The rule in plain words
Exposure value cannot be less than memorandum item: expected loss amount.
EBA checks it for five rows: PD/LGD approach: total, simple risk weight approach: total, 190%, 290% and 370%. That makes five 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.
PD/LGD approach: Total, Exposure value >= PD/LGD approach: Total, Memorandum item: Expected loss amount
What to do if your filing fails it
- 01Open the template below and find the cells the rule reads.
- 02Compare the values in your file. If the first is smaller than it may be, one of them is wrong: check both before you change either.
- 03EBA allows a small rounding difference, worked out from the decimals each value is reported with.
- 04It runs only when your filing indicators mark C 10.01 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
Credit risk: equity - IRB approaches to capital requirements - TOTAL (C 10.01)
Rows
- 0020PD/LGD approach: Total
- 0050Simple risk weight approach: Total
- 0070190%
- 0080290%
- 0090370%
Columns
- 0060Exposure value
- 0090Memorandum item: Expected loss amount
A worked example
The first of its checks, with simple numbers.
Memorandum item: expected loss amount can then be at most 1,200.
A file that reports 1,200 passes. One that reports 1,300 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_10.01,r0020,c0060,} >= {C_10.01,r0020,c0090,}The next four:
{C_10.01,r0080,c0060,} >= {C_10.01,r0080,c0090,}{C_10.01,r0090,c0060,} >= {C_10.01,r0090,c0090,}{C_10.01,r0070,c0060,} >= {C_10.01,r0070,c0090,}{C_10.01,r0050,c0060,} >= {C_10.01,r0050,c0090,}Other rules on C 10.01
- Risk weighted exposure amount cannot be negative (v3729_s)Warning
- PD/LGD approach: total, PD assigned to the obligor grade or pool cannot be more than 1 (v1617_m)Warning
- A calculation check across credit risk: equity (C 10.02, v0492_m)Warning
- Memorandum item: expected loss amount must equal 0.024 times exposure value (v0489_m)Warning
- Risk weighted exposure amount must equal 3.7 times exposure value (v0488_m)Warning
- Memorandum item: expected loss amount must equal 0.008 times exposure value (row 0080, v0487_m)Warning
- Risk weighted exposure amount must equal 2.9 times exposure value (v0486_m)Warning
- Memorandum item: expected loss amount must equal 0.008 times exposure value (row 0070, v0485_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.