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Moody's — Moody's Analytics — Moody's Analytics User Webinar Series: CRR2 & EBA 3.0 (October 2020)
78 slides from Moody's's conference presentation, Oct 13, 2020
Slide 1: Moody's Analytics User Webinar Series CRR2 & EBA 3.0
Moody’s Analytics User Webinar Series CRR2 & EBA 3.0 13 October 2020
Slide 2: Final Basel 3 delayed to 1 January 2023
“Final Basel 3” (Basel 4) delayed to 1st January 2023 but in EU CRR2 EBA3.0 is still planned for June 2021 CRR 2 & EBA 3.0 SA-CCR Revised Credit Risk Standardized & IRB approaches (CR SA, CR IRB) Other updates on credit risk (e.g. CIUs, Revised Market Risk (standardized & IMM) (FRTB) CCPs, SME, infr
Slide 3: Migrating RiskAuthority to the cloud: Banking Cloud
We are migrating our “on-premise” award winning “RiskAuthority™” software suite to the cloud = our “Banking Cloud” offering Banking Cloud is our new suite of SaaS applications to help banks smoothly transition to the cloud and benefit from reduced total cost of ownership and better quality of servic
Slide 4: Important Reminder: sunset of software versions prior 5.0
Important Reminder: sunset of software versions prior 5.0 » All RiskFoundation/RiskAuthority software versions prior 5.0 will NOT be supported anymore after 31st December 2020 The application User Interface, for these software versions (prior 5.0), was using Adobe Flash which will not be supported b
Slide 5: Agenda
Agenda 1 CRR2 Credit Risk & Leverage Ratio 2 CRR2 NSFR 3 EBA 3.0 reports CRR2 & EBA3.0 5
Slide 6: CRR2 & EBA 3.0 Credit Risk and Leverage Ratio
Moody’s Analytics User Webinar Series CRR2 & EBA 3.0 Credit Risk and Leverage Ratio Thanh Ha Ngo, Senior Director, Product Management 13 October 2020
Slide 7: Agenda
Agenda 1 EBA timeline Focus on some recent RiskAuthority Credit Risk 2 & Leverage Ratio updates for CRR2 & EBA 3.0 Banking Cloud Credit Risk & Leverage Ratio 3 roadmap for CRR2 & EBA 3.0 CRR2 & EBA3.0 7
Slide 8: CRR2 regulatory timeline
CRR2 regulatory timeline CRR2 & EBA3.0 8
Slide 9: EBA has finalized SA-CCR in CRR2
EBA has finalized SA-CCR in CRR2 CRR2 REGULATION (EU) 2019/876 » CRR2 final on 20 May 2019, amending CRR » EBA-RTS-2019-02 was published on 18 Dec 2019 COREP EBA 3.0 was finalized in June 2020 CRR2 & EBA3.0 9
Slide 10: Impacts of COVID-19
Impacts of COVID-19 Final Basel III 2021 2022 2023 COVID-19 2027 Postponed to 2023 -> 2028 CRR2 COVID-19 SME and Infrastructure supporting factors Temp treatment of public EBA 3.0 remains in June 2021 but Supporting factors is advanced to debt issued in the currency June 2020 of another Member State
Slide 11: RiskAuthority v7.1.3 is the Minimum required version
RiskAuthority™ v7.1.3 is the Minimum required version for CRR2 and EBA 3.0 v7.1.3 CRR2 & EBA3.0 11
Slide 12: RiskAuthority Post 7.1 patches
RiskAuthority™ Post 7.1 patches Minimum Minor mandatory enhancements version for CRR2 for CRR2 LVR and EBA 3.0 and CRR2 CIU 7.1 8.0 Major 7.1.1 7.1.3 7.1.4 7.1.5 7.1.x Major release Jul SP Nov SP Dec SP Mar’21 SP xx’21 SP release Apr 2020 2020 Release date Release date 2021 Sep 2021 6 Nov 2020 18 De
Slide 13: Availability of the CRR2 functionalities
Availability of the CRR2 functionalities Available in v7.1 Available in v7.1 with enhancements in v7.1.3 Available in v7.1 with enhancements in v7.1.3 and/or v7.1.4 CRR2 & EBA3.0 13
Slide 14: CRR2 SME EU supporting factor & Infrastructure supporting factor
CRR2 SME EU supporting factor & Infrastructure supporting factor CRR2 & EBA3.0 14
Slide 15: A new formula-based SME EU RWA scaling factor
