Question ID: 419
Regulation Reference: (EU) No 2015/2450 - templates for the submission of information to the supervisory authorities
Article: 75
Status: Final
Date of submission: 10 Dec 2015
Question
The LOG provides the following guidance for this cell:
“Value of the repo or securities lending contract, following article 75 of Directive 2009/138/EC rules for valuation of contracts.”
We are unclear as to how to apply this to a securities lending/repo contract. A pure fair value approach is not something captured by companies today and cannot be determined without significant complexity. We are also unclear how such an amount would be defined in practice. Hence, we have interpreted this requirement as the fair value of the underlying assets of security lending /repo contracts. We believe this value would provide a comparable and more practical measure of the contract.
Can EIOPA confirm that they agree with this interpretation?
EIOPA answer
Actually the idea is to capture the market value of the contract. The value to be received/paid if at the reference date the undertaking would pass the contract to another party.
If IFRSs are used, fair value as per IFRS, which should correspond to the future expected cash flows, discounted using a market discount rate for that instrument, at each valuation date. In this case this would have to consider the value of the asset lent/provided as part of a securities lending transactions or repurchase agreements, the value of the borrowed/received as part of a securities lending transactions or repurchase agreements and consider any fees/commissions involved.
This amount could be positive, negative or zero.