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NVB Summary on COREP Framework

Core Content

The Netherlands Bankers Association (NVB) has expressed its support for the European Common Reporting Framework (COREP), emphasizing its potential to reduce compliance costs for banks in solvency reporting. However, the NVB has also raised several concerns and recommendations regarding the framework's scope, alignment with Financial Reporting (FinRep), clarity of formats, and terminology.

Main Views

• Scope of COREP: The NVB advocates that COREP should be limited to Pillar 1 capital requirements. Pillar 2, which involves bilateral discussions between banks and supervisors, should not be included in the reporting package.
• Alignment with FinRep: The NVB encourages CEBS to align COREP with FinRep to prevent redundant reporting and ensure consistency in data collection. It suggests formalizing this alignment through agreements or forms.
• National Discretions: The NVB emphasizes the need for clarity on how national discretions will be incorporated into the reporting framework, including consistency in reporting frequency and definitions such as "Own Funds."
• Format Clarity: The NVB requests more clarity on the reporting formats, including the number of decimal places, the inclusion of intra-group exposures, and the structure of specific worksheets.
• Terminology Consistency: The NVB recommends that COREP terminology should be consistent with that of the Capital Requirements Directive (CRD) to avoid confusion and ensure coherence in regulatory reporting.

Key Recommendations

1. Scope of COREP

• Remove Pillar 2 related worksheets: The NVB proposes to remove OTH 1, 2, 3, 4, and 5 worksheets, as well as rows 152–171 in the CA worksheet.
• Focus on Pillar 1: COREP should only cover Pillar 1 capital requirements, which are more standardized and less subject to bilateral interpretation.

2. Alignment with FinRep

• Avoid double reporting: The NVB encourages CEBS to ensure that all Pillar 1-related risks reported in FinRep are also covered in COREP.
• Formal alignment: A formal agreement between FinRep and COREP is recommended to enhance coherence and reduce administrative burden.

3. National Discretions

• Reporting frequency: The NVB suggests quarterly reporting as it aligns with current practices in most European banks.
• Consistent definitions: Definitions such as "Own Funds" should be consistent across member states to prevent discrepancies.
• Clarification on inclusion: CEBS should clarify how national discretions, such as interpretations of CRD articles, will be integrated into the reporting package.

4. Format Improvements

• Include formulas and references: The NVB recommends that the reporting package include formulas and references to enable testing of data inputs.
• Report in millions: Amounts should be reported in millions to reduce complexity.
• Intra-group exposures: The reporting package should include information on intra-group exposures when reporting stand-alone EU-based subsidiaries.
• Data granularity: The NVB suggests that certain memorandum items, such as volatility and maturity adjustments, should be removed due to limited insight and high administrative burden.

5. Specific Worksheet Comments

• Worksheet "CA":

  • Rows 94–107: Clarification is needed on where "collective provisions" should be reported.
  • Rows 152–171: These should be removed as they pertain to Pillar 2.

• Worksheet "IRB":

  • Column 1: A more detailed definition of "original credit & counterparty risk exposure pre credit conversion factor" is needed.
  • Column 16: Reporting the number of obligors per obligor grade is not necessary for Pillar 1.
  • Column 26–29: Clarification is required on the structure of the "Originator: total exposures" line.

• Worksheet "Equity PD/LGD Approach":

  • The average LGD of 90% is mostly consistent, and reporting this item is not necessary.

• Worksheet "SA SEC 1" and "SA SEC 2":

  • Clarification is needed on where swaps/repos should be reported.
  • The inclusion of "securitised assets" in horizontal categories is unclear.

• Worksheet "FIRB CRM" and "AIRB CRM":

  • The NVB proposes to report outflows and inflows on a less frequent basis (not monthly or quarterly).
  • Columns 23–26 and 33–34 require more clarification, especially regarding LGD percentiles.

• Worksheet "CRM I-O":

  • Similar to other worksheets, reporting outflows and inflows on a monthly or quarterly basis is not necessary.

• Worksheets "MKR-IM" and "MKR-IM Daily":

  • Clarification is needed on whether back test reports are required for equity in the banking book.
  • The "MR Surcharge" and "Universal list" should be clarified, with the latter being reportable at the business line/product line level.

Terminology

• Consistency with CRD: The terminology in COREP should be aligned with that of the CRD.
• Grouping of private individuals: Private individuals not treated in retail should be grouped under corporates, which may lead to data pollution.
• Distinction between originators and investors: The distinction re-introduced in COREP templates should be clarified, as it was removed in the final CRD text.
• Percentile terms: Terms like "X-percentile" and "Y-percentile" should be clearly defined.
• Exposure weighted average maturity: This term should be standardized to avoid ambiguity.

Conclusion

The NVB supports the development of a common reporting framework (COREP) but stresses the importance of clarity, alignment with FinRep, and focus on Pillar 1. It recommends removing Pillar 2-related elements, clarifying terminology and definitions, and reducing the reporting frequency for certain items to minimize administrative burden.