CENTRAL BANK OF CYPRUS
EUROSYSTEM
REPORTING INSTRUCTIONS
on the
MONTHLY FLOWS ADJUSTMENTS DATA
and the
SECURITISATIONS AND OTHER LOAN TRANSFERS
ADJUSTMENTS DATA
of Monetary Financial Institutions
SECTION I
Introduction
Part 1
Part 2
SECTION II
Part 1
Part 2
SECTION III
Part 1
Part 2
JUNE 2014
Revised 3 September 2014
STATISTICS DEPARTMENT
MONEY AND BANKING STATISTICS
AND FINANCIAL ACCOUNTS SECTION
CENTRAL BANK OF CYPRUS
EUROSYSTEM
FLOWS&SEC/DEC.14
CENTRAL BANK OF CYPRUS
FLOWS&SEC/DEC.14
EUROSYSTEM
TABLE OF CONTENTS
Page
Section  :
GUIDANCE NOTES on the submission of Flows Adjustments Returns and the
Securitisations and Other Loan Transfers Adjustments Returns
List of abbreviations
Introduction
1.1
1.2
6
7
1.3
1.3.1
1.3.2
1.3.3
1.3.4
1.4
1.5
1.6
Scope
Submission of Flows Adjustments returns and Securitisations and other
Loan Transfers Adjustments Returns
Minimum standards for fulfilment of the reporting obligations
Minimum standards for transmission
Minimum standards for accuracy
Minimum standards for conceptual compliance
Minimum standards for revision
Verification and compulsory collection
Imposition of sanctions
Repeal
PART 1
Conceptual issues on the Flows Adjustments Returns
2.1
2.2
2.3
2.3.1
2.3.2
2.3.3
2.3.4
2.3.5
2.3.6
The need for flows adjustments
Inter-relationship with the MBSR Reporting Instructions
Guidance Notes
Definition of “flow”
The Flows Adjustments Returns
Reclassifications and other adjustments
Revaluation adjustments
Exchange rate adjustments
Further guidance notes on special matters/items
PART 2
Statistical Reporting Requirements for Loan Securitisations and Other
Loan transfers
3.1
3.2
3.3
3.4
3.5
3.6
Definitions
Requirements for reporting net flows of loans securitised or otherwise
transferred
Requirements for reporting of securitised and derecognised loans which are
serviced
Requirements for reporting the outstanding amounts of loans serviced in a
securitisation
Statistical reporting requirements for MFIs applying the IAS39, the IFRS9
or similar national accounting rules
Reclassification and revaluation amounts for Securitisations and other
Loans transfers
7
7
8
8
9
9
9
9
10
10
11
11
12
13
16
18
18
24
26
27
27
27
28
CENTRAL BANK OF CYPRUS
EUROSYSTEM
FLOWS&SEC/DEC.14
Section II :
SCHEDULES
PART 1
Flows Adjustments Returns
1.1
1.2
Revaluation adjustments schedules
Reclassifications and other adjustments schedules
PART 2
Securitisations and other Loan transfers adjustments Returns
2.1
2.2
Securitisations and other loan transfers schedules
Reclassification and revaluation schedules for securitisations and other loan
transfers
Section III :
TECHNICAL REQUIREMENTS
PART 1
1.
Submission Details for Flows Adjustments Returns
Main Submission Requirements
(i) Electronic submission
(ii) Submitted FLOW data must be certified
2.
3.
4.
5.
6.
PART 2
1.
VPN client software
File specifications for FLOW1 type of data
General notes
Variables used for each record of FLOW data item
Allowed values
Per Schedule specifications of data to be reported
Submission Details for Securitisations and Other Loan Transfers
Adjustments Returns
Main Submission Requirements
(i) Electronic submission
(ii) Submitted ‘Securitisations and other loan transfers’ data must be certified
2.
3.
4.
5.
6.
VPN client software
File specifications for ‘Securitisations and other loan transfers’ type of data
General notes
Variables used for each record of ‘Securitisations and other loan transfers’ data item
Allowed values
Per Schedule specifications of data to be reported
CENTRAL BANK OF CYPRUS
FLOWS&SEC/DEC.14
EUROSYSTEM
CENTRAL BANK OF CYPRUS
EUROSYSTEM
SECTION 
GUIDANCE NOTES
on the submission of
FLOWS ADJUSTMENTS RETURNS
and the
SECURITISATIONS AND OTHER LOAN TRANSFERS
ADJUSTMENTS RETURNS
of Monetary Financial Institutions
JUNE 2014
CENTRAL BANK OF CYPRUS
FLOWS&SEC/DEC.14
EUROSYSTEM
LIST OF ABBREVIATIONS
CBC
: Central Bank of Cyprus
ECB
: European Central Bank
ESA 2010
: European System of Accounts 2010
FARs
: Flows Adjustments Returns
SEC and OLT Rs
: Securitisations and Other Loan Transfers Returns
MBSR
: Monthly Balance Sheet Return
MFIs
: Monetary Financial Institutions
NACE
: Statistical classification of economic activities in the European
Community- NACE Rev.2 of the European Union
NCBs
: National Central Banks
RIs
: Reporting Instructions
CENTRAL BANK OF CYPRUS
FLOWS&SEC/DEC.14
EUROSYSTEM
INTRODUCTION
1.1
Scope
The Central Bank of Cyprus (“CBC”), hereby, issues these Reporting
Instructions (“RIs”) which prescribe the returns and contents of data
relating to reclassification and revaluation adjustments, as well as the
statistical reporting requirements for loan securitizations and other
loan transfers which Monetary Financial Institutions (“MFIs”) are
required to submit to the CBC on a monthly basis.
