters of the reference year, the yearly average of these quarters must be reported. 18

19 Reporting data of ex-ante contributions (Section C) Derivative adjustment - Illustrations Data needed from the institution: Legal ref. Field ID Example A: All derivatives are booked on-balance sheet Example B: Some derivatives are booked on-balance sheet, others are held off-balance sheet Total Liabilities in annual financial statements DR 2015/63 - Art. 3(22) 2A Absolute amount of fair values (including accrued interests) of derivative liabilities booked on-balance sheet under accounting standards in annual financial statements Netting under accounting rules can be applied DR 2015/63 - Art. 3(22), 5(3) 2C2 Assets 100 Liabilities Derivative fair values = Assets 89 Liabilities Derivative fair values = Absolute amount of fair values (including accrued interests) of derivative liabilities held off-balance sheet under accounting standards Netting under accounting rules can be applied DR 2015/63 - Art. 3(22), 5(3) 2C3 0 (zero) Negative fair values of derivatives held off-balance sheet = -11 Absolute amount = 11 Leverage value of derivatives with negative current replacement costs: Absolute amount of current replacement costs + Notional*% (CRR Art. 274) OR Notional*% (CRR Art. 275 if already applied for CRR Art. 92) Netting under Leverage rules (CRR Art. 295) can be applied, except cross-product netting DR 2015/63 - Art. 3(22), 5(3); CRR 575/2013 Art. 274, 275, 295; DR 2015/62 Art. 429a 2C (Sum of Notional*% for all derivatives with negative current replacement cost) = 80 (CRR Art. 274) OR Sum of Notional*% for all derivatives with negative current replacement cost = 80 (CRR Art. 275) Automatic calculations in the reporting form: Floor amount Leverage value of derivatives after floor DR 2015/63 - Art. 3(22), 5(3), 5(4) 2C5 75% * 22 = 16.5 Max ( 80 ; 16.5) = 80 Total Liabilities after derivative adjustment 2C = =

20 Reporting data of ex-ante contributions Tab 3 provides guidance to report possible deductions from the total liabilities after derivative adjustment. The Delegated Regulation 2015/63 allows deductions under strict conditions. A single transaction can only be deducted ONCE from the total liabilities after derivatives adjustment, even if it matches several of the deduction categories below. The deduction of qualifying derivative liabilities in Tab 3 should take into account the adjustment made to all the derivative liabilities in Tab 2 (Section C). Section Deduction category Conditions A Qualifying liabilities related to clearing activities Only for CCPs and if conditions in Art. 5(1)(c) are met B C D E F Qualifying liabilities related to CSD activities Qualifying liabilities that arise by virtue of holding client assets or client money Qualifying liabilities that arise from promotional loans Qualifying IPS liabilities (and assets) Qualifying intragroup liabilities (and assets) Only for CSDs and if conditions in Art. 5(1)(d) are met Only for investment firms and if conditions in Art. 5(1)(e) are met Only for institutions operating promotional loans and if conditions in Art. 5(1)(f) are met Only for qualifying IPS members and if conditions in Art. 5(1)(b) & 5(2) are met Only for qualifying group entities and if conditions in Art. 5(1)(a) & 5(2) are met 20

21 Reporting data of ex-ante contributions (Section F) Deduction of non-derivative intragroup liabilities Illustration* The intragroup transactions below between group entities A and B meet all the conditions in Article 5(1)(a) of the DR 2015/63. In the example below, there is a perfect match between the accounting value of intragroup transactions booked by A and B in their respective financial statements. In case of mismatch, the liability value prevails over the asset value. Group entity B Assets Liabilities Assets Liabilities Intragroup nonderivative assets with A (accounting value) = 30 Intragroup non-derivative liabilities with A (accounting value) = 25 Intragroup non-derivative assets with B (accounting value) = 25 Group entity A Intragroup non-derivative liabilities with B (accounting value) = 30 Total Intragroup liabilities = 25 Total deductible intragroup liabilities for group entity A = 25/2 = 12.5 Total deductible intragroup assets for group entity B = 25/2 = 12.5 Deductible amounts for A & B come from their respective qualifying liabilities. An even deduction is applied (50% of qualifying liabilities for A, same for B) Total Intragroup liabilities = 30 Total deductible intragroup liabilities for group entity A = 30/2 = 15 Total deductible intragroup assets for group entity B = 30/2 = 15 Data needed from the group entity A for its intragroup non-derivative deductions: Values in this example Legal ref. Field ID. Intragroup liabilities that meet all the conditions in Article 5(1)(a) of the DR: Total accounting value. Intragroup assets that meet all the conditions in Article 5(1)(a) of the DR: Total accounting value booked by group entity A Adjusted value taking into account the values and derivative adjustment made by group entity B Automatic calculation in the reporting form:. Deductible amount of assets and liabilities arising from qualifying intragroup liabilities for A /2 + 25/2 = 27.5 DR 2015/63-5(1)(a), 5(2) 3F5 3F9 3F10 3F11 * The same methodology applies for transactions between IPS members (Art. 5(1)(b)) 21

