ANNEX VII

This Annex contains additional instructions in relation to the tables included in Annex VI of this Regulation. This Annex complements the instructions in format of references included in the tables in Annex VI.

All the general instructions included in Part I of Annex II of this regulation shall also apply.

Data specified in Article 101 (1) of CRR is subject to reporting by all institutions using immovable property for the purposes of Part Three, Title II of CRR.

The template covers all national markets an institution/group of institution is exposed to (see Article 101 (1) CRR). According to Article 101 (2) sentence 3 the data should be reported for each property market within the Union separately.

Definition of loss: "Loss" means "economic loss" as defined in Article 5 (2) CRR, including losses stemming from leased property. The recovery flows stemming from other sources (e.g. bank guarantees, life insurance, etc) shall not be recognised when calculating losses stemming from immovable property. Losses of one position shall not be netted with the profit of a successful recovery of another position.

According to the definition of Article 5(2) CRR, for exposures secured by residential and commercial property the calculation of economic loss should start from outstanding exposure value at reporting date and should include at least: (i) proceeds from collateral realisation; (ii) direct costs (including interest rates payments and workouts costs linked to the liquidation of the collateral); and (iii) indirect costs (including operating costs of the workout unit). All components need to be discounted to the reporting reference date.

Exposure value: The exposure value follows the rules stipulated in Part Three, Title II of CRR (see Chapter 2 for institutions using the standardised approach, and Chapter 3 for institutions using the IRB approach).

Property value: The property value follows the rules stipulated in Part Three, Title II of CRR

F/X effect: The reporting currency shall be used with the exchange rate at the reporting date. The reporting currency shall be the exchange rate at the reporting date. Moreover, the estimates of the economic losses should consider the F/X effect if the exposure or collateral is denominated in different currency.

Following the reporting scope, the CR IP Losses reporting shall consist of the following templates:

1. (a)

   one total template

2. (b)

   one template for each national market in the Union where the institution is exposed to, and

3. (c)

   one template aggregating the data for all national markets outside the Union where the institution is exposed to.

Exposures: All exposures that are treated according to Part Three, Title II of CRR and where the collateral is used to reduce own funds requirements, are reported in CR IP Losses. This also means that in case the risk mitigation effect of immovable property is only used for internal purposes (i.e. under Pillar 2) or for large exposures (see Part Four CRR), the exposures and losses concerned must not reported.

Losses: The institution which has the exposure by the end of the reporting period shall report the losses. Losses shall be reported as soon as provisions are to be booked according to accounting rules. Also estimated losses should be reported. Loss data shall be collected on a loan-by-loan basis, i.e. aggregation of individual loss data stemming from exposures collateralised by immovable property.

Reference date: The exposure value from the date of default should be used for reporting of losses.

1. (a)

   Losses should be reported for all defaults on loans secured by real estate property that occur during the respective reporting period (i.e. irrespective of whether the work out is completed during the period or not). Since there may be a long time lag between default and loss realisation, loss estimates (which includes incomplete workout process) shall be reported in cases where the workout has not been completed within the reporting period.

2. (b)

   For all defaults observed within the reporting period, there are three scenarios: (i.) defaulted loan can be restructured so that it is no longer treated as in default (no loss observed); (ii.) realization of all collateral is completed (completed workout, actual loss known); or (iii.) incomplete workout (loss estimates to be used). Loss reporting shall include only losses stemming from scenario (ii.) realisation of collateral (observed losses) and scenario (iii.) incomplete workout (estimates of losses).

3. (c)

   As losses shall be reported only for exposures having defaulted during the reporting period, changes to losses of exposures having defaulted during previous reporting periods will not be reflected in the reported data. I.e. proceeds from the realisation of the collateral at a later reporting period or lower realised costs than previously estimated shall not be reported.

Role of the valuation of the property: The latest valuation of the property before the default date of the exposure is needed as reference date for reporting the part of exposure secured by mortgages on immovable property. After default, the property might be re-valued. This new value should however not be relevant for identifying the part of the exposure which was originally fully (and completely) secured by the mortgages on immovable property. However the new value of the property shall be considered in economic loss reporting (a reduced property value is part of economic costs). In other words, the latest valuation of the property before the default date shall be used to determine which part of the loss shall be reported in cell 010 (identification of exposure values which is fully and completely secured) and the re-valued property value for the amount to be reported (estimation a possible workout from collateral) in cells 010 and 030.

Treatment of loan sales during the reporting period: The institution which has the exposure by the end of the reporting period shall report losses, but only if a default for that exposure was identified.