Bank Reporting Forms, Definitions and Validations
Form CE - Frequently Asked Questions
This is a selection of the most frequently asked questions by banks required to report the new consolidated country exposure return (Form CE), along with answers given by the Bank. The contents will be updated on an ongoing basis. If you have any other questions, please contact us.
Reporting
Valuations
Risk Transfers
| Q. | Can you clarify what the first reporting date will be? |
| A. | The first reporting date is 31st December 2004. You will be expected to report within the same reporting timetable as is currently required for Form C1 (i.e. within 7 weeks of the reporting date or 7 weeks and two days for those institutions reporting electronically). |
| Q. | Who should report Form CE? |
| A. | Each UK-owned banking group should complete a return
at the top level of the group, unless it can satisfy the
Bank that it conducts no external business and has no office
or subsidiary overseas. Additional UK-registered subsidiaries of a UK-banking group which are asked to report country exposure data can choose whether to report the new Form CE or to continue reporting Form C1. However, once a subsidiary has elected to move to Form CE they cannot revert back to reporting Form C1. |
| Q. | Why can UK-registered subsidiaries of a UK-banking group choose to report Form C1 rather than Form CE? |
| A. | The data reported within Form C1 is sufficient for these
institutions. However, it may be easier for the parent institution
to collate the data for Form CE at a group level if it's
UK-registered subsidiaries complete Form CE. The Bank has
set up the facility to collect Form CE from UK-registered
subsidiaries if required. As such, the choice between completion of Form CE or Form C1 is at the discretion of the parent institution. However, once a subsidiary has elected to move to Form CE they cannot revert back to reporting Form C1. |
| Q. | How are financial claims to be valued? | |
| A. | This
area of the definitions has recently been altered to be
in line with the guidelines provided by the Bank for International
Settlements (BIS) following further consideration of International
Accounting Standards (IAS39). The revised definitions are
now consistent with the move away from a 'banking book/trading
book' split as indicated in the new IAS39. Therefore, financial claims in the form of loans and receivables originated by the bank (and not held for trading) as well as 'held to maturity investments' should be valued at face value or amortised cost price. However, 'available for sale' financial assets and financial assets held for trading should be valued at market or fair values. Those financial claims resulting from derivative contracts should be valued at market prices or fair values (i.e. current credit exposure calculated as the sum of all positive market values or fair values of derivative contracts outstanding after taking account of legally enforceable bilateral netting agreements). |
|
| Q. | What does the term 'face value' mean? | |
| A. | Face value can also be referred to as nominal value. | |
| Q. | What qualifies as collateral? |
| A. | Anything that is considered 'eligible' collateral under Basel II qualifies as collateral within Form CE reporting. Generally this covers any tangible security and includes cash, debt securities, equities and real estate. |
| Q. | How do you risk transfer cash collateral? |
| A. | Risk transfer of cash collateral is reported slightly
differently to other collateral on Form CE as there is no
risk associated with holding cash. For example, if a bank in the UK makes a loan to a Dutch bank in the Netherlands and cash collateral is provided by the Dutch bank (or a third party), the claim would be reported by the UK bank as:
For further information and an example regarding this, please see pages 9 and 13 of Form CE definitions. |
| Q. | Why do inward and outward risk transfers not have to be equal? |
| A. | Unlike on Form C1, inward and outward risk transfers are
not always equal, either in total or within the sector
breakdowns. There are two reasons for this. Where there is cash collateral, risk transfers will differ because there is no risk associated with holding cash. This is explained through an example above. Risk can be transferred between sectors to more accurately reflect where the ultimate risk lies. Hence inward risk transfers to any individual sector will not necessarily equal outward risk transfers to that sector. For example, if a bank in the UK makes a loan to a French bank in France and German public sector securities are offered as collateral, the claim would be reported by the UK bank:
For further information and an example regarding this, please see pages 8 and 13 of Form CE definitions. |
| Q. | How do you risk transfer repurchase agreements? |
| A. | Amounts due under a sale and repurchase agreement should
be reported as a claim on the country of the counterparty
and not risk transferred to the country of the issue
of the security. For example, if a bank in the UK undertakes a sale and repurchase agreement with a German bank in Germany and the bank receives Japanese securities, the claim would be reported:
If instead, a bank in the UK undertakes a sale and repurchase agreement with a Swiss bank's branch in Germany and the bank receives Japanese securities, the claim would be reported:
For further information and an example regarding this, please see page 10 of Form CE definitions. |
Bank of England
8 November 2004
