The rule in plain words
In each of 9 columns (listed below) of Counterparty credit risk: size of the derivative business (CCR 1) (C34.01.01.01): "Size of the derivative business" (row 0010) must equal the sum of "On- and off-balance sheet derivatives" (row 0020) and "(-) Credit derivatives that are recognised as internal hedges against non-trading book credit risk exposures" (row 0030).
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- 03If they differ, a part is missing, a value sits in the wrong cell, or the total is out of date.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 C34.01.01 as reported.
- 06This is a warning. It does not stop the return on its own, but your supervisor may ask you to explain it.
The cells it reads
Counterparty credit risk: size of the derivative business (CCR 1) (C34.01.01.01)
Rows
- R0010Size of the derivative business
- R0020On- and off-balance sheet derivatives
- R0030(-) Credit derivatives that are recognised as internal hedges against non-trading book credit risk exposures
Columns
- C0010Long derivative positions
- C0020Short derivative positions
- C0030Total
- C0040Long derivative positions
- C0050Short derivative positions
- C0060Total
- C0070Long derivative positions
- C0080Short derivative positions
- C0090Total
A worked example
With simple numbers.
Size of the derivative business must then be 2,000.
A file that reports 2,000 passes. One that reports 2,100 fails, by 100.
The numbers are illustrative, reported to the unit, so the rounding tolerance does not change the result.
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 warning.
The Bank’s own words and formula
The plain words above spell out the Bank’s formula, with each cell named from its templates. In the Bank of England’s list of validations, word for word:
[v09804_m];[scope({t: C34.01.01.01, c:0010;0020;0030;0040;0050;0060;0070;0080;0090})];[{t: C34.01.01.01, r: 0010} = {t: C34.01.01.01, r: 0020} + {t: C34.01.01.01, r: 0030}]
Show the formulaShowHide
The Bank of England's formula. Cells are written as {t: table, r: row, c: column}.
{t: C34.01.01.01, r: 0010} = {t: C34.01.01.01, r: 0020} + {t: C34.01.01.01, r: 0030}Where it applies, in the Bank's words (its scope):
scope({t: C34.01.01.01, c:0010;0020;0030;0040;0050;0060;0070;0080;0090, f: banking, fv: banking_reporting})Other rules on Counterparty credit risk: size of the derivative business (CCR 1) (C34.01.01.01)
- The sum of "Long derivative positions" and "Short derivative positions" must equal "Total" (v09803_m)
- The sum of "Long derivative positions" and "Short derivative positions" must equal "Total" (v09802_m)
- The sum of "Long derivative positions" and "Short derivative positions" must equal "Total" (v09801_m)
- Every value in "Size of the derivative business" and "On- and off-balance sheet derivatives" in 6 columns must be zero or more (v10307_s)
- Counterparty credit risk: size of the derivative business (CCR 1): a value must not be negative (v10308_s)
- Counterparty credit risk: size of the derivative business (CCR 1): a value must not be more than another (v10492_s)
- If "Total assets" is not zero, "Percentage of total assets" must equal "Size of the derivative business" divided by "Total assets" (v10638_m)
Every PRA banking rule on C34.01.01.01
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.