Question ID: 3253 - FICOD020
Regulation Reference: (EU) 2022/2454 - ITS with regard to supervisory reporting of risk concentrations and intra-group transactions (FICOD
Topic: Reporting templates on risk concentrations and intra-group transactions for conglomerates (FICOD)
Article: Annex II
Status: Final
Date of submission: 13 Feb 2025
Question
Derivatives (processing of operations with buying and selling positions), When transactions include both purchase and sale positions with the same counterparty on the same type of financial instrument, the SEO includes operations combining buying positions selling positions. Can banks declare the (contractual) net position if it exceeds the threshold?
EIOPA answer
Derivative are considered on the basis of their “carrying amount” which induce the recognition of netting effect as considered under applicable accounting framework. For derivatives, “transaction level” shall be therefore understood as all transactions under a given master netting arrangement (i.e. the “netting set” value). Several master netting agreements or netting sets could then be considered as forming a SEO and in that case, aggregation shall be done on a gross basis (i.e. no netting between different netting agreements where no contractual provisions would allow such netting).
Illustration:
In a given financial conglomerate, Credit institution A entered into a master netting agreement with several Insurance Undertakings of the group for their hedging/investment needs considered by the Coordinating Authority as being part of a single SEO:
| Underlying risk | Counterpart | Fair Value (for CI A) | Netting Set FV | |
| Derivative 1 | IR | IU A | 50 | NS1 = 150 |
| Derivative 2 | IR | IU A | 100 | |
| Derivative 3 | IR | IU A | 100 | NS2 = (100) |
| Derivative 4 | FX | IU A | (200) | |
| Derivative 5 | FX | IU B | 300 | NS3 = 200 |
| Derivative 6 | FX | IU B | (100) |
In the example above, the credit institution A has an exposure of 350 on Insurance Undertakings A (150) and B (200) while as part of a separate netting set Insurance Undertaking A has an exposure of 100 on Credit Institution A. In that example, the value to be considered for assessing the significance of this SEO is therefore 350.
If the significance threshold determined by the coordinator after consulting the relevant competent authority is below 350, the financial conglomerate is expected to report separately each netting set (one line by netting set) in template “FC.02 - IGT – Derivatives” and to identify such netting sets as forming a single SEO by giving a unique identifier in column FC0090 of “FC.02 - IGT – Derivatives”.