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EBA Consultation on Asset Encumbrance Reporting Summary

Core Content

The European Banking Authority (EBA) launched a consultation on Asset Encumbrance reporting, which is mandated under Article 95 of the Capital Requirements Regulation (CRR). This reporting requirement asks credit institutions to disclose the level of their encumbered assets, including repurchase agreements, securities lending, and all forms of asset encumbrance, in aggregate terms to competent authorities. The EBA aims to include this information in the implementing technical standard for Article 95 paragraph 2, and the consultation is aligned with the COREP reporting framework.

Main Points

• Mandate: Institutions must report encumbrance levels, and this will be integrated into the COREP reporting system.
• Definition of Asset Encumbrance: An asset is considered encumbered if it is pledged or subject to arrangements that secure, collateralize, or credit enhance transactions. Assets not used as collateral and freely withdrawable are not considered encumbered.
• Reporting Focus: The consultation emphasizes the need to report both encumbered and unencumbered assets, and includes detailed product breakdowns for clarity.
• Templates: The EBA proposed five reporting templates:
  • Part A: Encumbrance overview (quarterly)
  • Part B: Maturity data (quarterly)
  • Part C: Contingent encumbrance (annually)
  • Part D: Covered bonds (quarterly)
  • Part E: Advanced data (semiannually)

Key Information

Reporting Methodology

• Reporting will reuse existing concepts from COREP and FINREP frameworks to reduce the implementation burden.
• Data will be based on carrying amounts (accounting values), but will also include fair value evaluations.
• A Data Point Model (DPM) is provided to help with the structured representation of field descriptions, facilitating implementation.

Proportionality

• Part A is mandatory for all credit institutions.
• Part D is only required for institutions that issue covered bonds.
• Parts B, C, and E are optional and will be reported only if:
  • Total assets are less than €30 billion.
  • Asset encumbrance levels are below 5%.
  • Either threshold is not exceeded in the previous two years.
• There is a consideration to exempt smaller institutions from reporting Parts B, C, and E, depending on the calibration process.

Contingent Encumbrance

• The concept of contingent encumbrance is introduced to assess the potential impact of adverse market conditions on collateral needs.
• Institutions must calculate at least two scenarios:
  • A 30% decrease in the fair value of encumbered assets.
  • A 10% depreciation in significant currencies.
• This is further supplemented by a 3-notch downgrade in the liquidity framework, similar to the approach in the liquidity coverage ratio (LCR).

Conclusion

The EBA aims to adopt a pragmatic approach to asset encumbrance reporting to ease the implementation burden on institutions. The consultation is open to practical suggestions that align with existing reporting systems. The implementation timeline is integrated with the rest of the COREP framework, and the EBA is seeking comments on the feasibility of this approach.

Contact Information

To submit comments on the consultation:

• Email: EBA-CP-2013-05@eba.europa.eu
• Subject Reference: 'EBA/CP/2013/05'
• Deadline: 24 June 2013

For further contact:

• Address: Floor 18 | Tower 42 | 25 Old Broad Street, London EC2N 1HQ, United Kingdom
• Phone: +44 (0)20 7933 9900
• Fax: +44 (0)20 7382 1771
• Email: info@eba.europa.eu
• Website: www.eba.europa.eu