At the time of publishing this communication, there have been 170 FINREP related questions, with about 60 percent currently answered.
The queries range from approaches to calculation of FINREP specific estimates to questions around validation rules, group structure reporting and the prudential scope of consolidation.
Outlined below are some of the key implications for firms – based on published EBA responses.
Firms cannot make a materiality call to reduce the number of templates – or the number of data cells – they must complete for submission, if no specific thresholds are set out by FINREP for those templates.
Furthermore, the EBA has confirmed that if the overall threshold for templates related to geographical breakdown (20.1 – 20.7) is met, then templates 20.4 to 20.7 need completing separately, for every country to which the institution is exposed.
Without a materiality threshold, the amount of time and effort required for firms to complete every template may be substantially higher than expected.
Financial instruments measured at fair value
Further details were provided around the calculations required for financial assets measured at fair value:
- The EBA confirmed that changes in fair value due to credit risk must be calculated for held for trading financial instruments. No guidance has been provided around how to calculate this estimate, but the EBA expects institutions’ IT systems to have this level of information.
- For all accumulated changes in fair value, institutions should use the starting point for the calculation as “the moment when they acquired the instrument”. Again, it is the EBA’s expectation that institutions’ IT systems will have this level of data stored.
- The EBA acknowledges that this type of information may not always be entirely available and in such instances, following the principles of IAS 8, an institution shall carry out a reliable estimation of this amount.
As a result of these EBA expectations firms may have to invest significantly in developing their IT systems to provide a process for calculating the granular data required.
Information on forborne and non-performing exposures
The EBA provided clarity around the first submission of this information for the 30 September 2014 reference date:
- Firms will submit information on forbearance and non-performing exposures on 31 December 2014 for the reference date 30 September 2014.
- Cells in the templates other than 18 and 19 that refer to forborne and non-performing exposures (Templates 6, 9.1, 20.4, 20.5, 20.7 and 30.2) should be left blank when institutions submit FINREP templates on 11 November 2014.
To discuss the implications of the EBA’s responses further or any other FINREP related issues please contact: