Tri-Agency Database System BCAR Rules Overview

Document Properties

  • Date: Effective Q1 2015

The purpose of this document is to provide an overview of the BCAR validation rules and provide guidance in interpreting email feedback of validation rule failures. Because the structure of BCAR is different from conventional returns, the feedback is different. This document should assist interpretation of errors.

The rules for the BCAR return are detailed in a report entitled BArules.xls and is posted on the RRS web site under Documents/Portal Documents/English/Return Validation Rules/DTI Validation/BCAR Validation.

DATA POINT ADDRESSES

Data point address (DPA) numbers have been assigned to all the BCAR data items. There are two types of DPAs in BCAR

  • 4-digit "non-dimensional" DPAs occur in the uniquely structured schedules (non- dimensional) in BCAR, such as Schedule 3 Capital Elements or Schedule 40 Derivatives.
  • 8-digit "dimensional" DPAs. These represent those data items that are in a series of similarly-structured schedules (dimensional), e.g. the exposure class/type breakdown schedules (Corporate, Sovereign, Bank, etc.). The 8-digit DPAs have the following structure:
    • Digits 1-2 represent the exposure type
    • Digits 3-4 represent the measure type (column description)
    • Digits 5-6 represent the RW or PD row
    • Digits 7-8 represent the schedule number

TYPES OF VALIDATION RULES

There are two types of validation rules – pre-edit or structural rules and business rules. If an institution fails any of the pre-edit validation rules, the business validation rules cannot be processed. When pre-edit rules are identified, the institution will be advised by email and BCAR must be corrected and re-filed.

1. Pre-Edit or Structural Rules

Similar to other returns, pre-edit rules ensure a file is sent in the correct format including such things as the institution code. BCAR has additional pre-edit rules that ensure DPAs have the correct sign (i.e. + or -). Most BCAR DPAs should always be positive values. However, there are two types of exceptions. Certain DPAs must always be reported as negative or zero values and other DPAs may be reported as either positive or negative.

In Q1 2011, the rules for non-dimensional DPAs were changed to business validation rules and are therefore now included in the BArules report noted previously. For dimensional DPAs, the rules remain as pre-edit rules, as described below.

(a) Dimensional DPAs that should always be reported as negative or zero

Schedules 5, 7, 8, 9, 10, 11, and 13

Data reported in the column titled Adjustments for CRM - Adjustment to net exposure for collateral (comprehensive approach), with the exception of the repo-style transactions exposure type, should always be negative or zero.

Schedule 25A, 30, 31, 32, 33

Data reported in the column titled Adjustments for CRM - Decrease in exposure for guar. & credit derivatives should always be negative or zero.

(b) Dimensional DPAs that may be reported as either positive or negative

Schedules 5, 7, 8, 9, 10, 11, 13, 22A, 23A, 24A, 25A, 26, 27, 28

Data reported in the column titled Adjustments for CRM - Redistribution of net exposure for guarantees, credit derivatives may be reported as either positive or negative.

Schedules 5, 7, 8, 9, 10, 11

Data reported in the column titled Adjustments for CRM - Redistribution of net exposure for collateral (simple approach) may be reported as either positive or negative.

Schedules 22A, 22B, 25A, 25B, 26, 27, 28, 32, 34

Data reported in the column titled Adjustments for CRM - Adjustment to repo-style transaction exposure may be reported as either positive or negative.

Schedules 5, 7, 8, 9, 10, 11, and 13

Data reported under the repo-style transaction exposure type in the column titled Adjustments for CRM – Adjustment to net exposure for collateral (comprehensive approach) may be reported as either positive or negative.

2. Business Validation Rules

Business validation rules check to ensure that calculations are correct (subtotals, exposure times RW, etc.). These rules also ensure that where certain options under the capital adequacy framework are mutually exclusive that only one method is reported.

There are two types of rules:

(a) Non-dimensional rules

Non-dimensional rules have one occurrence each. A unique equation spells out each rule, listing all data-points involved. These rules include cross return validations that check to ensure that certain figures agree with amounts reported in other regulatory returns (e.g. Consolidated Balance Sheet (M4), Allowance for Impairment (C3), etc).

(b) Dimensional rules

Dimensional rules define relationships that occur many times, in multiple schedules and many times within a schedule. They include, for example, aggregation rules that are sums of columns and rows. The dimensional validation rules were generated using a generic approach, whereby a rule checking for a given relationship between various measures was coded and applied to multiple combinations of rows, columns, and schedules. The Rules Report provides these rules with a generic equation for the rule type rather repeating the rule multiple times with different DPAs. Note that the email feedback that an institution receives of validation rule failures does provide the specific DPAs involved for each individual failure ("instance") of a rule type.

TERMINOLOGY AND TOLERANCES

1. Rule Number

Non-dimensional Rules

RS:142625002-1
  • RS stands for Rule Set
  • 142625002 is the rule number. A non-dimensional rule number can have eight or nine digits. If the rule number has eight digits, the first number represents the Schedule number where the target DPA appears. If the rule number has nine digits, the first two numbers represent the Schedule number where the target DPA appears. The four digits that follow the schedule number represent the target DPA. The example has nine digits. Therefore 142625002 refers to Schedule 14 and target DPA 2625. The last 3 digits act as a counter to differentiate between RS numbers when a given DPA is the target in more than one rule. In this example, this is the second rule that contains target DPA 2625.
  • -1 is the number of occurrences of the rule. All non-dimensional rules have an occurrence number of 1.

