The rule in plain words
Exposure after CRM with substitution effect should equal exposure before CRM effects + on-balance sheet netting adjustments + CRM with substitution effects on the exposure
In each of 7 rows (listed below) of Credit and counterparty credit risks and free deliveries: IRB approach to capital requirements (CR IRB 1) (OF08.01.01.01): "Exposure after CRM substitution effects pre-conversion factors" (column 0090) must equal the sum of "Original exposure pre-conversion factors" (column 0020), "(-) Total outflows" (column 0070) and "Total inflows (+)" (column 0080).
The headline gives only the template and the kind of check, because the rule is too long to say in a headline. The plain words above say all of it.
What to do if your return fails it
- 01Open the table below and find the cells the rule reads.
- 02Add up the parts in your return and compare the result with the total.
- 03If they differ, a part is missing, a value sits in the wrong cell, or the total is out of date.
- 04The Bank of England allows a small rounding difference, worked out from the decimals each value is reported with.
- 05It runs only when your filing indicators mark OF08.01.01 as reported.
- 06This is a blocking check. A return that fails it is normally rejected, so fix it before you submit.
The cells it reads
Credit and counterparty credit risks and free deliveries: IRB approach to capital requirements (CR IRB 1) (OF08.01.01.01)
Rows
- R000140%
- R0030Off-balance sheet items subject to credit risk
- R003110%
- R003220%
- R003350%
- R0034100%
- R0035Own estimate
Columns
- C0020Original exposure pre-conversion factors
- C0070(-) Total outflows
- C0080Total inflows (+)
- C0090Exposure after CRM substitution effects pre-conversion factors
Sheets
- S0001Total (AIRB approach)
- S0002Total (FIRB approach and slotting approach)
- S0006Institutions (FIRB approach)
- S0009Corporates - Specialised Lending (AIRB approach)
- S0010Corporates - Specialised Lending (FIRB approach or slotting approach)
- S0011Corporates - Other general corporates - non-SME (AIRB approach)
- S0012Corporates - Other general corporates - non-SME (FIRB approach)
- S0015Retail - Qualifying revolving (AIRB approach)
- S0016Retail - Other SME (AIRB approach)
- S0017Retail - Other non-SME (AIRB approach)
- S0018Retail - Secured by commercial immovable property SME (AIRB approach)
- S0019Retail - Secured by commercial immovable property non-SME (AIRB approach)
- S0020Retail - Secured by residential immovable property - SME (AIRB approach)
- S0021Retail - Secured by residential immovable property non-SME (AIRB approach)
- S0022Corporates - Financial corporates and large corporates (FIRB approach)
- S0023Corporates - Other general corporates - SME (AIRB approach)
- S0024Corporates - Other general corporates - SME (FIRB approach)
Which returns it applies to
Line4 Check runs it on the own funds (PRA001) return on Bank of England banking taxonomy 4.1.1. The Bank of England applies it to own funds (PRA001) returns, as a blocking check.
The Bank’s own words and formula
The first paragraph of the plain words above is the Bank of England’s own, word for word, from its list of validations. The second spells out its formula, with each cell named from its templates.
Show the formulaShowHide
The Bank of England's formula. Cells are written as {t: table, r: row, c: column}.
{t: OF08.01.01.01, c: 0090} = sum({t: OF08.01.01.01, c: 0020; 0070; 0080})Where it applies, in the Bank's words (its scope):
scope({t: OF08.01.01.01, r:0001;0030;0031;0032;0033;0034;0035,z:0001;0002;0006;0009;0010;0011;0012;0015;0016;0017;0018;0019;0020;0021;0022;0023;0024, f: banking, fv: banking_reporting})Other rules on Credit and counterparty credit risks and free deliveries: IRB approach to capital requirements (CR IRB 1) (OF08.01.01.01)
- Credit and counterparty credit risks and free deliveries: IRB approach to capital requirements (CR IRB 1): a total must equal the sum of its parts (boe_b0746)Blocking
- Credit and counterparty credit risks and free deliveries: IRB approach to capital requirements (CR IRB 1): a total must equal the sum of its parts (boe_b0747)Blocking
- Total Exposures in 'Total AIRB' sheet should equal the sum of the individual exposure classes in each AIRB sheets for the columns listed (boe_b0748)Blocking
- Expected loss after PMAs should equal expected loss before PMAs plus adjustment due to PMAs (boe_b0743)Blocking
- Values of data points in the 'Total FIRB and slotting' sheet should equal the sum of the (non-Total) FIRB sheets for the columns listed (boe_b0749)Blocking
- Total off balance sheet items should equal the breakdown of off balance sheet items by conversion buckets (boe_b0742)Blocking
- Credit and counterparty credit risks and free deliveries: IRB approach to capital requirements (CR IRB 1): a total must equal the sum of its parts (boe_b0750)Blocking
- Total off balance sheet items should equal breakdown of off balance sheet items by conversion buckets (boe_b0741)Blocking
Every PRA banking rule on OF08.01.01.01
Checks like this one, run at the point of submission, are the first step to real-time supervision. Line4 builds SupTech software for financial regulators that runs checks like these as each return arrives.