In scope for Asset Encumbrance? If you do COREP - you are!
Asset Encumbrance, the next regulatory speed bump, is fast approaching (less than 30 working days); but there is still some confusion by some firms as to whether they are in scope or not.
"Surely if there are no encumbered assets, there is nothing to report?"
This is NOT THE CASE!
All COREP firms are in scope
To be clear - if a firm is in scope for any aspect of COREP, then that firm is also in scope for Asset Encumbrance (AE). However, there are various thresholds which apply - as the European Banking Authority (EBA) has sought to “apply the AE Implementing Technical Standards (ITS) in a proportionate manner” – which means that ‘some’ templates (note, only some) will not be required from smaller institutions.
Which templates need to be submitted?
- There are 9 templates, organised into 5 template groups: Parts A to E
- Except for Part A, there are threshold criteria for certain templates
- All firms in scope for AE (i.e. all firms in scope for COREP) need to report Part A
- There are threshold conditions for larger institutions (€30bn+ assets or >15% encumbrance), and for firms dealing with covered bonds
Full details on all templates can be found online at the EBA HERE >>>.
No encumbered assets? Then that’s what you need to report
After talking to several firms, it seems that there is confusion about this, but there is no ‘Nil Return’. Firms with no encumbered assets are required to report this fact, and templates within Part A set out an analysis of the assets of the reporting institution. Other sections of Part A are also reported including collateral received (for example if your firm has reverse repos), and sources of encumbrance (e.g. repos themselves).
Firms should be particularly aware of this, and need to be mindful that the information is reportable as at the end of December 2014 - really not very far away.
Next steps
So, there is still no let up from the work needed to get the full EBA reporting requirements implemented. Although phased, there is clearly hardly a breath to be taken between getting COREP done (including LC and SF, LE and LR of course, and FINREP for some), and now getting on with AE.
Firms should bear in mind that the AE templates are not a one-off either – they are here to stay and need to be added to the business-as-usual reporting load. The templates DO lend themselves to automation - especially if firms have already automated COREP.
We’re in it together
If you have any views or updates on Asset Encumbrance please comment below, let’s make sure we’re prepared and ready for December 31st 2014.
Chief Solutions Officer | Building generative AI tools for Tax
9yThe FCA are expecting lots of nil returns - we've tested that specific requirement for them. It required a systems change as for COREP etc, you must submit at least one monetary fact. Not the case for AE.
Senior Partnerships Lead, Grocery Advertising at Amazon
9yMr. Tipping, thank you for being so informative, concise and helpful. I look forward to your future posts
Digital NED & Board Chair, Risk & Audit Chair, Visiting Professor UWE, Mentoring Founders & NEDs, Regulatory Advisor, Chapter Zero Member
9yTom, thanks for summarising the situation so clearly. I suspect most larger firms will have their returns in order by now (?) but some of the mid sized and smaller firms may not. Last chance - at least for an interim solution!