QA2022-43 - Row 210 - Derivatives Intragroup liabilities

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Feb 01, 2024
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Resolution Reporting Subject Matter Guidance
Guidance Documents Intragroup-liabilities
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QA2022-43

Question


We need some clarifications regarding derivative intragroup liabilities meeting the conditions under article 44/2/h of the BRRD2. Our understanding is that they should be reported in the new row r0210 and therefore be excluded from row 330 (for the carrying amount) and 334 (for the outstanding amount), following the top to bottom approach. 1. If our interpretation is correct, the intragroup carrying amount of the derivatives meeting the conditions under article 44/2/h of the BRRD2 shall be reported in row 0210 instead of row 330. As a consequence, the ldt_corep_finrep rule SRBDQ_0346 (T01.00-r0330-c0121 = FINREP F01.02-020-010 + F01.02-150-010 + F01.02-062-10) cannot not be respected. Considering that the severity of such rule is “warning”, are we expected to justify the inconsistency accordingly (ie. as a result of the abovementioned switch)? 2. The intragroup outstanding amount of the derivatives meeting the conditions under article 44/2/h of the BRRD2 shall be reported in row 210 instead of row 334. Following what indicated in the guidance (derivatives are specific in nature and should not be reported under T03.01), these intragroup derivatives shall not be included in the template T03.01, even if they are now reported at row 210. Could you please confirm whether this approach is in line with your expectations? 3. Finally, considering that rows 331, 332 and 333 do not contribute to the total liabilities outstanding amount of T01.00 and thus, they cannot be reported under the new row 210, should they be fed net or gross of intragroup liabilities meeting the conditions under article 44/2/h of the BRRD2?


Response


An intragroup derivative instrument meeting the conditions set out in Article 44(2)(h) BRRD shall be considered excluded from the scope of the bail-in tool and, as such, it should be reported in row r210 of template T 01.00. Accordingly, its carrying and outstanding amounts should not be reported in rows r330 and r334, respectively. Moreover: 1) Under the scenario described in the question, validation rule SRBDQ_0346 should not be applicable. The severity rule of “Warning” clarifies that there may be specific circumstances under which this rule may provide false positive results. This is one of those instances. We encourage the reporting entities to clarify with the IRTs the reasons why this rule is triggered; 2) Derivative instruments shall not be reported in template T 03.01, whether they meet the conditions set out in Article 44(2)(h) BRRD or not; 3) All other derivative instruments falling outside the scope of row r210 of template T 01.00 should be reported in rows r331-r333 of the same template. Accordingly, the amounts reported in rows r331-r333 should be net of the intragroup derivative instruments meeting the conditions of Article 44(2)(h) BRRD.