A new formula- based SME EU RWA scaling factor » The SME total group exposure’s portion below the threshold of Euro 2,5 millions will receive the SME supporting factor of 0.7619, whereas, » the portion of exposure exceeded the threshold of Euro 2,5 millions will receive the SME supporting factor of
Slide 16: Infrastructure supporting factor
» The own funds requirements for exposures to entities that operate or finance physical structures or support essential public services must be multiplied by a factor of 0.75 CRR2 & EBA3.0 16
Slide 17: Available in RiskAuthority v7.1
Available in RiskAuthority™ v7.1 » New formula-based RWA scaling factor » New input columns such as BIS_ENTITY_TYPE_ORIGINAL for application of the factor to the SME EU obligor CRR2 & EBA3.0 17
Slide 18: CRR2 Counterparty Credit Risk
CRR2 Counterparty Credit Risk CRR2 & EBA3.0 18
Slide 19: New Hedging Set for inflation
Available in New Hedging Set for inflation RiskAuthority™ v7.1 » » • • • CRR2 & EBA3.0 19
Slide 20: New Hedging Set for inflation
New Hedging Set for inflation Table Name Columns Values SWAP(*) PAY_INDEXATION_RULE RCPN: Real Coupon REC_INDEXATION_RULE YONY: Period On Period OATI: Oat-i FUTURE, OPTIONS, FRA, INDEXATION_RULE RCPN: Real Coupon CAPFLOOR, EQUITY_SWAP YONY: Period On Period OATI: Oat-i DEAL_IMPORT INDEXATION_RULE_1
Slide 21: New Hedging Set for inflation
New Hedging Set for inflation » New Supervisor Option » New column in SACCR_ADD_ON_FACTOR config CRR2 & EBA3.0 21
Slide 22: Supervisory delta formula for interest rate options
Available in Supervisory delta formula for interest rate options when the RiskAuthority™ interest rate is negative, includes a lambda component v7.1 » Final Draft RTS, Art 279a(3)(a) CRR2 & EBA3.0 22
Slide 23: Delta formula defined by supervisor options
Delta formula defined by supervisor options CRR2 & EBA3.0 23
Slide 24: Additional FX risk category
Available in Additional FX risk category RiskAuthority™ v7.1 CRR2 Art. 277 (5) and EBA RTS » For transactions with only 1 material risk driver, but where the currency of the underlying of the transaction is different from the settlement currency of the transaction an additional FX risk category must
Slide 25: Settlement currency column has been created
Settlement currency column has been created Table Name New columns Description SWAP SETTLEMENT_CCY (if different Settlement currency of the trade if different from OPTIONS from the currency of the trade) the currency of the trade FUTURE ASSET_SWAP COMMODITY_SWAP EQUITY_SWAP CREDIT_DERIVATIVE DEAL_IM
Slide 26: Additional FX risk
Additional FX risk CRR2 & EBA3.0 26
Slide 27: Treatment of sold Options
Available in Treatment of sold Options RiskAuthority™ v7.1.3 » » New supervisor option for CRR2 CRR2 & EBA3.0 27
Slide 28: Netting sets and margin agreements
Available in RiskAuthority™ v7.1.3 Netting Set groups multiple trade 01 trade 02 trade 03 trade 04 trade 07 Margin Agreements and trade 08 trade 05 trade 06 standalone trades trade 11 trade 12 trade 09 trade 10 MA breaks up NS trade 03 trade 04 trade 01 trade 02 trade 07 trade 08 trade 05 trade 06 t
Slide 29: Margin and netting data modelling
Margin 1 » Existing datamodeling (using links from single margin to multiple nettings) can still be applied (top-down approach) Netting 1 Netting 2 T1 T2 T3 T4 » All the trade tables (SWAP, FOREX, OPTIONS, DEAL_IMPORT…) now have a new column MARGIN_AGREEMENT (on top of the existing NETTING_AGREEMENT
Slide 30: EBA 3.0 CCR Reports
Available in EBA 3.0 CCR Reports RiskAuthority™ v7.1.3 » 11 reports for counterparty credit risk » The reports where SA-CCR/IMM will be reported are: » C34.02: CCR EXPOSURE BY APPROACH » C34.03: EXPOSURE VALUE FOR STANDARDISED APPROACHES: SA-CCR or SIMPLIFIED SA-CCR » C 34.05 COUNTERPARTY CREDIT RIS
