INCENTIVES FOR ADDITIONAL CREDIT CLAIMS - 18 JUNE 2020 - European ...
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INCENTIVES FOR ADDITIONAL CREDIT CLAIMS 18 JUNE 2020
ON TODAY’S CALL
MARCO ANGHEBEN
HEAD OF BUSINESS DEVELOPMENT AND REGULATORY AFFAIRS
+49 160 415 9944
marco.angheben@eurodw.eu
EIRINI KANONI
VICE PRESIDENT, BUSINESS DEVELOPMENT
+49 151 615 67595
eirini.kanoni@eurodw.eu
NICOLA MOSCAN
INTERN, BUSINESS DEVELOPMENT
+49 69 50986 9315
nicola.moscan@eurodw.eu
2
CONTENT
• ADDITIONAL CREDIT CLAIMS (ACC) REGULATORY ASPECTS
• OPERATIONAL ASPECTS FOR ACC
• ACC ELIGIBILITY CRITERIA
• DATA QUALITY VERIFICATION SERVICES FOR ACC
• Q&A
3
ADDITIONAL CREDIT CLAIMS REGULATORY ASPECTS MARCO ANGHEBEN
WHAT IS AN ADDITIONAL CREDIT CLAIM?
Credit claims - more commonly referred to as “bank loans” - represent a large share of the collateral
accepted by the Eurosystem:
• The Eurosystem accepts credit claims as collateral in its credit operations in several forms
• The term “credit claims” is defined in the EU’s Financial Collateral Directive as pecuniary claims arising
out of an agreement whereby a credit institution grants credit in the form of a loan
• The Eurosystem accepts several types of credit claims as collateral
Source: European Central Bank website
5
EUROSYSTEM ADDITIONAL CREDIT CLAIM FRAMEWORK (1)
Eligibility Criteria Non-marketable Assets
Type of asset Credit claims
Credit standards The debtor/guarantor must meet high credit standards. The
creditworthiness is assessed using Eurosystem credit assessment
framework (ECAF) rules for credit claims.
Handling procedures Eurosystem procedures
Type of debtor/guarantors • Public sector
• Non-financial corporations
• International and supranational institutions
Place of establishment of the Euro area
debtor or guarantor
Currency Euro
Minimum size Minimum size threshold at the time of submission of the credit claim
• for domestic use: choice of the NCB;
• for cross-border use: common threshold of € 500,000.
Cross-border use Yes
Source: European Central Bank website
6
EUROSYSTEM ADDITIONAL CREDIT CLAIM (ACC) FRAMEWORK (2)
Source: European Central Bank website
7
ECB PRESS RELEASE AS OF 7 APRIL 2020
The emergency collateral package contains three main features.
1. Governing Council (GC) decided on a set of collateral measures to
facilitate an increase in bank funding against loans to corporates and
households. GC decided to temporarily extend the additional credit
claims (ACC) frameworks further by:
o Accommodating the requirements on guarantees to include
government and public sector guaranteed loans to corporates,
SMEs and self-employed individuals and households
o Enlarging the scope of acceptable credit assessment systems used
in the ACC frameworks
o Reducing the ACC loan level reporting requirements
2. GC further adopted the following temporary measures:
o A lowering of the level of the non-uniform minimum size threshold
for domestic credit claims to EUR 0 from EUR 25,000 previously to
facilitate the mobilisation as collateral of loans from small
corporate entities;
o An increase in the maximum share of unsecured debt instruments
issued by any single other banking group in a credit institution’s
collateral pool.
o A waiver of the minimum credit quality requirement for marketable
debt instruments issued by the Hellenic Republic for acceptance as
collateral in Eurosystem credit operations.
3. GC decided to temporarily increase its risk tolerance level in credit
operations through a general reduction of collateral valuation haircuts
by a fixed factor of 20%.
Full release is available here.