The requirements are revised in accordance with the provisions of
Regulation 2013/33, issued by the European Central Bank (“ECB”) on
24 September 2013, concerning the balance sheet of the monetary
financial
institutions
ECB/2008/32(recast).
sector,
which
replaced
Regulation
The new requirements also take into account
the balance sheet requirements set out in Guideline ECB/2014/15
which
replaced
Guideline
ECB/2007/9
on
monetary,
financial
institutions and markets statistics (recast). Furthermore, they provide
for data necessary for the compilation of the euro area financial
accounts, the “Other Financial Intermediaries” sector as well as data
required for supervisory and financial stability purposes.
These RIs are closely connected with and build on the “Reporting
Instructions on the Monthly Balance Sheet Return of Monetary
Financial Institutions” and apply to all MFIs resident in Cyprus. A list
of these institutions, which is updated on an ad hoc basis, can be
found on the CBC’s website at
www.centralbank.gov.cy/nqcontent.cfm?aid=1366.
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1.2
FLOWS&SEC/DEC.14
Submission of the Flows Adjustments Returns (FARs) and the
Securitisations and Other Loan Transfers Adjustments Returns
(SEC and OLTRs)
MFIs are required to submit to the CBC the FARs and the SEC and
OLTRs prescribed in Section II of this Directive, within eight working
days from the end of the reference month, in accordance with the
minimum standards for transmission, accuracy, conceptual compliance
and revisions, as set out in paragraph 1.3 below.
The first returns of reporting MFIs under these RIs shall be submitted
to the CBC for the reporting month of December 2014. The first
reporting month for the above adjustments data, for MFIs commencing
operations after December 2014, shall be for the reference month
following the one for which an MBSR is submitted.
The transmission of the FARs and the SEC and OLTRs, which shall be
certified by using electronic signatures, shall be effected electronically
as described in the “Technical Requirements” set out in Section III of
these RIs. The names of the officers authorised to certify the returns
shall be provided to the Money and Banking Statistics and Financial
Accounts Section, Statistics Department of the CBC, prior to the first
data submission under these RIs.
1.3
Minimum standards for fulfillment of the reporting requirements
The following minimum standards must be observed by MFIs in order to
meet the reporting requirements to the CBC of the above returns.
1.3.1
Minimum standards for transmission
(a) MFIs shall ensure that they transmit the FARs and the SEC and
OLTRs within the specified time limit, i.e. within eight working
days from the end of the reference month.
(b) MFIs shall ensure that the transmission of the returns is effected in
accordance with the provisions of Section ΙΙΙ of these RIs, which
may change from time to time; the prescribed technical format of
transmission of data should not in any way be changed on the
initiative of MFIs.
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(c) MFIs shall always provide the CBC with the names of at least two
contact persons prior to the first data transmission, who shall be
responsible for the submission of the FARs and SEC and OLTRs to
the CBC and for the provision of any explanations and/or
clarifications deemed necessary by the CBC on the contents of the
returns.
1.3.2
Minimum standards of accuracy
(a) The data included in the FARs and SEC and OLTRs shall be correct.
All linear constraints must be fulfilled (eg. assets’ and liabilities’
sides must balance, where the case maybe, subtotals must add up
to totals and data must be consistent across similar schedules).
(b) The data shall be complete. In very rare cases, where a reporting
MFI is not able to provide data for certain instrument categories, an
estimate shall be reported.
It is emphasized that such reporting
shall be accepted only for one transmission and that the situation
shall be rectified by the next transmission at the latest.
(c) Data shall be expressed in euro and shall be submitted to the last
cent without any rounding of the figures.
(d) The allowed values for the reported data are specified in the
“Technical Requirements” as set out in Section III.
1.3.3
Minimum standards for conceptual compliance
(a) The submitted data shall be consistent with the provisions of these
RIs, as well as those of the “Reporting Instructions concerning the
Monthly Balance Sheet Return of Monetary Financial Institutions”.
