July 11, 2016 – By Nicola Hortin
The European Central Bank (ECB) published the final version of the first phase of the AnaCredit rules at the end of May 2016. One of the main changes since the draft rules were published is the postponement of the first reporting reference date by six months from March to September 2018. This delay is in recognition of the significant additional granularity of reporting data that will need to be submitted, as AnaCredit requires loan level reporting plus details of credit protection received and significant counterparty information. At this time the technical submission details have not been published.
Although reporting begins in September 2018, firms may need to submit counterparty reference data to National Central Banks (NCBs) from 31 Dec 2017 onwards, but this is yet to be confirmed.
Given that some of the rules are now finalised, AxiomSL is building an early working version of the AnaCredit solution to be ready in Q3 this year which we will make available to clients for testing. We will update the early working version as the submission requirements from the regulators become clear, and we will also incorporate feedback from clients.
The AnaCredit rules will only apply to some entities and branches within a banking group. Reporting is required on a solo basis by credit institutions which are resident in a Eurozone country. This includes the credit institution’s branches irrespective of where they are based. AnaCredit also applies to resident foreign branches of credit institutions and therefore a branch of a UK or US bank set up in a Eurozone country would be in scope. Reporting on a consolidated basis may be introduced in a later phase.
Since AnaCredit data must usually be submitted to the local NCB, there is a possibility of dual reporting where a branch is in a Eurozone member state and the legal entity it is part of is also in the Eurozone e.g. for a German branch of a French bank, data for the branch may need to submitted as part of the legal entity submission to Banque de France and also as a branch submission to the Deutsche Bundesbank. Under the final rules NCB’s have the ability to decide not to collect the data to avoid this double count.
AnaCredit does not apply to subsidiaries of Eurozone based entities e.g. if a bank based in France has a subsidiary set up in the UK, this subsidiary would not need to report under AnaCredit.
In scope products for the first phase of AnaCredit are deposits, overdrafts, credit card debt, credit lines, trade receivables, financial leases and other loans, but the product scope may be increased to derivatives and off balance sheet items at a later stage. Firms will need to have robust systems in place well before September 2018 to ensure accuracy and quality of the data submitted to the regulators.
Other changes in this final version of the rules include the alignment of the reporting threshold to €25,000 for all loans, along with the introduction of quarterly reporting for small banks for a transitory period of two years at the discretion of the relevant NCB, in recognition of concerns around the burden of monthly reporting on smaller firms.
An important point is that the reporting threshold of €25,000 does not apply at the individual loan level. Rather a given instrument, e.g. a loan, has to be reported under AnaCredit if it is held by a debtor whose commitment amount (both drawn and undrawn) for all eligible instruments equals or exceeds this threshold within the reference period. In these cases, every single eligible instrument of the debtor is subject to reporting, even if the commitment amount of an individual instrument does not exceed the threshold.
This means that firms will need to monitor the commitment amount to each counterparty across all in scope products during the period to determine if a disclosure is required – a breach of the €25,000 threshold will result in a disclosure being required for that counterparty and all in scope products would then be reportable. This check applies at the level of the ‘observed agent’ e.g. for the foreign branch or for institutional units of the reporting entity (which may be a single office or several offices in different locations of the same home jurisdiction).
The AnaCredit rules split data into Template 1 and Template 2. Although the term “Template” is used, there are no fixed format report templates since AnaCredit requires the submission of granular loan level data rather than summary reports. Within each “Template” are data sets, each with a defined list of attributes.
Reporting for most data sets is monthly with the total number of unique data attributes being 95, so the volume of data to be submitted to NCBs is exceptional.
The data sets required are as follows, along with some examples of the data attributes for each:
- Counterparty reference data: Name, LEI, address, size, balance sheet total, turnover, no of employees, ultimate parent
- Instrument data: Type, inception date, interest rate reset frequency, reference rate, subordinated
- Financial data: Interest rate, next interest rate reset date, arrears, default status, accrued interest
- Counterparty-instrument data: Counterparty role (creditor, debtor, servicer, originator)
- Joint liabilities data: Outstanding amount for each debtor
- Accounting data: Accounting classification, write offs, impairment, sources of encumbrance, carrying amount
- Protection received data: Type, value, original value, location if real estate
- Instrument-protection received data: Protection identifier, value of credit protection for the instrument, third party claims on the protection
- Counterparty risk data: Probability of default
- Counterparty default data: Default status of counterparty
At present the technical requirements for data submission to the various NCBs have not been published. However, NCBs need to confirm the reporting obligations at least 18 months before the first reporting reference date, which would mean the deadline for this is March 2017. We will keep clients updated on submission requirements as these are published.