8
COLLATERAL EASING MEASURES IN RESPONSE TO THE COVID-19 CRISIS
Loan level data reporting
frequency:
• Monthly to quarterly
Haircut levels:
• 20% reduction
As of June 2020
9
EXISTING ACC EUROSYSTEM TEMPLATES ACROSS ASSET CLASSES
ECB Loan Level ECB Loan Level
ECB Loan Level ECB Loan Level
Data - Reporting Data - Reporting
Data - Reporting Data - Reporting
Template Name Template for Template for
Template for Template for
Residential Consumer
SME ACCs Leasing ACCs
mortgage ACCs Finance ACCs
N° fields 118 159 205 71
N° of ND
allowed
18 39 22 20
mandatory
fields
Source: European DataWarehouse
10ASSET CLASSES FOR THE ADDITIONAL CREDIT CLAIMS
So far Bank of Italy has allowed three asset classes of loans to be part of an ACC portfolio, one new asset
class has just been added recently:
1. Residential Mortgages
2. Small and Medium Enterprises
3. Leases
4. Consumer loans [new asset class recently added]
More information can be found in the dedicated section of BI website
11NEW FRAMEWORK FOR GREEK ACC SME/CORPORATE PORTFOLIOS
Source: https://www.bankofgreece.gr/trapeza/nomiko-plaisio/keimena-nomothetikoy-xarakthra?topics=aa49dd6e-2904-4e5f-a59d-b2fdd533adc1
12FRAMEWORK FOR FRENCH ACC PORTFOLIOS
Source: https://www.banque-france.fr/politique-monetaire/cadre-operationnel-de-la-politique-monetaire/remise-dactifs-en-garantie-des-operations-de-refinancement-de-
leurosysteme/la-mobilisation-des-actifs-remis-en-garantie/mobilisation
13FRAMEWORK FOR PORTUGUESE ACC PORTFOLIOS
Source: https://www.bportugal.pt/page/ativos-de-garantia-pol-mon
14BANK OF ITALY PRESS RELEASE AS OF 9 JUNE 2020
The new Eurosystem measures are aimed at supporting the
credit supply to families and companies and create incentives for
Italian banks to access the Eurosystem liquidity.
Banks will be able to pledge the following as collateral for
Eurosystem’s operations:
• Homogeneous loan portfolios consisting of consumer credits
issued for families;
• Resindential mortgage loans within portfolios, regardless of
the debtor’s probability of default (the current 10% threshold
has been eliminated), whereas the current loan-to-value
(80%) has been increased to 100%.
The requirement that only performing loans can be pledged stays
in place.
Two new sources of creditworthiness evaluation have been
introduced:
• The performance component of the Bank of Italy’s internal
credit quality assessment system (ICAS), with evaluations
based exclusively on data from the risk management, to be
used for loans issued to small enterprises and pledged as
collateral within portfolios of corporate loans;
• A unique PD and LGD, calculated according to a conservative
approach, to be used for the evaluation of i) loans issued to
artisans and small family businesses, pledegd as collateral
within corporate loans portfolios; ii) loans pledged as
collateral within consumer credits portfolios.
These measures will be valid from the 17 June 2020 and will apply
until September 2021. The Eurosystem may extend these
temporary measures further in the future.
Source: https://www.bancaditalia.it/media/comunicati/documenti/2020-
01/CS_ulteriori_misure_ACC_202020609.pdf
15BANK OF ITALY ANALYSIS ON THE EUROSYSTEM’S EMERGENCY RESPONSE
TO COVID-19
Source: https://www.bancaditalia.it/media/notizie/2020/Nota-Covid-collaterale-10062020.pdf
16EVOLUTION OF ACC PLEDGED IN ITALY OVER THE LAST 9 YEARS
17ESTIMATED INCREASE OF THE ECB AND BDI GUARANTEES AS OF JUNE 2020
18OPERATIONAL ASPECTS FOR ACC NICOLA MOSCAN
AVERAGE VALUATION HAIRCUTS APPLICABLE TO ELIGIBLE ASSET CATEGORIES
20BENEFITS OF ACC VERSUS ABS
ACC ABS
Legal requirements Country specific Country specific
Definition of default Common May vary
Rating No Rating required Rating required
Documentation Limited Heavy with offering docs, investor
reports etc.
ECB Templates Auto, RMB, SME, Consumer, Leasing Auto, RMBS, SME, Consumer, Leasing,
Credit Cards, DECC
Reporting Frequency Every three months Monthly, Quarterly
Legal Treatment of loans On-Balance Sheet Off-Balance Sheet
Pool size May vary for each reporting period Static or dynamic
Loan Credit Quality Performing loans only All loans
21ECB ABS & ACC ACCOUNT STATUS REPORTING
Examples of template differences between the ECB ABS and the corresponding ACC fields
ECB ECB Field
Field ECB ABS Field Description Code ECB ACC Field Description
Code
RMBS AR166 Current status of account: AR166 Current status of account:
Performing (1) Performing (1)
Arrears (2) Restructured - no arrears (2)
Default or Foreclosure (3) Arrears (3)
Redeemed (4) Performing but removed from pool by Counterparty (4)
Repurchased by Seller (5) Redeemed or Prepaid (5)
Other (6) Other (6)
No Data (ND)
SME NA NA AS72 Current status of account:
Performing (1)
Restructured - no arrears (2)
Arrears (3)
Performing but removed from pool by Counterparty (4)
Redeemed or Prepaid (5)
Other (6)
May use No Data options
Leasing AL122 Current status of account: AL122 Current status of account:
Performing (1) Performing (1)
Restructured - no arrears (2) Restructured - no arrears (2)
Restructured - arrears (3) Arrears (3)
Default or foreclosure (4) Performing but removed from pool by Counterparty (4)
Arrears (5) Redeemed or Prepaid (5)
Repurchased by Seller – breach of reps and Other (6)
warranties (6) All 'No Data' options ay be used in this field
Repurchased by Seller – restructure (7)
Repurchased by Seller – special servicing (8)
Redeemed (9)
Other (10)
All 'No Data' options may be used in this field
12ELIGIBILITY CRITERIA FOR ACC MARCO ANGHEBEN
CLARIFICATIONS ON THE NEW REPORTING FREQUENCY
Bank of Italy Answers
With the modififcation of the reporting frequency for LLD from monthly to quarterly, will it apply only for the new
ACC portfolios or will it be introduced for the already existing portfolios too?