(b) In the event of deviations from the requirements, reporting MFIs
shall monitor on a regular basis and quantify the difference
between the measure used and the measure contained in these
RIs.
(c) MFIs must be able to provide conceptual explanations regarding
any data reported under revaluation adjustments, reclassifications
and
other
adjustments
and
Securitisations
and
Other
Loan
Transfers data.
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1.3.4
FLOWS&SEC/DEC.14
Minimum standards for revisions
MFIs may have to revise the data referring to the previous reference
month should such need arise. In addition, revisions arising from, for
example, mistakes or improved reporting procedures and referring to
data prior to the previous reference month, may also occur. However,
MFIs shall not systematically revise the data for the period prior to the
previous reference month. Should such revisions, however, take place,
they should be submitted to the CBC accompanied by an explanatory
note.
1.4
Verification and compulsory collection
The CBC shall exercise the right to verify or collect the information
which MFIs are required to provide pursuant to these RIs, without
prejudice to the ECB’s right to exercise this right itself. In particular,
the CBC shall exercise this right when an MFI does not fulfill the
minimum standards for transmission, accuracy, conceptual compliance
and revisions specified in paragraph 1.3 above.
1.5
Imposition of sanctions
The ECB may impose sanctions on reporting agents which fail to comply
with the statistical reporting requirements set out in these Reporting
Instructions in accordance with Decision ECB/2010/10 of 19 August
2010 on non-compliance with statistical reporting requirements.
1.6
Repeal
The “Reporting Instructions on the monthly Flows Adjustments Data of
Monetary Financial Institutions” and all its subsequent amendments
issued in January 2010, shall be repealed with effect 1st January 2015.
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PART 1
CONCEPTUAL ISSUES ON THE FLOWS ADJUSTMENTS
RETURNS
2.1
The need for flows adjustments
The purpose of flows adjustments statistics is to enable the calculation
of the net transactions, i.e. the real movement in balance sheet items,
from period to period, as opposed to other non-transactional factors.
Such data are extremely useful to the CBC e.g. for economic research,
financial
stability,
supervisory
and
other
purposes.
With
the
implementation of these RIs, the enhanced data will also be used to
fulfil the CBC’s statistical obligations towards the ECB.
The
ECB
compiles
euro
area
monetary
aggregates
and
their
counterparts as month-end stock positions within the framework of the
aggregated balance sheet of the
euro
area monetary financial
institutions sector. The ECB also analyses developments in monetary
statistics.
The evolution of monetary aggregates and counterparts is analysed by
the ECB in terms of the transactions that have taken place during the
period, measuring, separately, transactions in liabilities and in assets.
Therefore, in the context of aggregate balance sheet statistics, the
value of net transactions (flows) is to be distinguished from changes in
stock positions that arise for other reasons.
Euro area flows statistics for balance sheet items are compiled by the
ECB by taking the difference between balance sheet levels (stocks) for
two consecutive periods and then making adjustments that remove the
effect of changes from events other than transactions, i.e. revaluation
adjustments, reclassifications/other adjustments and exchange rate
differences.
2.2
Inter-relationship with the MBSR RIs
Since the FARs relate to the reporting of data on non-transactional
changes in balance sheet item values from one month to another, these
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RIs are closely connected with and build on the “Reporting Instructions
on
the
Monthly
Balance
Sheet
Return
by
Monetary
Financial
Institutions”.
Therefore, the definitions, basic reporting rules, special provisions for
the treatment of certain balance sheet items, general information on
the monthly balance sheet return, description of balance sheet items
and guidance on their classification, included therein, are an integral
part of these RIs as well.
Furthermore, for the sake of ease and efficiency, the FARs, as well as
the pertinent technical requirements, have been designed in such a
way so as to be, to the extent possible, compatible with the RIs of the
MBSR.
2.3
Guidance notes
2.3.1
Definition of “flow”
The “flow” for a balance sheet item for period t is defined as:
Ft = (Lt - Lt-1) - Ct - Vt – Et,
where for period t: Ft = Flow
Lt = Stock at the end of the period
Lt-1 = Stock at the end of the previous period
Ct = Reclassification adjustment
Vt = Revaluation adjustment
Et = Exchange rate adjustment
Ct, Vt and Et are ”non-transactions-related” factors
In this respect, it should be noted that the ECB does not collect data on
flows directly but, instead, it follows an indirect approach for the
derivation of flows. First, it calculates the month-to-month differences
(Lt-Lt-1) in balance sheet items from data available through the MBSR.
Secondly, it collects revaluation and reclassification adjustments (Vt
and Ct) from National Central Banks (“NCBs”). Thirdly, it estimates the
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exchange rate adjustment (Et) through its own methodology. Finally,
by deducting the three types of adjustments from the difference in
stocks, it produces the real flows (Ft), ie. the differences which are due
to actual transactions, which are then published and used in many
ways.
