Calculation of the NPL ratio for determining F_23.00 to F_26.00 reporting requirements

Background provided by the submitter · verbatim

The ratio outlined in Article 11(g)(ii) shall be calculated based on Article 47a of CRR; more specifically, loans and advances that fall under Article 47a(1) and (3) shall be considered for the purpose of determining the reporting requirements of templates F_23.00 to F_26.00.

- Article 47a(1) of CRR stipulates that an exposure shall include "a loan, an advance and a demand deposit".

- The "loans and advances" definition in Annex V to the ITS on Supervisory Reporting (FINREP instructions) includes demand deposits at credit institutions and central banks (Part 1, par.32).

Further to Q&A 2020_5170, the EBA has clarified that for the purpose of the EBA GLs on management of non-performing and forborne exposures, cash balances at central banks and other demand deposits shall be excluded from the ratio calculation, which approach is aligned with that used for Pillar 3 disclosures.

We deem that supervisory reporting also needs to be aligned with this approach, that is, to exclude cash balances at central banks and other demand deposits from the calculation of the ratio in Article 11(g)(ii) of the ITS on Supervisory Reporting.

1. Should cash balances at central banks and other demand deposits be included or excluded for calculating the ratio in Article 11(g)(ii) of the ITS on Supervisory Reporting?

2. Due to jargon differences, can it be clarified whether the term "demand deposit" in CRR Article 47a(1)(a) includes both demand deposits with other credit institutions and cash balances at central banks?

Rationale for rejection · verbatim

This question has been rejected because the issue it deals with is already explained or addressed in Article 11 (g) of Commission Implementing Regulation (EU) 2021/451 where it is specified that the ratio shall not include loans and advances classified as held for sale, cash balances at central banks and other demand deposits in either the denominator or the numerator. Therefore, the ratio is aligned with the Pillar 3 disclosures and the EBA Guidelines on management of non-performing and forborne exposures.

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