• The reports’ quarterly frequency will be applied also for the already existing portfolios, whose cut-off dates are
fixed at the end of each quarter and the information duty needs to be fulfilled within a month from the cut-off
date.
Will the quarterly reporting frequency of LLD apply from the first upload for the ACC portfolios created after the
20 of April 2020?
• With regards to portfolios registered with EDW for the first time, the deadline for the quarterly reporting
requirement of LLD depends on the date when the portfolio will be registered at the Bank of Italy, and it
assumes that there would be three months of registration.
Will the first European DataWarehouse report need to be fulfilled within the end of July 2020 (end of October
2020 for the second report) for a new portflio created on the 23 of April 2020?
• Therefore, with respect to the loans confered for the first time in April, the EDW reporting requirement (with
cut-off date 30 June 2020) needs to be fulfilled within the 31 of July 2020; similarly, for thte loans confered for
the first time in May, the reporting requirement (with cut-off date 31 July 2020) needs to be fulfilled within the
31 of August 2020; after that, the cut-off dates are fixed at the end of each quarter and the reporting
requirement has to be actualized within a month from the cut-off date.
Source: Banca d’Italia
24LLD REPORTING DEADLINES FOR ACC PORTFOLIOS
Example from Bank of Italy ACC reporting frequency requirements
First month Deadline for first Deadline for second Deadline for third
First reporting Second reporting Third reporting
delivering the pool reporting reporting reporting
cut-off date cut-off date cut-off date
to Banca d'Italia submission submission submission
Apr-2020 30 June 2020 31 July 2020 30 September 2020 31 October 2020 31 December 2020 31 January 2021
May-2020 31 July 2020 31 August 2020 30 September 2020 31 October 2020 31 December 2020 31 January 2021
Jun-2020 31 August 2020 30 September 2020 30 September 2020 31 October 2020 31 December 2020 31 January 2021
Jul-2020 30 September 2020 31 October 2020 31 December 2020 31 January 2021 31 March 2021 30 April 2021
Aug-2020 31 October 2020 30 November 2020 31 December 2020 31 January 2021 31 March 2021 30 April 2021
Sep-2020 30 November 2020 31 December 2020 31 December 2020 31 January 2021 31 March 2021 30 April 2021
Oct-2020 31 December 2020 31 January 2021 31 March 2021 30 April 2021 30 June 2021 31 July 2021
Nov-2020 31 January 2021 28 February 2021 31 March 2021 30 April 2021 30 June 2021 31 July 2021
Dec-2020 28 February 2021 31 March 2021 31 March 2021 30 April 2021 30 June 2021 31 July 2021
Jan-2021 31 March 2021 30 April 2021 30 June 2021 31 July 2021 30 September 2021 31 October 2021
Feb-2021 30 April 2021 31 maggio 2021 30 June 2021 31 July 2021 30 September 2021 31 October 2021
Mar-2021 31 maggio 2021 30 June 2021 30 June 2021 31 July 2021 30 September 2021 31 October 2021
Source: Banca d’Italia
25‘COVID-19’ CREDIT ELIGIBILITY
The Bank of Italy accept, as collateral for its financing operations, loans indicated in the Law Decree n.
23/2020 of 8 April 2020 called Decreto Liquidità:
• State-guaranteed loans granted to Families and Corporates
Families
Corporates
Sottogruppo
attivitá economica
SAE 400 and 499
(SAE) 614 and 615
Pool of Credits
26HAIRCUT CALCULATION
The Bank of Italy will apply specific haircuts as a function of the best credit worthiness between the
debtor and the guarantor.
