The rule in plain words
Exposure weighted average LGD (%) for large financial sector entities and unregulated financial entities cannot be more than 1.
EBA checks it for three rows: total exposures, exposures subject to SME-supporting factor, and exposures assigned to obligor grades or pools: total. That makes three 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.
Exposure weighted average LGD (%) for large financial sector entities and unregulated financial entities: Of which: exposures subject to SME-supporting factor <= 1
What to do if your filing fails it
- 01Open the template below and find the cells the rule reads.
- 02Look for a value outside the limit in these cells.
- 03If the value is a percentage, EBA expects it as a decimal: 12% is reported as 0.12.
- 04EBA compares the values exactly here: there is no rounding tolerance.
- 05It runs only when your filing indicators mark C 08.01 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 and counterparty credit risks and free deliveries: IRB approach to capital requirements - TOTAL (C 08.01.a)
Rows
- 0010Total exposures
- 0015Of which: exposures subject to SME-supporting factor
- 0070Exposures assigned to obligor grades or pools: Total
Column
- 0240Exposure weighted average LGD (%) for large financial sector entities and unregulated financial entities
A worked example
The first of its checks, with simple numbers.
Exposures subject to SME-supporting factor, exposure weighted average LGD (%) for large financial sector entities and unregulated financial entities can then be at most 1.
A file that reports 1 passes. One that reports 1.1 fails, by 0.1.
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_08.01.a,r0015,c0240,} <= 1The next two:
{C_08.01.a,r0070,c0240,} <= 1{C_08.01.a,r0010,c0240,} <= 1Other rules on C 08.01.a
- Exposure weighted average lgd cannot be more than 1 (v4820_m)Warning
- Total exposures, risk weighted exposure amount pre supporting factors must equal the sum of its seven parts (v4770_m)Not run yet
- The absolute value of guarantees plus the absolute value of credit derivatives plus the absolute value of other funded credit protection cannot be more than original exposure pre conversion factors (v4756_m)Warning
- Internal rating scale, PD assigned to the obligor grade or pool cannot be more than 1 (v6299_m)Warning
- Secured by immovable property: risk weighted exposure amount after supporting factor: SME must equal total exposures (v1673_m)Not run yet
- Risk weighted exposure amount after supporting factor: purchased receivables must equal total exposures (v1672_m)Not run yet
- Total outflows must equal the sum of its three parts (v1663_m)Warning
- Exposure after CRM substitution effects pre conversion factors must equal the sum of its three parts (v1662_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.