Dimensional Rules

E.g. Start Rule ID RS:130-0 End Rule ID RS:130-245
  • RS stands for Rule Set
  • 130 is the rule number.
  • -245 is the number of occurrences of the rule. Dimensional rules have occurrence numbers of 1 and greater.

2. ABS

ABS denotes absolute value. In some rules, the notation "SUM ABS" is used to signify the summation of the absolute value of a number of DPAs regardless as to whether they are reported as a positive or negative value.

3. TST

The expression "TST" is used in rules that have conditions.

For example, RS427904001-1

TST IS (($7889 <> 0)); (TST and ($7904 <> 0)) or (not TST)

"TST IS" should be considered an if statement. If data point 7889 is not equal to 0, then data point 7904 should not be equal to 0.

4. GENGROUP

Some error messages for dimensional rules contain the expression GENGROUP. GENGROUP is used when a validation rule involves the aggregation of a number of DPAs. The email feedback will provide the rule using GENGROUP – e.g. @BA_GENGROUP5317184. The DPAs included in the group are listed in square brackets after the group name.

5. Tolerances

For certain rules there are tolerances whereby a validation error will not be generated unless the error exceeds a tolerance level. In most cases, the tolerances allows for a difference of plus or minus 10 between reported amounts and the amounts generated by applying the validation rules.

TIPS TO AVOID CERTAIN VALIDATION ERRORS

The BCAR reporting instructions are available on OSFI's website (under Banks and Trust and Loan Companies, Filing Instructions, Returns and Penalties, Financial Returns and Instructions, Basel II Capital Adequacy Reporting (BCAR)). The BCAR reporting instructions should be used as a guide for completing the return. BCAR contains several schedules that carry forward amounts from one schedule to another. Validation rules ensure that the amounts are correctly carried forward. In some cases, these validation rules may not be readily apparent. The following provides some elaboration.

Schedule 39 – Off-balance Sheet Exposures

Schedule 39 collects undrawn commitments and other off-balance sheet exposures by product type and credit risk approach.

Undrawn commitments – Retail

The notional principal amount and credit equivalent amount of undrawn retail commitments reported on Schedule 39 must equal the sum of all the notional principal and credit equivalent amounts (before credit risk mitigation) reported for undrawn commitments on all the corresponding retail schedules (Standardized 9, 10, 11; IRB 30, 31, 32, 33, 34). Validation rules ensure that the notional principal amount and the credit equivalent amounts reported on these schedules agree, in total, to the amount reported on Schedule 39.

Undrawn commitments – Non-Retail

The notional principal amount and credit equivalent amount of undrawn non-retail commitments reported on Schedule 39 must equal the sum of all the undrawn commitments (before credit risk mitigation) reported on all the corresponding non-retail credit risk schedules (Standardized 5, 7, 8, 12; IRB 22A, 22B, 23A, 23B, 24A, 24B, 25A, 25B, 26, 27, 29, 35). Validation rules ensure that the notional principal amount and the credit equivalent amount reported on these schedules agrees, in total, to the amounts reported on Schedule 39.

Other off-balance sheet – excluding securitization

The notional principal amount and credit equivalent amount of other off-balance sheet amounts reported on Schedule 39 must equal the sum of all the other off-balance sheet amounts (before credit risk mitigation) reported on all the corresponding credit risk schedules (Standardized 5, 7, 8, 9, 10, 11; IRB 22A, 22B, 23A, 23B, 24A, 24B, 25A, 25B, 26, 27, 29, 30, 31, 32, 33, 34). Validation rules ensure that the notional principal amount and the credit equivalent amount reported on these schedules agrees, in total, to the amounts reported on Schedule 39.

Schedule 40 – Derivative Contracts

Schedule 40 collects details on derivatives by product type, contract type, and maturity. The notional principal amount and the credit equivalent amount of OTC derivatives reported in Section B of Schedule 40 must equal the sum of all the amounts reported for OTC derivatives (before credit risk mitigation) on all the corresponding credit risk schedules (5, 7, 8, 10, 11, 13, 22A, 22B, 23A, 23B, 24A, 24B, 25A, 25B, 26, 27, 28, 29, 32, and 34). Validation rules ensure that the notional principal amount and the credit equivalent amount reported on these schedules agrees, in total, to the amounts reported on in Section B of Schedule 40.

Please note that written options do not form part of the exposures subject to counterparty credit risk and as a result, should not be included in Section B of Schedule 40.

Schedule 41 – Securitization Exposures

Schedule 41 collects securitization exposures by type and credit risk approach. The credit equivalent amount of securitization exposures on Schedule 41 must equal the sum of all the credit equivalent amounts (before credit risk mitigation) reported on Schedules 14 (Standardized) and 37 (IRB). Validation rules ensure that the credit equivalent amount reported on these schedules agrees, in total, to the amounts reported on Schedule 41.

Schedule 44 – Exposures by Original Obligor and by Ultimate Guarantor

Schedule 44 collects information regarding exposures and guarantors by exposure class. Pre- CRM exposures by original obligor must equal the pre-CRM gross exposure amounts reported on the various exposure class schedules. For further guidance on completing this schedule, please refer to the BCAR reporting instructions.

Schedule 45 – Balance Sheet Coverage by Risk Type

Schedule 45 forms a reconciliation to the consolidated balance sheet (M4). Most credit risk figures are calculated from summing or carrying forward data reported in the various credit risk schedules. For further guidance on completing this schedule, please refer to the BCAR reporting instructions.