The rule in plain words
To <10 (under ) must equal to <5 plus to <10 (under 2.5 to <10).
EBA checks it for two columns: number of obligors at the end of the previous year and defaulted during the year. That makes two checks. A failure names the one that failed.
How the Line4 Check report words itShowHide
The first of its checks, word for word as the report shows it when it fails. The others read the same, with their own column, row or sheet.
Number of obligors at the end of the previous year: 2.5 to <10 = 2.5 to <5 + 5 to <10
What to do if your filing fails it
- 01Open the template below and find the cells the rule reads.
- 02Add up the parts in your file and compare the result with the total.
- 03If they differ, a part is missing, a value sits in the wrong cell, or the total is out of date.
- 04EBA allows a small rounding difference, worked out from the decimals each value is reported with.
- 05It runs only when your filing indicators mark C 08.05 as reported.
- 06This is a warning. It does not stop the filing on its own, but your authority may ask you to explain it.
The cells it reads
Credit risk and free deliveries: IRB approach to capital requirements: back-testing of PD (CR IRB 5) (C 08.05)
Rows
- 01002.5 to <10
- 01102.5 to <5
- 01205 to <10
Columns
- 0020Number of obligors at the end of the previous year
- 0030Of which: defaulted during the year
A worked example
The first of its checks, with simple numbers.
To <10 (under ) must then be 2,000.
A file that reports 2,000 passes. One that reports 2,100 fails, by 100.
The numbers are illustrative, reported to the unit, so the rounding tolerance does not change the result.
Show the rule as writtenShowHide
EBA's formula, as written out for the first of its checks. Cells are written as {template, row, column, sheet}.
{C_08.05,r0100,c0020,} = {C_08.05,r0110,c0020,} + {C_08.05,r0120,c0020,}The next one:
{C_08.05,r0100,c0030,} = {C_08.05,r0110,c0030,} + {C_08.05,r0120,c0030,}Other rules on C 08.05
- To <2.5 (under ) must equal to <1.75 plus to <2.5 (under 0.75 to <2.5) (v09758_m)Warning
- To <100 (under ) must equal to <20 plus to <30 plus to <100 (under 10 to <100) (v09760_m)Warning
- To <0.15 (under ) must equal to <0.10 plus to <0.15 (under 0.00 to <0.15) (v09757_m)Warning
- Arithmetic average PD cannot be more than 1 (v09763_m)Warning
- Observed average default rate cannot be more than 1 (v09764_m)Warning
- Average historical annual default rate cannot be more than 1 (v09765_m)Warning
- Number of obligors at the end of the previous year cannot be less than defaulted during the year (v09780_m)Warning
Every COREP own funds rule, by template
Checks like this one, run at the point of submission, are the first step to real-time supervision.