2A Schedule for Asset Reporting by Counterparty

PURPOSE

The purpose of the EB/ET – 2A schedule for asset reporting by counterparty, is to provide a better understand of the interconnectedness between financial institutions and improve the monitoring of shadow banking activities.

STATUTORY

Sections 628 of the Bank Act

APPLICATION

This return applies to the following banks: Royal Bank of Canada (RBC), Toronto Dominion Financial Group (TD), Bank of Nova Scotia (BNS), Bank of Montreal (BMO), Canadian Imperial Bank of Commerce (CIBC), and National Bank of Canada (NBC).

PUBLICATION

This information would not be published without out a process to anonymize the information to protect the confidentiality of both reporting institutions and their counterparties.

FREQUENCY

Quarterly – calendar

REPORTING DATES

This return is to be completed as of the last Wednesday of each quarter and submitted within 45 days of the quarter-end date.

CONTACT AGENCY

Bank of Canada

GENERAL INSTRUCTIONS

Guidelines for the EB/ET-2A follow the 2018 version of the Bank of International Settlements' (BIS) report on Institution-to-Institution Credit Exposure (I-I Credit Data or Large Credit Exposures Return), unless otherwise stated. The agencies will review any changes to the BIS's I-I credit exposure guidelines subsequent to 2018 and determine if they are to be inherited by the EB/ET- 2A.

• The scope of the return matches that of the Institution-to-Institution Credit Exposure (e.g. worldwide exposures excluding central banks, governments and multilateral development banks).
• One difference between the EB/ET-2A and the Institution-to-Institution Credit Exposure is that the EB/ET-2A is to be reported in thousands of Canadian Equivalent with no decimals, whereas the Institution-to-Institution Credit Exposure is to be reported in millions of USD Equivalent with three decimals (Please note that the same CAD/USD exchange rate is to be used for all entries on the EB/ET-2A; therefore, the ratio of any exposures reported on both the EB/ET-2A and the Institution-to-Institution Credit Exposure for the same period should produce the same exchange rate).
• Another noticeable difference between the EB/ET-2A and the Institution-to-Institution Credit Exposure reporting guidelines is the treatment of blanks vs. zeros. As far as the EB/ET-2A return is concerned, there is no difference in meaning between a blank and a zero value for a cell.
• Clearing Houses in the EB/ET-2A are treated as non-bank financial entities. Although Clearing Houses belong to Template C in the I-I Credit Exposure guidelines – which is outside the scope of this return – having them as non-bank financial entities is consistent with the counterparty types scope of Template A and Template B. Selected information from Template A and B in the I-I guidelines are part of the scope of the EB/ET-2A return. In addition, only transactions carried out on behalf of the bank (i.e. in-house trades) should be reported.

1. COUNTERPARTY IDENTIFICATION

This return has a mix of fixed counterparties, variable counterparties, and an aggregated "other" column for each category. The fixed counterparties are named entities and will be reported on every reporting period regardless of their exposure ranking. Variable counterparties change from one reporting period to another and are numbered by category (e.g. Auto Lender 1, Auto Lender 2, Auto Lender 3, …). The selection of the variable counterparties is to be updated every period using the exposure rankings, to report the largest counterparty exposures in every category without duplicating the counterparties already reported as fixed counterparties. The "other" column for each category captures the residual aggregate exposures for all counterparties that are not individually identified as either fixed or variable counterparties.

2. EXPOSURE RANKING

For each category, the ranking of counterparty exposures is determined by the "Total" line (line 14), which is a sum of exposures for each financial instrument. The ranking of exposures determines which variable counterparties are to be reported every period.

3. INDUSTRY CLASSIFICATION

This return uses the 2017 version 3 North American Industry Classification System (NAICS) as a guide to map financial institutions to the industries on the EB/ET-2A. The concordance table is in Appendix I 'Concordance Table – NAICS to EB/ET Assets'. Corporate conglomerates that satisfy the criteria of multi-sector classification should be categorized on a best efforts basis. Additionally, a small number of the 6-digit NAICS classifications apply to multiple EB/ET categories (522111, 522112, 523920, 523990, 526989, 522299), counterparties with these classifications are to be allocated to the EB/ET categories on a best efforts basis.