Slide 31: New result Table T_SACCR_TRADE
Available in New result Table T_SACCR_TRADE RiskAuthority™ v7.1.3 SACCR_TRADE_SR SACCR_TRADE_IMPORT V_SACCR_TRADE T_SACCR_TRADE CRR2 & EBA3.0 31
Slide 32: New result Table T_SACCR_COLL
Available in New result Table T_SACCR_COLL RiskAuthority™ v7.1.3 SACCR_COLLATERAL_SR SACCR_COLL_IMPORT V_SACCR_COLL T_SACCR_COLL CRR2 & EBA3.0 32
Slide 33: Calculation of RC_PRE_CRM and PFE_PRE_CRM
Available in Calculation of RC_PRE_CRM and PFE_PRE_CRM RiskAuthority™ v7.1.3 » » CRR2 & EBA3.0 33
Slide 34: CRR2 NPE Backstop
CRR2 NPE Backstop CRR2 & EBA3.0 34
Slide 35: Minimum coverage requirement (NPE)
Available in Minimum coverage requirement (NPE) RiskAuthority™ v7.1.3 Secured by CRM ( - ) Specific provision, additional value adjustments and other Portion of deductions = AVAILABLE EAD that is COVERAGE insufficiently covered The longer it is non- performing the lower probability it will recover M
Slide 36: Definition of NPE and time passed since classification
Definition of NPE and time passed since definition as NPE, with T_CDR.NPE_BUCKET_ID (NEW) T_CDR.ead_npe_cov For unsecured / secured parts T_CDR.ead of NPE For unsecured / secured parts CRR2 & EBA3.0 36
Slide 37: New data and calculation requirements
(NEW) capped value at expo level T_CDR.ead_pro_cap New data T_CDR.ead_pro - … requirement at deal level (NEW) T_CDR.ead_ava (NEW) T_CDR.ead_other_ded (NEW) New calc T_CDR.prov_short_deduction requirement T_CDR.ead_pro_discount (NEW) T_CDR.npe_wo CRR2 & EBA3.0 37
Slide 38: Forbearance granted after classification as NPE
Forbearance granted between ]1y,2y] or between ]2y, 6y] after classification as NPE Definition of NPE and time passed since definition as NPE: T_CDR.NPE_BUCKET_ID is not null T_CDR.first_forbearance New column required: T_CDR.first_forbearance_bucket CRR2 & EBA3.0 38
Slide 39: CRR2 Treatment of CIU
CRR2 Treatment of CIU CRR2 & EBA3.0 39
Slide 40: New RWA methods for CIU
Available in New RWA methods for CIU RiskAuthority™ v7.1 » Minor enhancements in » RiskAuthority™ v7.1.4 » » » » CRR2 & EBA3.0 40
Slide 41: CRR2 Leverage Ratio
CRR2 Leverage Ratio CRR2 & EBA3.0 41
Slide 42: CEM Reduced SA-CCR
Available in RiskAuthority™ v7.1 CEM Derivatives, cash variation margin, netting agreements NEW Reduced SA-CCR “CCP leg” of client-cleared trade when the bank has no obligation to reimburse excluded Available in RiskAuthority™ PFE multiplier is 1 v7.1.3 “Client leg” of Client-cleared NEW Full RWA tr
Slide 43: CRR2 Exemptions
Available in RiskAuthority™ CRR2 Exemptions v7.1.1 » Article 429a – New Exemptions to leverage amount – (1)(c ) Exposures that are assigned a risk weight of 0 % in accordance with Article 113(6) or (7) : Banks inter Group and Institutional Protection Scheme – (1) (d)When the bank is a public develop
Slide 44: Expected enhancements for leverage
Minor Expected enhancements for leverage enhancements in RiskAuthority™ v7.1.4 » Specific provision on off-balance from BIS_PROVISION_LINKS to populate T_LEVERAGE (instead of T_PROVISION) » Minor updates to SFT cash receivable / payable offset CRR2 & EBA3.0 44
Slide 45: Banking Cloud Credit Risk & Leverage Ratio roadmap for CRR2 EBA3.0
Banking Cloud Credit Risk & Leverage Ratio roadmap for CRR2 EBA3.0 End Of End Of End Of October January March 2021 2020 CRR2 configurations CRR2 & EBA 3.0 updates: EBA 3.0 reports update: available for: - updated result data model - COREP OF - Credit Risk (SA&IRB) (T_ tables) - COREP LR - SA-CCR - C
Slide 46: CRR2 & EBA 3.0 NSFR