Therefore, these RIs relate to the submission of data by MFIs to the
CBC on:
•
•
Revaluation adjustments
Reclassifications and other adjustments
The above data is, in turn, processed by the CBC and transmitted to
the ECB, under strict deadlines, for further action as above. The data is
also used by the CBC for the calculation of the flows for Cyprus.
The three types of adjustments mentioned in the definition of the flow
are explained in paragraphs 2.3.3 - 2.3.6 below.
2.3.2
The Flows Adjustments Returns
The FARs comprise two sets:
1. Schedules for revaluation adjustments
2. Schedules for reclassifications and other adjustments
Both sets of schedules follow a very similar structure as the MBSR
schedules. The reporting is, however, in some ways simplified,
reflecting the fact that the flows adjustments data requirements of the
ECB are less extensive than the balance sheet data requirements.
Furthermore, some types of adjustment are not applicable to certain
balance sheet items (e.g. no revaluation adjustment applies to items
such as cash, deposits and debt securities issued by MFIs). In certain
cases, such as those of Schedules 2.7, 6, 8, 11, 13 and 14, further
simplifications could have been made as, generally, no detailed flows
adjustments data are required on the sub-items of those Schedules.
However, the above Schedules were kept very close to their original
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form (as in the MBSR) in order not to interfere with the underlying
MBSR software systems of both the CBC and the MFIs, as this would,
perhaps, create additional work burden for MFIs.
2.3.3
Reclassifications and other adjustments
‘Reclassifications and other adjustments’ comprise any change in the
balance sheet of the reference sector that arises as a result of changes
in the composition and structure of the reporting population, changes in
the classification of financial instruments and counterparties, changes
in statistical definitions and the correction of reporting errors, all of
which gives rise to breaks in the series, and hence affect the
comparability of two successive end-of-period stocks.
Reclassifications and other adjustments comprise the effect of the
following factors on MFI balance sheet items:
(a) Changes in the classification of assets and liabilities
These may arise as a result of changes in instrument classification or
sectoral classification of MFIs’ counterparties and may occur for a
number of reasons. The following is a non-exhaustive list of examples
to be used only as an indication of situations which give rise to
reclassifications and other adjustments :
i.
A customer may change his country of residence, eg. from Other
MU Member States to Rest of the World.
ii.
A non-financial corporation may change its principal activity and
become a financial corporation or vice-versa.
iii.
A public sector body may be transferred to the private sector, or
vice-versa.
iv.
A sole trader turning his business into a limited company (nonfinancial corporation).
v.
The issuer of Securities changing its country of residence or its
principal activity (eg from MFI to non-MFI and so on) or being
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transferred from the public sector to the private sector (eg. a
semi-government
organization
becoming
a
non
financial
corporation).
vi.
A negotiable security becoming non-negotiable or vice versa.
The above and other similar situations will lead reporting MFIs to
reclassify asset and liability balances within their balance sheet. As a
result, changes will be observed in the reported stock positions in the
period in which the change takes place. As these changes essentially
represent book-entry transfers between sectors or instruments, they do
not represent transactions and must be reported as adjustments, so
that their effect is removed from the flows statistics.
(b) Correction of reporting errors
It is inevitable that, from time to time, errors may occur and these
must be corrected.
The following is a non-exhaustive list of examples to serve, only as an
indication:
(i)
A customer’s deposit or loan which had been previously
classified in the wrong maturity band or ESA sector/subsector,
geographical area or NACE code.
(ii)
A housing loan which had been previously classified in error
under consumer credit or vice versa.
(iii)
A tangible fixed asset erroneously classified under intangible
fixed assets or vice versa.
(iv)
A non-negotiable security previously classified in error under
negotiable securities (i.e. into Securities other than shares
instead of Loans).
(v)
Securities other than shares wrongly classified as Shares and
other equity.
(vi) Misclassifications of items within Remaining Assets or Remaining
Liabilities.
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(vii) A customer who is a private individual classified in error as non
financial corporation or vice-versa.
(viii) A customer’s deposit redeemable at notice wrongly classified as
overnight or with agreed maturity.
(ix) Securities other than shares or Shares and other equity
classified under the wrong country of issuer or currency or
maturity band (when applicable) or ESA sector/subsector.
The effects of correcting the above errors do not represent transactions
and must, therefore, be reported as reclassification adjustments.
Minimum standards for revisions are already in place for MFIs’ monthly
balance sheet data (stocks) and MFIs should make every effort to
immediately correct errors in the stock data as soon as the errors have
been identified. It should be noted that, where the error in stock data
occurs once only (i.e. it affects a single month) or affects back series
only over a limited time range, revisions can be made that totally
remove the error from the data. In these circumstances, no break in
series will occur and, therefore, reclassifications and other adjustments
data will not need to be reported.