4. COUNTERPARTY CONSOLIDATION

Counterparty consolidation is to follow the BIS's Institution-to-Institution Credit Exposure guidelines, subject to the following expectations:

1. As outlined in the Institution-to-Institution Credit Exposure guidelines funds and investment vehicles (e.g. mutual funds, other investment funds, and special purpose vehicles) are to be reported as separate counterparties unless they receive an explicit guarantee from a parent. Furthermore, the expectation is that very few funds or investment vehicles have a guarantee sufficient to warrant consolidation in this context.
2. Auto lenders are to be reported as individual counterparties and not consolidated into non-financial parent companies, a related discussion is included in the Institution-to-Institution Credit Exposure guidelines.
3. Otherwise counterparties are generally expected to be consolidated at the ultimate parent level, except for the following cases:
   1. Manulife Financial Corporations: All entities in the corporate structure of Manulife Financial Corporation are allotted to "Insurance Companies" except for the following cases:
      1. Manulife Bank of Canada (LEI:5493001EC14NJPX15P10): is to be reported under "Deposit Taking Institutions (excluding credit unions)"
      2. Manulife Asset Management and subsidiaries are to be reported separately into their respective categories as per the I-I guidelines (e.g. Investment Management Companies, Mortgage Investment Corporations/Mortgage Investment Funds, and Real Estate Investment Companies).
   2. Power Corporation of Canada: All entities in the corporate structure of Power Corporation of Canada are allotted to "Insurance Companies" except for the following cases:
      1. IGM Financial Inc. and subsidiaries are to be reported separately into their respective categories as per the I-I guidelines (e.g. Investment Management Companies, Mortgage Investment Corporations/Mortgage Investment Funds, and Real Estate Investment Companies).
      2. Power Energy Corporation and subsidiaries are to be reported in the Non-Financial Corporations category.
      3. Sagard Funds (Sagard Europe, Sagard Holdings, and Sagard China) are to be reported separately in the Investment Management Companies category as per the I-I guidelines.

5. CROSS RETURN RULES AND CONSISTENCY WITH I-I CREDIT DATA

When a counterparty is included on both EB/ET-2A and the I-I Credit Exposure Return, the corresponding values for that counterparty are expected to match up to an exchange rate difference, except for cases where the specific consolidations instructions deviate from the I-I approach. Otherwise there are no other cross return rules vis-à-vis other returns.

Notes on Rules:

1. The same CAD/USD exchange rate is to be used for all entries on the EB/ET-2A; therefore, the ratio of any exposures reported on both the EB/ET-2A and the Institution-to-Institution Credit Exposure for the same period should produce the same exchange rate.
2. For cases where the consolidation instructions from section 4 above deviate from the approach of the Institution-to-Institution Credit Exposure, the rules will be modified accordingly.

6. FINANCIAL INSTRUMENT CATEGORIES

The definitions for financial instrument categories on the EB/ET-2A follow the financial instrument definitions of the I-I Credit Exposure Return. The mapping between corresponding data points is provided on the EB/ET-2A return and in the table below.

7. MINIMUM REPORTING THRESHOLD FOR "OTHER COUNTERPARTIES"

The threshold to determine if a counterparty exposure is to be included in this return depends on the financial/non-financial industry status of the counterparty and is not based on a set dollar amount.

• Threshold for financial corporations: All counterparties in a financial industry are to be covered by the return and included when computing the "other counterparty" columns.
• Threshold for non-financial corporations: Only counterparties that represent medium or large exposure are to be covered by the return and included when computing the "other counterparty" column for non-financial corporations (column 171). There is no expectation of small retail exposures being included in this column. The definition of a medium or large exposure is left to the judgment of the reporting institution.

APPENDIX I – CONCORDANCE TABLE – NAICS TO EB/ET ASSETS