Clarifications concerning the data attribute “default status of the instrument” in Example 34 in Part II

Question

We have some questions concerning Example 34 in Part II which illustrates the reporting of the default status and the performing status of the instrument in the case of a “transaction-based” assessment in line with paragraph 226 of Annex V to the amended ITS when the definition of default applies at the level of the individual credit facility only for a subset of the debtor’s (retail) instruments, while for the other (non-retail) instruments the definition of default applies at the level of the counterparty. Specifically, could you please confirm that INS#2 in the sentence “…because INS#2 (a) is 90 days past due and (b) accounts for more than 20% of the gross carrying amount of all on-balance-sheet exposures to DEBT#1” should be INS#3? Secondly, it seems that the example fails to account for the provision of paragraph 90 of the EBA Guideline on the application of the definition of default under Article 178 of the CRR which stipulates that if the debtor is in default (concerning the exposures to which the definition of default at the obligor level applies), then all instruments of that debtor are considered in default, including instruments subject to the application of the definition of default at individual credit facility level. Could you please clarify this?

Answer

There is indeed a typographical error in this sentence; it should indeed refer to INS#3 in the part concerned (“…classified as “non-performing” because INS#3 (a) is more than 90 days past due and (b) accounts for more than 20% of the gross carrying amount of all on-balance-sheet exposures to DEBT#1”).

As regards the second question, this example deals with the complex situation of default and performance status in the case of counterparties that have both instruments whose default status is assessed at the counterparty level and (retail) instruments that are assessed at the instrument level. While the example focuses on the performance status, it does not fully reflect the provisions of the EBA Guideline on the application of the definition of default under the CRR.

It is important to note that the example provided in the Manual is without prejudice to the EBA Guideline on the application of the definition of default under the CRR. It should also be noted that while the values of the different data attributes of the instrument’s default and performing status follow the CRR (rather than being stipulated by the AnaCredit Regulation), the example solely aims to illustrate how these data attributes are jointly reflected in the AnaCredit datasets. Consequently, rather than elaborating on its assumptions (which are thoroughly clarified in the EBA Guideline), the example has been revised as follows, whereby the focus is on the interplay of several data attributes in AnaCredit.

Revised Example 34

: Performing status of the instrument – mixed retail and non-retail exposures under the CRR

  • A reporting agent has a portfolio consisting of one debtor (DEBT#1) with four instruments. For the two non-retail instruments, the default status is assessed at the level of the counterparty. For the two retail instruments, the reporting agent uses the option provided by the last sentence of Article 178(1) of the CRR and assesses the default status at the level of the individual credit facility. The assessment of the performing status is “transaction-based” in line with paragraph 226 of Annex V to the amended ITS. As of 30 September 2019, the reporting agent determines that:
  • INS#1 is a retail exposure, originated on 15 April 2017, which is not more than 90 days past due.
  • INS#2 is a retail exposure, originated on 6 October 2018, which is not more than 90 days past due, but has been non-performing since 10 July 2019.
  • INS#3 is a non-retail exposure which is more than 90 days past due as of 20 August 2019.
  • INS#4 is a non-retail exposure, originated on 29 January 2019, which is not more than 90 days past due.
  • In the retail portfolio, the default status is assessed at the level of the individual instrument; however, in this example, all instruments whose default status is assessed at the level of the instrument are set to default on the basis of other unlikeliness to pay considerations (see paragraph 90 of the EBA Guideline on the application of the definition of default under Article 178 of Regulation (EU) No 575/2013 (EBA/GL/2016/07)).
  • In the non-retail portfolio, where the default status is assessed at the level of the whole counterparty, the default status of DEBT#1 is “default because more than 90/180 days past due”.
  • As regards the performing status, all the instruments of DEBT#1, including the retail instruments INS#1 and INS#2, are classified as “non-performing”.
  • The above assumptions are reflected in the financial dataset as shown in Table 69.

Table 69 The performing and default status of the instruments of DEBT#1

Reporting reference date

Instrument identifier

Default status of the instrument

Date of the default status of the instrument

Performing status of the instrument

Date of the performing status of the instrument

30/09/2019

Ins#1

Default because unlikely to pay Not in default

20/08/2019

Non-performing

20/08/2019

30/09/2019

Ins#2

Default because unlikely to pay Not in default

20/08/2019

Non-performing

10/07/2019

30/09/2019

Ins#3

Non-applicable

Non-applicable

Non-performing

20/08/2019

30/09/2019

Ins#4

Non-applicable

Non-applicable

Non-performing

20/08/2019

  • As regards the default status of the counterparty in the counterparty default dataset, DEBT#1 is reported as “default because more than 90/180 days past due” with the date 20 August 2019. This is shown in Table 70 (the counterparty default dataset).

Table 70 The default status of the counterparty of DEBT#1

Reporting reference date

Counterparty identifier

Default status of the counterparty

Date of the default status of the instrument

30/09/2019

DEBT#1

Default because more than 90/180 days past due

20/08/2019

Media contacts