However, where the error affects
historical data and no correction of past data can be made or
corrections can be made only for a limited time range, then a break will
occur between the first reference month with the corrected stock figure
and the last reference month with the incorrect stock figure. In this
case, reclassification and other adjustments data needs to be reported
in the reference month where the break occurs.
(c )
Changes in statistical coverage
This case refers to changes in the composition of the MFI sector,
through institutions joining or leaving the MFI sector. Such situations
may give rise to the transfer of business across economic sector
boundaries.
To the extent that such transfers do not represent
transactions, they should be reported as flows adjustments under
reclassifications and other adjustments (see paragraph 2.3.6 (i) for
further guidance).
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(d)
Changes in structure
This situation refers to the appearance in or disappearance from the
banking system of certain assets and liabilities (due to the creation or
disappearance
of
an
institutional
unit),
arising
from
restructuring, ie. mergers, acquisitions and divisions.
corporate
To the extent
that the above do not represent transactions, they should be reported
as flows adjustments under reclassifications and other adjustments
(see paragraph 2.3.6 (h) for further guidance).
Furthermore, corporate restructuring operations may lead to changes in
the
valuation
of
financial
assets
and
liabilities.
Revaluation
adjustments are reported to reflect these changes and thus allow
transactions to be correctly derived.
2.3.4
Revaluation adjustments
Revaluation adjustments relate to changes in the valuation of certain
balance sheet instruments and affect a more limited range of items
than the reclassification and other adjustments category. They mainly
reflect the impact of fluctuations in the market prices/values of
securities, shares and financial derivatives, changes in the valuation of
fixed assets as well as the impact of loan write downs/ write-offs.
Changes in value caused by movements in exchange rates are not
considered revaluation adjustments but are, instead, part of the
exchange rate adjustment (see paragraph 2.3.5).
Revaluation adjustments may therefore arise, mainly, as a result of the
following three factors:
(a)
Price revaluation of securities/shares/financial
derivatives
This refers to fluctuations in the valuation of securities other than
shares, shares and other equity and financial derivatives on the asset
side as well as financial derivatives on the liability side, which arise as a
result of changes in their prices/values. The adjustment includes the
changes that occur in the value of end-period balance sheet stocks
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arising from holding (unrealized) gains/losses during the reporting
month.
Therefore, MFIs should report any revaluations/fair value
adjustments which were recognized during the reporting month
through the profit and loss account or revaluation reserves.
(b)
Loan write-downs/write-offs/Loan restorations
By the term loan write-down/write-off, the accounting entry is meant,
whereby a loan considered to be partially or wholly worthless is
partially or wholly removed from the books. Therefore, a revaluation
adjustment seeks to remove from the flows statistics the impact of
changes in the value of loans recorded on the balance sheet that are
caused by the application of write-downs/write-offs of loans by MFIs.
Losses recognized at the time loans are sold/transferred to a third
party should also be included in the adjustment.
As loans in the MBSR are reported gross of provisions for doubtful
debts, MFIs should report an adjustment at the time of a write-off and
not at the time of recording a provision because the provision has no
effect on gross loans.
A reversal of write-off may take place when a previously written off
loan is subsequently considered to be recoverable.
Such loans may
(partially or totally) be restored on balance sheet or, alternatively, they
may be recovered by the MFI without being first restored on the
balance sheet. In the first case (i.e. of the loan being restored on the
balance sheet), a revaluation adjustment should be reported so that
the restored loan is not recorded as a new loan in the transaction flows.
On the contrary, in the second case (i.e. of the loan being recovered
without restoration on balance sheet), no adjustment is to be reported.
Write-downs that occur at the time when a loan is securitized (or
otherwise transferred) and write-offs/write-downs on serviced loans are
reported to the CBC in accordance with the “Statistical Reporting
Requirements for Loan Securitisations and other loan transfers” as
described in PART 3 of these RIs.
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Write-offs/write-downs on loans for which the MFI acts as a servicer
may also occur, because the loans are still subject to on-balance sheet
recording, either on the individual accounts of the MFI or at group level.
They may also occur when the servicer must state a reduced principal
loan balance for impaired loans in order to be in compliance with the
investor agreements.
(c )
Changes in the values of fixed assets
Changes in the valuation of fixed assets may emanate from upward or
downward revaluation exercises (e.g. land and buildings) and, of
course, through depreciation/amortization.
2.3.5
Exchange rate adjustment
Movements in exchange rates against the reporting currency (i.e. euro)
that occur between end-period reporting dates give rise to changes in
the values of assets/liabilities denominated in other currencies when
expressed in the reporting currency.
As these changes are not due to transactions, they need to be removed
from the flows data through an exchange rate adjustment. Contrary to
the practice for the other two types of adjustments (revaluations,
reclassifications and other adjustments), the exchange rate adjustment
is estimated by the ECB, based on balance sheet data transmitted by
the
NCBs,
using
its
own
methodology
which
includes
certain
assumptions and simplifications.
