The rule in plain words
Portfolios under the fall-back approach must equal these three added up:
- 100% of net unrealised profit
- 10% of notional value
- 25% of inception value
All the values are in the total AVA column (0110) of C 32.02.a.
How the Line4 Check report words itShowHide
Word for word as the report shows it when the rule fails.
Total AVA: Portfolios under the fall-back approach = 100% of net unrealised profit + 10% of notional value + 25% of inception value
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- 03If they differ, a part is missing, a value sits in the wrong row, or the total is out of date.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 32.02 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
Prudent valuation: core approach – pre and post diversification (C 32.02.a)
Rows
- 0180Portfolios under the fall-back approach
- 0190100% of net unrealised profit
- 020010% of notional value
- 021025% of inception value
Column
- 0110Total AVA
A worked example
The first of its checks, with simple numbers.
Portfolios under the fall-back approach must then be 2,450.
A file that reports 2,450 passes. One that reports 2,550 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. Cells are written as {template, row, column, sheet}.
{C_32.02.a,r0180,c0110,} = {C_32.02.a,r0190,c0110,} + {C_32.02.a,r0200,c0110,} + {C_32.02.a,r0210,c0110,}Other rules on C 32.02.a
- Diversification benefits must equal the sum of its two parts (v6349_m)Warning
- Market price uncertainty calculated using the expert based approach cannot be more than market price uncertainty (v6351_m)Warning
- Market price uncertainty calculated using the expert based approach cannot be less than market price uncertainty (v6352_m)Warning
- Close-out costs calculated using the expert based approach cannot be more than close-out costs (v6353_m)Warning
- Close-out costs calculated using the expert based approach cannot be less than close-out costs (v6354_m)Warning
- Model risk calculated using the expert based approach cannot be more than model risk (v6355_m)Warning
- Total category level pre-diversification must equal the sum of its seven parts (v6344_m)Warning
- Model risk calculated using the expert based approach cannot be less than model risk (v6356_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.