22 Reporting data of ex-ante contributions (Section F) Deduction of derivative intragroup liabilities Illustration* The intragroup transactions below between group entities A and B meet all the conditions in Article 5(1)(a) of the DR 2015/63. In the example below, all the intragroup transactions between A and B are derivatives. Group entity B Group entity A Assets Liabilities Assets Liabilities Intragroup derivative liabilities with A (accounting value) = 22 Intragroup derivative liabilities with A (leverage value) = 80 Intragroup derivative assets with B (accounting value) = 22 Intragroup derivative liabilities with B (accounting value) = 10 Intragroup derivative liabilities with B (leverage value) = 30 Total Intragroup liabilities = 80 Total deductible intragroup liabilities for group entity A = 80/2 = 40 Total deductible intragroup assets for group entity B = 80/2 = 40 Deductible amounts for A & B come from their respective qualifying liabilities taking into account the derivative adjustment. An even deduction is applied (50% of qualifying liabilities for A, same for B) Total Intragroup liabilities = 30 Total deductible intragroup liabilities for group entity A = 30/2 = 15 Total deductible intragroup assets for group entity B = 30/2 = 15 Data needed from the group entity A for its intragroup derivative deductions:. Intragroup liabilities that meet all the conditions in Article 5(1)(a) of the DR: Values in this example Legal ref. Field ID Total accounting value Of which: arising from derivatives: accounting value Arising from derivatives: leverage value DR 2015/63 - Art. 3(22), 5(1)(a), 5(2) 3F5 3F6 3F1. Intragroup assets that meet all the conditions in Article 5(1)(a) of the DR: Total accounting value booked by group entity A 22 CRR 575/2013 Art. 274, 275, 295 3F9 Adjusted value taking into account the values and derivative adjustment made by group entity B Automatic calculations in the reporting form: 80 DR 2015/62 Art. 429a 3F10. Deductible amount of assets and liabilities arising from qualifying intragroup liabilities for A 80/2 + 30/2 = 55 3F11 * The same methodology applies for transactions between IPS members (Art. 5(1)(b)) 22

23 Reporting data of ex-ante contributions Tab 4 Collects data regarding the risk profile in order to apply the risk adjustment Risk Pillars and Indicators for 2016 ex-ante contributions: Risk Pillar Risk Indicators I II III IV Risk Exposure Stability and variety of sources of funding Importance of an institution to the stability of the financial system or economy; Additional risk indicators determined by the SRB MREL Leverage Ratio Common Equity Tier 1 Capital Ratio Total Risk Exposure divided by Total Assets Net Stable Funding Ratio; LCR Share of interbank loans and deposits in the European Union Trading activities, off-balance sheet exposures, derivatives, complexity and resolvability; Membership in an Institutional Protection Scheme Extent of previous extraordinary public financial support Each year the applicability of the risk indicators is subject to analysis by the SRB. 23

24 Reporting data of ex-ante contributions Tab 4 Collects data regarding the risk profile in order to apply the risk adjustment Article 8.3 of the DR 2015/63 foresees the situation where a waiver was granted to the institution under the CRR rules. Has the competent authority granted a waiver to the institution from the application of CRR requirements on an individual basis?* Consequences No Information in tab 4 to be reported at individual legal entity level Less fields to be filled in tab 4 See Appendix Yes, for the leverage ratio Yes, for own funds requirements Leverage ratio risk indicator (4A7 field in section A.ii) to be reported at the lowest EU sub-consolidated level. If the latter does not apply, at EU consolidated level. Risk indicators in sections A.iii, A.iv and D.i to be reported at the lowest EU sub-consolidated level. If the latter does not apply, at EU consolidated level Always the same reporting level (EU sub-consolidated or consolidated) must be applied in sections A.iii, A.iv and D.i * This waiver shall be granted by the competent authority in circumstances defined in Regulation (EU) No 575/2013 (CRR). 24