Therefore, the exchange rate adjustment is beyond the scope of
these Ris and MFIs should not submit this type of adjustments
to the CBC.
2.3.6
Further guidance notes on special matters/items
(a) Data signs
Upward and downward revaluation adjustments should be reported
with
a
positive
and
negative
sign,
respectively.
Also,
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reclassifications into and out of an item should be reported with a
positive and negative sign, respectively.
(b) No revaluation adjustment for deposits and debt securities issued
by MFIs
It is clarified that as deposits are reported in the MBSR in their
nominal values, they are not subject to revaluation adjustments.
The same treatment is applicable in the case of debt securities
issued by MFIs.
(c) Accrued interest receivable/payable
According to the MBSR RIs, accrued interest receivable and payable
are not presented together with the respective principal amounts
but
are,
instead,
separately
classified
under
remaining
assets/remaining liabilities, respectively. MFIs should note that,
when accrued interest is moved to the corresponding account (e.g.
loan,
deposit
etc)
this
constitutes
a
transaction
and
no
reclassification or other type of adjustment is applicable.
(d) Fixed assets revaluation adjustment
In the case of fixed assets, the revaluation adjustment reported
should take
into
account any revaluations as well as
any
depreciation/amortization charges in the reporting month. In this
regard, monthly depreciation/amortization charges are considered
downward revaluations and should, therefore, be reported with a
negative sign.
(e) MFIs’ accompanying explanatory notes in relation to their
reclassifications and other adjustments
In relation to reclassifications and other adjustments, MFIs should
note that accompanying notes explaining the most significant
adjustments are required. This is an area requiring the exercise of
judgment on the part of MFIs and provision has been made to
enable the writing of text at the bottom of each FAR text file. The
above is necessary so as to avoid unnecessary enquiries by CBC to
the reporting MFIs’ staff following the submission of data.
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(f) Adjustments and double entry system
Revaluation and reclassification adjustments are subject to the
same double-entry accounting rules as stocks of balance sheet
items. Therefore, in general, adjustments have a counterpart and,
in both types of adjustments, the asset side should agree with the
liabilities (including capital and reserves) side. However, due to the
nature and particularities of some of the lower level breakdowns of
information collected through the FARs, there are exceptions to this
theoretical rule. In some cases, a revaluation or reclassification
adjustment may have a counterpart which is not to be captured by
the returns. The following examples serve only as an indication of
such cases:
•
A reclassification of a company out of Special Purpose Entities
(SPEs) involves only one entry (a negative reclassification out of
SPEs) because only the Special Purpose Entity stocks are reported
in the MBSR (ie no positive reclassification into “non-SPEs” would
be reported).
•
The reclassification of a loan with collateral to a loan without
collateral would entail only one entry (a negative reclassification
out of loans with collateral), because there is no corresponding
category “Loans without collateral”).
(g) Renewal of deposits/rescheduling of loans
It is clarified that the renewal of a deposit for a period which is
different than the original one or its conversion into another type of
deposit should not be reported as a reclassification. Instead, such
a deposit is deemed to have been repaid and a new one placed (i.e.
both are considered transactions).
The same approach applies in the case of loan rescheduling, where
the maturity of a loan may change/ extended after negotiations
between the MFI and the borrower.
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(h) Mergers/acquisitions/divisions
The criterion used to distinguish between flows that represent
transactions and those to be recorded as reclassifications relies on
the existence of two separate institutional units at the moment
when the transfer takes place.
The following cases can be identified as the most usual :
(i) Merger of two or more reporting institutions into a new reporting
institution/ acquisition of one reporting institution by another
reporting institution, belonging to the same sector.
This case refers to the merger of two MFIs into a new MFI
(consolidation merger) or the acquisition of an MFI by another MFI
(statutory merger).
When a merger takes place, two different types of non-transactions
may arise.
First, and probably most important, a change in the
value of assets and liabilities may occur.
Such a revaluation/
devaluation is not a transaction, so the amounts involved are
recorded under revaluation adjustments.
In addition, any outstanding balances between the two merged
institutions are cancelled.
This decrease in the cross-positions
between the merging MFIs and the disappearance from the banking
system of their shares, is not a financial transaction and, therefore,
an adjustment to remove its impact from the flow statistics must
be included under reclassifications and other adjustments with a
negative sign. Useful information sources for the identification of
these adjustments may be the final set of assets and liabilities
recorded by each of the two merged institutions and the first set of
assets and liabilities recorded for the new institution as a whole.
(ii) Division of one reporting institution into two different reporting
institutions
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This refers to the division of an MFI into two separate MFIs.
This operation is the opposite of a merger. However, any change
in the valuation of assets/ liabilities has the same impact as in a
merger.
