The rule in plain words
Adjustments to CET1 cannot be negative.
EBA checks it for seven rows: grandfathered instruments, instruments not constituting state aid, deductions, deferred tax assets that rely on future profitability and do not arise from temporary differences, deferred tax assets that are dependent on future profitability and arise from temporary differences and CET1 instruments of financial sector, deferred tax assets that are dependent on future profitability and arise from temporary differences, and exemption from deduction of equity holdings in insurance companies from CET 1 items. That makes seven 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.
Adjustments to CET1: Deductions >= 0
What to do if your filing fails it
- 01Open the template below and find the cells the rule reads.
- 02Look for a value with the wrong sign in these cells, such as an amount entered as a negative number.
- 03EBA compares the values exactly here: there is no rounding tolerance.
- 04It runs only when your filing indicators mark C 05.01 as reported.
- 05This 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
Capital adequacy - transitional provisions: Summary (C 05.01)
Rows
- 0020GRANDFATHERED INSTRUMENTS
- 0060Instruments not constituting state aid
- 0140Deductions
- 0170Deferred tax assets that rely on future profitability and do not arise from temporary differences
- 0380Deferred tax assets that are dependent on future profitability and arise from temporary differences and CET1 instruments of financial sector
- 0385Deferred tax assets that are dependent on future profitability and arise from temporary differences
- 0425Exemption from deduction of Equity Holdings in Insurance Companies from CET 1 Items
Column
- 0010Adjustments to CET1
A worked example
The first of its checks, with simple numbers.
Deductions, adjustments to CET1 must then be at least 0.
A file that reports 0 passes. One that reports -100 fails, by 100.
The numbers are illustrative.
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_05.01,r0140,c0010,} >= 0The next five:
{C_05.01,r0170,c0010,} >= 0{C_05.01,r0060,c0010,} >= 0{C_05.01,r0380,c0010,} >= 0{C_05.01,r0385,c0010,} >= 0{C_05.01,r0425,c0010,} >= 0And 1 more, the same formula for the other cells it covers.
Other rules on C 05.01
- Adjustments included in RWAs cannot be negative (v3689_s)Warning
- Eligible amount without transitional provisions cannot be negative (v3693_s)Warning
- If adjustments to CET1 is reported, eligible amount without transitional provisions must be reported (v4889_m)Warning
- Eligible amount without transitional provisions cannot be more than zero (v5016_s)Warning
- Applicable percentage cannot be negative (v2035_s)Warning
- Total adjustments must equal the sum of its three parts (v1630_m)Warning
- Total adjustments must equal other transitional adjustments (v6022_m)Warning
- Applicable percentage cannot be more than 1 (v6302_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.