Closely Correlated Currencies
The EBA issued (on 30th January 2019) a revised list of closely correlated currencies. It is understood that this list has not been endorsed by the European Commission as at 30th January. The closely correlated currencies affect the capital requirement on COREP C 22.00.
Exposures to be classed as ‘Associated with Particularly High Risk’ (APHR)
The EBA issued guidelines on classifying exposures as APHR. These guidelines are in addition to the information in article 128 of the CRR.
Only firms that apply the standardised approach to credit risk will be affected by these guidelines, which are to be effective from 1st July 2019. A firm that populates COREP CRSA may want to review the guidelines if it has exposures that might be particularly high risk.
Whistlebrook understands that a sample of circumstances that would warrant classification of an exposure as particularly high risk, include:
- Inability to know the extent of possible loss were a default to occur
- There is insufficient collateral to adequately mitigate the risk of loss
- There are investments that are deemed to be speculative and their success will influence repayment
Of note, is a requirement that where a firm identifies an exposure that is to be classed as APHR, but it is not obvious to do that according to the EBA documentation, the PRA should be contacted.
Further details are GL 2019-01.
Eligibility as Funded Credit Protection CP 1-19
This consultation paper is relevant to Banks and Building Societies that apply the standardised approach to credit risk. It is understood to also be applicable to UK subsidiaries of non-UK headquartered firms. Essentially this consultation paper re-emphasises article 207 of the CRR. Where the value of financial collateral is considered to be highly correlated to a borrower’s credit quality, the former should be excluded from CRSA Funded Credit Protection.
Prudent Valuation Report PV001
The final submission of PV001 is for report reference date 31st December 2018. This report has been replaced by COREP C 32.01 to C 32.04.
Firms are reminded that taxonomy 2.8.1 is effective from report reference date 31st December 2018. Wires has been updated for this taxonomy.
MREL (Minimum Requirements for Own Funds and Eligible Liabilities)
The Bank of England is requiring certain firms to submit three MREL forms. Only institutions that have been contacted by the Bank need to make submissions. The first return is due by 12th February and will be collected in XBRL format by the Bank’s BEEDS system.
MRL001 and MRL003 will have the same frequency as COREP Own Funds i.e. quarterly. MRL002 will have the same frequency as a firm’s Forecast Capital+ return.