Also, balances vis-à-vis other institutions can include
amounts between the two institutions that are not due to
transactions. Such amounts are included as an adjustment in
reclassifications and other adjustments, with a positive sign.
(iii) Merger between two institutions or acquisition of one institution by
another one, when one of the institutions does not belong to the
reporting sector.
This case refers to the merger of an MFI with a non-MFI or the
acquisition by an MFI of a non-MFI.
In such case, the assets/ liabilities of the non-MFI taken over by
the MFI have not arisen due to transactions but have been, instead,
brought into the MFI sector from another (non-MFI) sector.
As
such, all balance sheet positions, including the decreases in crosspositions, between the merging institutions should be reported as
reclassifications and other adjustments with a positive sign.
A reasonable methodology would be to compare the two balance
sheets of the reporting entity, with and without the incorporation of
the acquired non-MFI’s assets/ liabilities, and the differences
arising from the comparison be reported under reclassifications and
other adjustments.
(i)
Institutions joining or leaving the MFI sector
From time to time, there are cases where an institution may join
the MFI sector or an existing institution may leave the MFI sector.
For example, an existing institution of the Cyprus MFI reporting
population may decide to cease operating in Cyprus. On the
contrary, an overseas Bank may establish presence and operations
in Cyprus, joining thus the Cyprus MFI reporting population.
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To the extent that the joining institution starts its business ex novo
after having joined the MFI sector and/or the leaving institution
runs down its business gradually prior to leaving the MFI sector,
such cases do not give rise to flows adjustments. This is because
the consequent changes in assets and liabilities from period to
period represent real transactions.
In cases, however, where assets and liabilities are transferred into
the MFI sector (by the joining institution) or out of the MFI sector
(by the leaving institution) these should be reported under
reclassifications
and
other
adjustments.
Transfers
of
assets/liabilities into the sector should be reported with positive
signs at the end of the month in which it joins, whereas transfers
out of the sector should be reported with negative signs at the time
of its exit from the MFI sector. The above is necessary so that the
changes in balance sheet values from period to period are not
erroneously taken as arising from transactions.
(j)
Special Purpose Entities (SPEs)
It should be noted that, in submitting the FARs, where required,
both revaluation and reclassification adjustments which relate to
special purpose entities (eg. a loan by an MFI to an SPE, a deposit
by an SPE with an MFI, etc) must be reported separately as
provided in Section III “Technical Requirements”.
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PART 2
3.1
FLOWS&SEC/DEC.14
STATISTICAL REPORTING REQUIREMENTS FOR LOAN
SECURITISATIONS AND OTHER LOAN TRANSFERS
Definitions:
“Securitisation” means a transaction that is either:
(a)
a traditional securitisation as defined in Article 4 of Regulation (EU)
No 575/2013; meaning a transaction or scheme, whereby the credit
risk associated with an exposure or pool of exposures is tranched,
having both of the following characteristics:
i)
payments in the transaction or scheme are dependent upon the
performance of the exposure or pool of exposures;
ii) the subordination or tranches determines the distribution of
losses during the ongoing life of the transaction or scheme
and/or
(b)
a securitisation which involves the disposal of the loans being
securitised to a Financial Vehicle Corporation (FVC), as defined in
Article 1 of Regulation (EU) No. 1075/2013 (ECB/2013/40); meaning
a transaction or scheme whereby an entity that is separate from the
originator or insurance of reinsurance undertaking and is created for
or serves the purpose of the transaction or scheme issues financing
instruments to investors, and one or more or the following takes
place:
i) an asset or pool of assets, or part thereof, is transferred to an entity
that is separate from the originator and is created for or serves the
purpose of the transaction or scheme, either by the transfer of legal
title or beneficial interest of those assets from the originator or
through sub-participation;
ii) the credit risk of an asset or pool of assets, or part thereof, is
transferred through the use of credit derivatives, guarantees or any
similar mechanism to the investors in the financing instruments
issued by an entity that is separate from the originator and is created
for or serves the purpose of the transaction or scheme;
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iii) insurance risks are transferred from an insurance or reinsurance
undertaking to a separate entity that is created for or serves the
purpose of the transaction or scheme, whereby the entity fully funds
its exposure to such risks through the issuance of financing
instruments, and the repayment rights of the investors in those
financing instruments are subordinated to the reinsurance obligations
of the entity.
“Loan disposal” means the economic transfer of a loan or pool of
loans by the reporting agent to a transferee, achieved either by
transfer of ownership or by sub-participations. Loans disposed of
during a warehousing phase in a securitization are treated as if they
were already securitized.
Loan acquisition” means the economic transfer of a loan or pool of
loans from a transferor to the reporting agent, achieved either by
transfer of ownership or by sub-participation.
“Servicer” means an MFI which manages loans underlying a
securitization or loans that have otherwise been transferred in terms
of the collection of principal and interest from the obligors.