Moody’s Analytics User Webinar Series CRR2 & EBA 3.0 NSFR Yan Zhang, Director, Product Management 13 October 2020
Slide 47: Agenda
Agenda High level overview of NSFR existing 1 features 2 Key enhancements for CRR2 NSFR 3 Additional data requirements for NSFR CRR2 & EBA3.0 47
Slide 48: High level overview of NSFR existing features
1 High level overview of NSFR existing features
Slide 49: Release dates and version
Release dates and version ➢ RiskAuthority™ 7.1.4 release in December 2020 ➢ RiskAuthority™ calculation engine configuration files in January 2021 ➢ Liquidity Risk will be available on Banking Cloud SaaS platform in June 2021 CRR2 & EBA3.0 49
Slide 50: Existing key NSFR-specific features
Existing key NSFR-specific features 1. ASF/RSF factors determination 2. NSFR Amortizing 3. Encumbrance – Asset encumbrance per ISIN – Secured facility pool allocation – Covered bond pool allocation 4. Derivative & collateral – Derivative fair value netting – Deductible variation margin, excess ASF c
Slide 51: NSFR ASF/RSF Factor determination
NSFR ASF/RSF Factor determination Configuration file to be delivered as per CRR2 NSFR CRR2 & EBA3.0 51
Slide 52: NSFR Amortizing
NSFR Amortizing Different portions of principal cash flows falling in different time buckets can have different ASF/RSF factors. 6M 1Y CRR2 & EBA3.0 52
Slide 53: Asset Encumbrance treatment setup
Asset Encumbrance treatment setup CRR2 & EBA3.0 53
Slide 54: Encumbrance of Pool Assets - Covered Bond
Encumbrance of Pool Assets - Covered Bond » Flexible encumbrance allocation process to link different portions of assets to different positions of covered bonds. » Unencumbered when: – Over-collateralized, or – Retained part of issued securities (not pledged) CRR2 & EBA3.0 54
Slide 55: Encumbrance of Pool Assets - Received Facilities
Encumbrance of Pool Assets - Received Facilities » The part of collaterals in excess of the facility limit – unencumbered » The part of collaterals associated to the drawdowns – encumbered » The part of collaterals in excess of the drawdowns but below the facility limit – encumbered or not according
Slide 56: NSFR: Derivatives & collaterals
NSFR : Derivatives & collaterals » Derivatives : Net fair value per currency and for all-currency. » Received (or pledged) variation margin can be deducted from derivatives having positive (or negative) netted fair value, for a given netting set » Report correct RSF factor for default fund and initi
Slide 57: Key enhancements for CRR2 NSFR
2 Key enhancements for CRR2 NSFR
Slide 58: Repo netting (1)
Repo netting (1) CRR Art. 428e, Annex 13 (instructions) » Net cash receivable/payable – The same counterparty – The right to set off is legally enforceable – Settle on a net basis or settle simultaneously or the same settlement mechanism – The same settlement date (considering encumbrance date) – Th
Slide 59: Repo netting (2)
Repo netting (2) Enhancements » Configurable table to identify valid netting agreement and settlement system » Configurable netting rules for repo netting » Generate the netted results, per ccy and for all-currency combined CRR2 & EBA3.0 59
Slide 60: Derivative netting (1)
Derivative netting (1) » Derivatives netting : net fair value in its settlement currency, for a netting set. » General instruction - ITS ANNEX XXVII: For the purposes of reporting by currency subject to separate reporting as envisaged in Article 415(2) CRR, as regards derivatives as envisaged in Art
Slide 61: Derivative netting (2)
Derivative netting (2) Example and Enhancements » Assume the settlement currency is USD in the example Contract currency Fair value Deal 1 USD -100 Deal 2 USD 50 Deal 3 EUR 30 Netted results in BIS USD -50 Netted results in BIS EUR 30 Netted results in CRR2 USD -20 » Enhancements: – Identify the set