The best rating attributed to Italy will be assigned to the guarantor, hence corresponding to the third
Credit Quality Step (CQS).
Source: Trading Economics as of 2020
• Loan with ‘COVID’ guarantee issued to debtor with PD < Country PD
The haircut is calculated on the basis of the debtor’s rating, regardless of the collateral’s percentage
coverage
• Loan with ‘COVID’ guarantee issued to debtor with PD > Country PD
Loan calculated on the basis of Italy’s rating for the quote covered by the collateral, while the debtor’s
rating is used for the quote not covered by the State guarantee
In case the debtor did not have a rating or had one beyond the regulatory threshold (PD > 10%), the
haircut applied to the non-guaranteed quote would be equal to 100%.
27PRACTICAL EXAMPLES OF THE HAIRCUT CALCULATIONS
Based on a guaranteed «COVID-19» loan amount of €100.000
Debtor’s PD = 0,05% Debtor’s PD = 4% Debtor’s PD = 11%
Collateral coverage = 80% Collateral coverage = 80% Collateral coverage = 80%
Haircut calculated over Haircut calculated over Corporates
Haircut calculated over
€100.000 as a function of €80.000 as a function of €80.000 as a function of
the debtor’s PD the State’s PD
SAE 400 and the
499State’s PD
Haircut calculated over 100% Haircut on the
€ 20.000 as a function of remaining € 20.000
the debtor’s PD
Source: Pegaso2000 and European DataWarehouse calculations
28DATA QUALITY VERIFICATION SERVICES FOR ACC PORTFOLIOS EIRINI KANONI
DATA QUALITY CONTROLS ON ACC PORTFOLIOS WITH EDITOR
The ED data quality verification services aim at signalling potential inconsistencies and the lack of data (No
Data), within the ACC portfolios, before the data is published and made available to the Eurosystem
The data quality checks available in EDitor for residential and SME/corporate portfolios operates in three
separate steps:
1. Upload of the Loan-Level Data (LLD) file in EDitor
2. Automatic validation checks are run on the data and errors and potential inconsistencies are identified
3. Publication of the LLD file with the Eurosystem
The pre-screening tool verifies the information uploaded in the private area:
• Avoiding subsequent LLD corrections and
• Decreasing the risk of sanctions for lack of data or inconsistencies reported in the LLD file
30EDITOR FUNCTIONALITY FOR ACC (I)
• Data completeness score
based on the ECB matrix
• Data quality checks on ACC
portfolios:
• 300+ validation rules for
ACC residential
• 150+ validation rules for
ACC SME
• Rules for ACC consumer
and leasing portfolios
may be developed in the
future
31EDITOR FUNCTIONALITY FOR ACC (II)
• Data quality checks on the
portfolios and correction
of inconsistencies
• Potential inclusion of
further loans in the ACC
portfolios
32EDITOR FUNCTIONALITY FOR ACC (III)
• The graph shows the
types of checks
available in EDitor
• Data quality checks are
divided in seven
different categories:
• No Data (ND) checks
• inter-submission
inconsistencies
• duplicate entries
• negative values
• interfiled
inconsistency
• unusual entries
• format checks
33IDENTIFICATION OF POTENTIAL INCONSISTENCIES IN THE LLD FILE
By clicking on “Manage Submissions” and then “Results”, it is possible to view the potential inconsistencies within
the uploaded but not yet published portfolio. If you click on the download symbol , EDITOR shows the details
of the potential inconsistencies that have been indicated.
34DETAILS OF CHECKID AR26/CCR_ND5/A/01
Examples of the details available in EDITOR – CheckID AR26/CCR_ND5/A/01
a) File generated by the EDitor system
b) Loan details
35INCONCISTENCIES RESOLUTION
The details displayed in EDITOR allow for a rapid resolution of the inconsistencies and further inconsistency checks
through an additional upload
36STEPS FOR REGISTERING ACC PORTFOLIOS IN EUROPEAN DATAWAREHOUSE
Signature on the European DataWarehouse Customer Agreement
First Step
Registration of Organisation and Users on My ED Account
Second Step
Creation of ACC portfolio in EDitor with specific ED Code identifier
Third Step
Upload of ECB Loan-Level Data files in EDitor
Fourth Step
Fifth Step
Potential Data Quality Checks on the portfolio/s (RMB & SME)
(optional)
37Q&A
38THANK YOU//CONTACT US
EUROPEAN DATAWAREHOUSE GMBH
Walther-von-Cronberg-Platz 2
60594 Frankfurt am Main
www.eurodw.eu
enquiries@eurodw.eu
+49 (0) 69 50986 9017
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