MFIs shall report the following:
(a) The net flow of loans securitizations and other loan transfers carried
out during the reporting period.
(b) The end-of-period amount outstanding and financial transactions
excluding loan disposals and acquisitions during the relevant period in
respect of securitized and derecognized loans for which the MFI acts
as servicer.
(c) The end of period amount outstanding in respect of all loans for which
the MFI acts as servicer in a securitization.
(d) When applying the International Accounting Standard 39 (IAS 39),
the International Financial Reporting Standard 9 (IFRS 9) or similar
national accounting rules, the end-of-period amount outstanding in
respect of loans disposed of by means of a securitization that has not
been derecognized from the balance sheet.
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3.2
Requirements for reporting net flows of loans securitised or
otherwise transferred
For the purposes of Article 6(a) of Regulation 2013/33, MFIs are
required to calculate the items in Schedules 1.1, 1.1.1, 1.2, 1.2.1
and Schedule 2, as net flows of loans securitised or otherwise
disposed of during the relevant period minus loans acquired during
the relevant period.
Loans transferred to or acquired from non-domestic MFIs are included
in the calculation.
Loans transferred to or acquired from another domestic MFI, and
loans whose transfer occurs as a result of a division of the reporting
agent, or of a merger or take-over involving the reporting agent and
another domestic MFI, are not included in this calculation.
Schedules
1.1
1.1.1
1.2
1.2.1
Net Flows, i.e. Disposals minus acquisitions with an impact on the
loan stocks are reported in accordance with Schedules 1.1, 1.1.1, 1.2
and 1.2.1, i.e. disposals resulting in derecognition minus acquisitions
resulting in recognition or re-recognition.
Loans securitised or otherwise transferred to a Financial Vehicle
Corporation (FVC) are reported in Schedule 1.1 according to the ESA
2010 counterparty in the loans transfer.
Data for FVCs resident in
the euro area is additionally reported in Schedule 1.1.1. Further
breakdowns by original maturity and purpose of the loan (for some
items) are required.
Loans securitised or otherwise transferred to other counterparties
(except to FVCs) are reported in Schedule 1.2 according to the ESA
2010 counterparty in the loans transfer.
Similarly, data for non-
domestic euro-area MFIs is reported in Schedule 1.2.1.
Schedule 2
Disposals minus acquisitions without an impact on the loans stocks
are reported in accordance with Schedule 2, i.e. disposals not
resulting
in
derecognition
minus
acquisitions
not
resulting
in
recognition or re-recognition.
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3.3
Requirements for reporting of securitised and derecognised
loans which are serviced
Schedules
3.1
& 3.2
MFIs provide data in accordance with Schedules 3.1 and 3.2 on loans
securitised and derecognised for which the MFI acts as servicer as
follows:
3.1
(a) end-of-period amounts outstanding; and
3.2
(b) financial
transactions,
excluding
loan
disposals
and
acquisitions during the relevant period, i.e. the change in
the amounts outstanding which is attributable only to loan
principal repayments by borrowers.
3.4
Requirements for reporting the outstanding amounts of loans
serviced in a securitisation
Schedules
4.1
MFIs provide data on all loans serviced for Financial Vehicle
& 4.1.1 Corporations (FVCs) in a securitisation, irrespective of whether the
serviced loans or their respective servicing rights are recognised on
the reporting agent’s balance sheet.
With respect to loans serviced for FVCs resident in other euro area
Member States, MFIs provide further breakdowns, by aggregating the
serviced loans separately for each Member State in which an FVC is
resident.
3.5
Statistical reporting requirements for
MFIs
applying the
IAS39, the IFRS 9 or similar national accounting rules
Schedules
5
& 5.1
MFIs applying the IAS 39, the IFRS 9 or similar national accounting
rules, report the end-of-month amounts outstanding of loans
disposed of by means of a securitisation that have not been subject
to derecognition in accordance with Schedules 5 and 5.1.
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3.6
FLOWS&SEC/DEC.14
Reclassification and revaluation amounts for Securitisations
and other Loan transfers
Schedules
6.1.RA,6.1.1.RA,
7.1.ROA,
7.1.RA,
8.1.ROA,
8.1.RA,
8.1.1.ROA,
8.1.1.RA,
9.ROA, 9.1.ROA
In addition to net flows, transactions and outstanding amounts
to be reported in relation to loan securitisations and other loan
transfers, as described in para. 3.2 to 3.5, MFIs are required to
submit reclassifications and revaluations amounts for data
submitted in Schedules 1.1, 1.1.1, 3.1, 4.1, 4.1.1, 5 and 5.1, on
a monthly basis, in accordance with the requirements of
Schedules 6.1.RA, 6.1.1.RA, 7.1.ROA, 7.1.RA, 8.1.ROA, 8.1.RA,
8.1.1.ROA, 8.1.1.RA, 9.ROA and 9.1.ROA.
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