25 1 The Single Resolution Fund 2 Principals of ex-ante contributions Reporting data of ex-ante contributions Calculation of ex-ante contributions 25

26 Principals of ex-ante contributions Contributions to the Fund take into account the annual target level as well as the size and the risk profile of institutions. Annual target level Distribute the target among the institutions Non-risky / small institutions Lump-sum treatment Risky / large institutions Base/size of institution and risk of all institutions under the SRF x Risk of institution Total base/size and risk of all institutions under the SRF Calculation of base/size of institution: Total Liabilities - - Derivative Own funds Covered Deposits - - Intra-group adjustment liabilities -+ Institution s specific deductions X Risk factor adjustment 26

27 Calculation of ex-ante contributions Lump-sum reflects the fact that, in many cases, small institutions are less risky than larger institutions. Small institutions pay lump sum amount, when: Total Assets < 1bn; and Total Own Covered Base/size of an institution (i.e. ) 300m * Liabilities - - funds Deposits Base/size of institution Lump sum amount (annual) base/size 50m m < base/size 100m m < base/size 150m m < base/size 200m m < base/size 250m m < base/size 300m If the institution provides sufficient evidence that the lump sum amount is higher than the contribution calculated with the full risk adjustment methodology, the lower will be applied. * Partial lump sum also foreseen in Article 8.5 of Implementing Regulation 2015/81. 27

28 Calculation of ex-ante contributions Risk factor adjustment Collect risk indicators Distribute risk indicators into bins (discretisation) Rescale risk indicators Apply the sign to risk indicators Generate the Final Composite Indicator (FCI) Rescale the FCI and compute contributions 28

29 Appendix

30 Reporting data of ex-ante contributions Tab 4 Collects data regarding the risk profile in order to apply the risk adjustment Data to report by an institution that was not granted a waiver for the application of own funds and/or leverage ratio requirements on an individual basis: Field ID 4A1 4A2 4A7 4A8 4A9 4A14 4A15 4A17 4D1 4D5 4D9 4D10 4D14 Field (rephrased here below) Individual waiver for Leverage ratio granted? Reporting level of the Leverage ratio Leverage ratio (0.0000) Individual waiver for Own funds granted? Reporting level of the Common Equity Tier 1 capital ratio Common Equity Tier 1 capital Total Risk Exposure (or Total Risk Weighted Assets) Total Assets Risk exposure amount for market risk on traded debt instruments and equity Total off-balance sheet nominal amount Total derivative exposure Of which: derivatives cleared through a CCP Name of the IPS (when applicable) Value to report by the institution No Individual Leverage ratio at individual level (COREP C45.00)* No Individual CET 1 capital at individual level (COREP C01.00)* TRE at individual level (COREP C02.00)* Same as Total Liabilities (2A1 field in Tab 2) At individual level (COREP C02.00*, manual for IRB banks) At individual level (COREP C40.00)* At individual level (COREP C45.00)* At individual level (risk reducing data) If not applicable,.p 4D17-4D19 Extent of previous extraordinary public financial support * See Tab 5 of the reporting form for the exact row and column in COREP reporting See next slide 30

31 Reporting data of ex-ante contributions Tab 4 Collects data regarding the risk profile in order to apply the risk adjustment Extent of previous extraordinary public financial support risk indicator Field ID 4D17 Field (rephrased here below) Does the institution meet the following three conditions at the reference date (mainly 31 December 2014): a) The institution is part of a group that has been put under restructuring after receiving any State or equivalent funds such as from a resolution financing arrangement; b) The institution is part of a group that is still within the restructuring or winding down or liquidation period; c) The institution is part of a group that is not in the last 2 years of implementation of the restructuring plan. Whether the answer to the field 4D17 is Yes or No, the two following fields must be filled in. 4D18 4D19 Name of the EU parent RIAD MFI code of the EU parent 31

32 Thank you!