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Sources of encumbrance in AnaCredit

  • Question ID: 2020/0020
  • Date of publication: 31/01/2020
  • Subject matter: General clarifications
  • AnaCredit Manual: Part II
  • Data attribute: Sources of encumbrance


AnaCredit requires the data attribute “sources of encumbrance” to be reported in accordance with the implementing technical standards (ITS). However, since the different nature of aggregate reports (as in FINREP) and reporting instruments on a granular level under AnaCredit have different perspectives on the source of encumbrance, the reporting under AnaCredit is not always straightforward. Practical issues arise, for example, in the cases of multiple sources of encumbrance, self-securitisation or unused parts of instrument that do not require prior approval before withdrawal or replacement by other assets. For example, according to the ITS, if there is no impediment to withdrawal of collateral for the unused part of guarantee, only the used amount should be considered encumbered and reported on a pro-rata allocation. Meanwhile, under AnaCredit, a single instrument can be considered as either encumbered or unencumbered. We would therefore appreciate further guidance on how the reporting should take place in such cases.


The AnaCredit Regulation does not introduce a definition of “asset encumbrance”, but refers to the ITS (i.e. Annexes XVI and XVII on reporting on asset encumbrance). This means that all relevant provisions of the ITS with regard to the exact meaning of each value of the data attribute should be followed. As a consequence, the assessment of whether an instrument is “encumbered” or not should in principle not differ across AnaCredit and the ITS.

However, it is also acknowledged that there may be instances of partially encumbered instruments or instruments subject to multiple sources of encumbrance whose allocation in the ITS asset encumbrance templates may not be entirely captured under AnaCredit owing to the fact that the information in AnaCredit is collected at single instrument level.

More specifically, in accordance with the definition, a loan reportable to AnaCredit is considered as encumbered if it has been pledged or if it is subject to any form of arrangement to secure, collateralise or credit enhance any instrument from which it cannot be freely withdrawn.

Accordingly, Section 5.4.3 in Part II of the AnaCredit Reporting Manual clarifies that loans pledged that are subject to any restrictions on withdrawal, such as loans that require prior approval before withdrawal or replacement by other assets, are considered encumbered under AnaCredit. Conversely, loans placed at facilities that are not used and that can be freely withdrawn are not considered encumbered.

Therefore, for straightforward cases, AnaCredit mimics what is reported in asset encumbrance under the ITS.

However, if an instrument is subject to multiple sources of encumbrance at the same time, the source of encumbrance associated with the largest part of the instrument is reported under AnaCredit. If this information cannot be determined, any one of the sources is reported. Similarly, partially encumbered instruments are reported to AnaCredit as encumbered by providing the respective source of encumbrance. For example, with regard to loans in cover pools used for covered bond issuance, where the observed agent holds a part of the corresponding covered bonds, there may be loans that are only partially used and the unused parts can be freely withdrawn. While such loans are allocated on a pro-rata basis between encumbered and unencumbered for the purpose of reporting the ITS asset encumbrance templates, they are exclusively reported as encumbered for the purpose of AnaCredit. Meanwhile, this issue does not arise under the ITS, where exposures are allocated on a pro-rata basis among the different sources of encumbrance.

For example, consider a case of self-securitisation of ten loans with a carrying amount of €1,000 each. The reporting bank retains 85% of the securitisation. Accordingly, asset-backed securities (ABSs) with a value of €1,500 are held by third-party investors. The reporting bank is engaged in central bank funding and uses ABSs with an outstanding amount of €2,500 as collateral.

First, note that, in accordance with the ITS, the act of creating asset-backed securities that are retained does not constitute encumbrance per se. However, since some of the ABSs are subsequently used for central bank funding, the matching loans are considered as encumbered under the ITS. Consequently, in the example, the ten loans are subject to multiple sources of encumbrance at the same time: (i) partial encumbrance due to “Debt securities issued – asset-backed securities” (€1,500) as the instruments are used as collateral for asset-backed securities issued by the reporting bank, (ii) partial encumbrance due to “Central bank funding” (of €2,500) as there are instruments used as collateral for the liabilities of the reporting bank towards the central bank (under the assumption that the encumbered assets and the matching liabilities are equal), and (iii) partial non-encumbrance, as there are instruments that are not used and can be freely withdrawn.

Assuming that in this example of pledged portfolios of instruments in which only a part of the amount of the portfolio is actually encumbered (partially due to central bank funding and partially due to debt securities issued) the asset encumbrance cannot accurately be reflected at single instrument level, all the loans are reported to AnaCredit as encumbered and the source of encumbrance is “Central bank funding” as it applies to the largest part of the instruments.