QA2018-85 - Derivatives T01.00

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Feb 01, 2024
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Resolution Reporting Subject Matter Guidance
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QA2018-85

Question


r600: The calculation of TLOF is not in line with Art. 45 BRRD. For the purpose of art. 45 BRRD derivative liabilities shall be included in the total liabilities on the basis that full recognition is given to counterparty netting rights. With respect to derivatives, the value to be used shall be line r334. For line r334 the rules as described in art. 429 of the CRR related to the calculation of the leverage exposure should be used. This method requires different limitations for the recognition of contractual netting agreements (in regard to legal enforcement according to Art. 296 CRR and in regard to the limitation of collateral only to variation margin in cash, in the same currency as the settlement of the derivative contract and the requirement to cover the full amount of the derivative contract according to Art. 429a CRR. Our understanding is, that this limitations caused by the link to the rules as described in art. 429 of the CRR conflict with art. 45 BRRD. Even the EBA Q&A 2015_1824 (witch is only an unofficial opinion) point to the prudential netting to avoid limitations based on different accounting standards to achieve a wider scope of netting. We kindly ask to amend the calculation of TLOF in the LDT to r332 which reflect the full recognition of contractual netting and is in line with art. 45 BRRD and to delete r334 from the LDT.


Response


The LDR guidance was developed in line with the EBA Q&A n° 2015_1824 which clarifies "The netting principles applied for derivatives in Directive 2014/59/EU (BRRD) should be consistent with the prudential calculation". Therefore, we confirm our position that the TLOF should factor in the line r334.