This chapter provides worked examples of how to complete Template CR3, Template CCR5 and Template MR2.

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Effective as of: 01 Jan 2023 | Last update: 11 Nov 2021
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Interpretation of the effective date - illustration

99.1

The following table illustrates the application of paragraph DIS10.4 by specifying the first applicable fiscal period for disclosure requirements according to their frequency, using as example a bank with a fiscal year coinciding with the calendar year (case 1), a bank with a fiscal year ending in October of the same calendar year (case 2), and a bank with a fiscal year ending in March of the following calendar year (case 3).

(1)

Banks with fiscal year from 1 January to 31 December:

(a)

The first fiscal quarter subject to quarterly disclosure requirements with an "effective as of" date of 1 January of a given year will be the first fiscal quarter, ending in 31 March of that calendar year. The first fiscal quarter subject to quarterly disclosure requirements with an "effective as of" date of 31 December of a given year will be the fourth fiscal quarter, ending in 31 December of that calendar year.

(b)

The first fiscal semester subject to semiannual disclosure requirements with an "effective as of" date of 1 January of a given year will be the first fiscal semester, ending in 31 June of that calendar year. The first fiscal semester subject to semiannual disclosure requirements with an "effective as of" date of 31 December of a given year will be the second fiscal semester, ending in 31 December of that calendar year.

(c)

The first fiscal year subject to annual disclosure requirements with an "effective as of" date of 1 January of a given year will be the fiscal year starting in 1 January of that calendar year. The first fiscal year subject to annual disclosure requirements with an "effective as of" date of 31 December of a given year will be the fiscal year ending in that same 31 December of that calendar year.

(2)

Banks with fiscal year from 1 November of the previous calendar year to 31 October:

(a)

The first fiscal quarter subject to quarterly disclosure requirements with an "effective as of" date of 1 January of a given year will be the first fiscal quarter, ending in 31 January of that calendar year. The first fiscal quarter subject to quarterly disclosure requirements with an "effective as of" date of 31 December of a given year will be the first fiscal quarter, ending in 31 January of the following calendar year.

(b)

The first fiscal semester subject to semiannual disclosure requirements with an "effective as of" date of 1 January of a given year will be the first fiscal semester, ending in 31 April of that calendar year. The first fiscal semester subject to semiannual disclosure requirements with an "effective as of" date of 31 December of a given year will be the first fiscal semester, ending in 31 April of the following calendar year.

(c)

The first fiscal year subject to annual disclosure requirements with an "effective as of" date of 1 January of a given year will be the fiscal year starting in 1 November of the previous calendar year. The first fiscal year subject to annual disclosure requirements with an "effective as of" date of 31 December of a given year will be the fiscal year ending in 31 October of the following calendar year.

(3)

Banks with fiscal year from 1 April to 31 March of the next calendar year:

(a)

The first fiscal quarter subject to quarterly disclosure requirements with an "effective as of" date of 1 January of a given year will be the fourth fiscal quarter, ending in 31 March of that calendar year. The first fiscal quarter subject to quarterly disclosure requirements with an "effective as of" date of 31 December of a given year will be the third fiscal quarter, ending in 31 December of that calendar year.

(b)

The first fiscal semester subject to semiannual disclosure requirements with an "effective as of" date of 1 January of a given year will be the second fiscal semester, ending in 31 March of that calendar year. The first fiscal semester subject to semiannual disclosure requirements with an "effective as of" date of 31 December of a given year will be the second fiscal semester, ending in 31 March of the following calendar year.

(c)

The first fiscal year subject to annual disclosure requirements with an "effective as of" date of 1 January of a given year will be the fiscal year starting in 1 April of the previous calendar year. The first fiscal year subject to annual disclosure requirements with an "effective as of" date of 31 December of a given year will be the fiscal year ending in 31 March of the following calendar year.

Template CR3 – illustration

99.2

The following scenarios illustrate how Template CR3 should be completed.

   

a

b

c

d

e

   

Unsecured exposures: carrying amount

Exposures to be secured

Exposures secured by collateral

Exposures secured by financial guarantees

Exposures secured by credit derivatives

(i)

One secured loan of 100 with collateral of 120 (after haircut) and guarantees of 50 (after haircut), if bank expects that guarantee would be extinguished first

0

100

50

50

0

(ii)

One secured loan of 100 with collateral of 120 (after haircut) and guarantees of 50 (after haircut), if bank expects that collateral would be extinguished first

0

100

100

0

0

(iii)

Secured exposure of 100 partially secured: 50 by collateral (after haircut), 30 by financial guarantee (after haircut), none by credit derivatives

0

100

50

30

0

(iv)

One unsecured loan of 20 and one secured loan of 80. The secured loan is over-collateralised: 60 by collateral (after haircut), 90 by guarantee (after haircut), none by credit derivatives. If bank expects that collateral would be extinguished first.