Slide 62: FX Netting – without qualifying netting agreement
FX Netting – without qualifying netting agreement CRR Art. 428d(4) Conditions: » Full exchange of principal amounts on the same date » Netting per counterparty, per settlement currency and per date » Settlement currency is the currency of the net position (the one with the maximum contribution) CRR2
Slide 63: Derivatives netting: schema of enhancement
Derivatives netting: schema of enhancement Derivatives No Agreement Agreement Deal level : FX deals Deal level : No Full with Full principal principal exchange at All deals exchange at same date same date Net per Counterparty Net per Counterparty Per settlement ccy (across different FX deals with Pe
Slide 64: NSFR ASF/RSF Factor – add python formula
NSFR ASF/RSF Factor – add python formula CRR2 & EBA3.0 64
Slide 65: Additional data requirements for NSFR
3 Additional data requirements for NSFR
Slide 66: Summary
Summary » Regulatory capital, Minor interest, deferred tax » Variation margin/initial margin/contribution to CCP default fund, linked with a derivative, netting agreement or margin agreement » Non-performing assets (LCR v.s. NSFR): performing status more granular » Repo : netting agreement or settle
Slide 67: CRR2 & EBA 3.0 EBA 3.0 regulatory reports
Moody’s Analytics User Webinar Series CRR2 & EBA 3.0 EBA 3.0 regulatory reports Serge Blumberger, Director, Product Management 13 October 2020
Slide 68: Agenda
Agenda EBA timeline and main changes on 1 regulatory reports How EBA 3.0 is impacting our regulatory 2 reporting solution and data sourcing Reports configurations delivery plan and 3 minimum versions required CRR2 & EBA3.0 68
Slide 69: EBA timeline
EBA timeline ITS on, REGULATORY REPORTING New ITS on disclosure and reporting on MREL ITS on RESOLUTION PLANNING REPORTING GL on FUNDING PLANS Jun 2020 Dec 2020 Mar 2021 Jun 2021, Sep 2021, Dec 2021 ITS on supervisory benchmark GL on COVID-19 measures reporting and disclosures cP on supervisory repo
Slide 70: EBA 3.0 / CRR2 / Backstop Reg
EBA 3.0 / CRR2 / Backstop Reg Applicable from 30 June 2021 ➢ Final draft ITS on Supervisory Reporting (Consultation Paper published in October 2019) including changes to: ▪ Own Funds (3 new templates C35 on NPE Loss Coverage, changes in CA reports CET1 deductions) ▪ Credit Risk (new C08 templates ba
Slide 71: EBA 3.0 COREP OF - Capital & CR
EBA 3.0 COREP OF - Capital & CR CRR2 & EBA3.0 71
Slide 72: EBA 3.0 COREP OF - SEC, CCR, NPE
EBA 3.0 COREP OF - SEC, CCR, NPE CRR2 & EBA3.0 72
Slide 73: EBA 3.0 COREP LR
EBA 3.0 COREP LR CRR2 & EBA3.0 73
Slide 74: EBA 3.0 NSFR
PE Delete rows,columns, cells or templates Amendments to the label of rows/colums/tables E BA N F R Amendments to the content/definition of rows/columns . Include new rows/columns or cells Template | Template as ‘code Name of the template /group of templates P3 |Data Model RAY additional sourcing /
Slide 75: EBA 3.0 Delivery Plan and minimum versions
EBA 3.0 Delivery Plan and minimum versions Banking Cloud RiskAuthority RAY Minimum EBA version Framework Delivery Date Delivery Date Version end of October COREP OF/LR - new data model end of October 2020 2020 7.1 SP3 end of Jan 2021 (XLS only) end of January COREP OF/LR - XLS & XBRL conversion & Va
Slide 76: Questions?
Questions?
Slide 77: moodysanalytics.com
5) Better Mooby s Faster Decisions ANALYTICS moodysanalytics.com
Slide 78: CRR2 & EBA3.0
© 2020 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liabilit
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