The rule in plain words
None of the values it checks in credit risk: equity can be negative.
EBA checks it for two columns: PD assigned to the obligor grade or pool (%), and exposure weighted average LGD (%). And for two rows: total IRB equity exposures and PD/LGD approach: total. That makes four 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 assigned to the obligor grade or pool (%): Total IRB Equity Exposures >= 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 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
- 0010Total IRB Equity Exposures
- 0020PD/LGD approach: Total
Columns
- 0010PD assigned to the obligor grade or pool (%)
- 0070Exposure weighted average LGD (%)
A worked example
The first of its checks, with simple numbers.
Total IRB equity exposures, PD assigned to the obligor grade or pool (%) 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_10.01,r0010,c0010,} >= 0The next three:
{C_10.01,r0010,c0070,} >= 0{C_10.01,r0020,c0070,} >= 0{C_10.01,r0020,c0010,} >= 0Other rules on C 10.01
- Original exposure pre conversion factors cannot be negative (v903632_s)Warning
- Each of the nine values it checks in credit risk: equity cannot be more than zero (v903653_s)Warning
- None of the 18 values it checks in credit risk: equity can be negative (v903654_s)Warning
- Total IRB equity exposures must equal the sum of its four parts (v10632_m)Warning
- Exposure value cannot be less than off-balance sheet items (v09800_m)Warning
- Exposure value cannot be less than memorandum item: expected loss amount (v4788_m)Warning
- 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
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.