20

80

60

20

0

(v)

One unsecured loan of 20 and one secured loan of 80. The secured loan is under-collaterised: 50 by collateral (after haircut), 20 by guarantee (after haircut), none by credit derivatives.

20

80

50

20

0

Definitions

Exposures unsecured- carrying amount: carrying amount of exposures (net of allowances/impairments) that do not benefit from a credit risk mitigation technique.

Exposures to be secured: carrying amount of exposures which have at least one credit risk mitigation mechanism (collateral, financial guarantees, credit derivatives) associated with them. The allocation of the carrying amount of multi-secured exposures to their different credit risk mitigation mechanisms is made by order of priority, starting with the credit risk mitigation mechanism expected to be called first in the event of loss, and within the limits of the carrying amount of the secured exposures.

Exposures secured by collateral: carrying amount of exposures (net of allowances/impairments) partly or totally secured by collateral. In case an exposure is secured by collateral and other credit risk mitigation mechanism(s), the carrying amount of the exposures secured by collateral is the remaining share of the exposure secured by collateral after consideration of the shares of the exposure already secured by other mitigation mechanisms expected to be called beforehand in the event of a loss, without considering overcollateralisation.

Exposures secured by financial guarantees: carrying amount of exposures (net of allowances/impairments) partly or totally secured by financial guarantees. In case an exposure is secured by financial guarantees and other credit risk mitigation mechanism, the carrying amount of the exposure secured by financial guarantees is the remaining share of the exposure secured by financial guarantees after consideration of the shares of the exposure already secured by other mitigation mechanisms expected to be called beforehand in the event of a loss, without considering overcollateralisation.

Exposures secured by credit derivatives: carrying amount of exposures (net of allowances/impairments) partly or totally secured by credit derivatives. In case an exposure is secured by credit derivatives and other credit risk mitigation mechanism(s), the carrying amount of the exposure secured by credit derivatives is the remaining share of the exposure secured by credit derivatives after consideration of the shares of the exposure already secured by other mitigation mechanisms expected to be called beforehand in the event of a loss, without considering overcollateralisation.

             

Template CCR5 - illustration

99.3

The case below illustrates the cash and security legs of two securities lending transactions in Template CCR5:

(1)

Repo on foreign sovereign debt with $50 cash received and $55 collateral posted

(2)

Reverse repo on domestic sovereign debt with $80 cash paid and $90 collateral received

 

e

f

 

Collateral used in securities financing transactions (SFTs)

 

Fair value of collateral received

Fair value of posted collateral

Cash - domestic currency

 

80

Cash - other currencies

50

 

Domestic sovereign debt

90

 

Other sovereign debt

 

55

...

   

Total

140

135

     

Template MR2 – illustration

99.4

The paragraphs below describe the relevant provisions for components of IMA capital requirement calculations.

(1)

The aggregate capital requirement for approved and eligible trading desks (TDs) (IMAG,A) according to MAR33.43 is defined as: CA + DRC + Capital surcharge.

(2)

According to MAR33.41 CA is defined as:

(3)

According to MAR33.22 DRC is defined as the greater of: (1) the average of the DRC requirement model measures over the previous 12 weeks; or (2) the most recent DRC requirement model measure.

(4)

According to MAR33.45 Capital surcharge: is calculated as the difference between the aggregated standardised capital charges (SAG,A) and the aggregated internal models-based capital charges (IMAG,A = CA + DRC) multiplied by a factor k. k and SAG,A are only recent while IMAG,A is average or recent -> Surcharge is average or recent.

, where

Example: illustration of the correct specification for row 12 in template MR2

99.5

Applying the formulae set out in MAR33.22, MAR33.41, MAR33.43, and MAR33.45 (marked in italics in row 12 below), the relevant components for CA [either most recent (8+9) or average 1.5*8 +9] and DRC should take the respectively greater value of the "most recent" and "average" (marked in bold). This results in the green and amber trading desks total capital requirements (including capital surcharge) of 485.

    a b  
  Template MR2 Most recent Average  
         
8 IMCC 100 130 *1.5 
9 SES 130 100  
 

(CA=max[IMCCt-1+SESt-1;mc*IMCCavg+SESavg])

(230) (295)  
10 DRC 100 90  
11 Capital surcharge for amber TD 90  
12    

Capital requirements for green and amber TDs (including capital surcharge)

max[a=(8+9); b=(multiplier*8+9)]+max[a=10; b=10]+ 11

485  
13 SA Capital requirements for TD ineligible to use IMA Cu 20