Office of the Superintendent of Financial Institutions
This report provides the Bank of Canada with data on collateral pledging.
Section 24 of the Bank of Canada Act, sections 628 and 600 of the Bank Act.
This return applies to all banks and foreign bank branches. Trust and Loan Companies are not required to submit this return. Data reported in part B 'collateral pledged by counterparty' is only required from Domestic-Systemically Important Banks (D-SIBs).
Information from this return may be published on an anonymized basis.
This return is to be completed at the business day frequency. With some cells classified as only requiring updated information as of month end.
All of the returns for a calendar month are to be completed and submitted within 35 Highlighted text calendar days of the last Highlighted text business day of that month to the head office of the Bank of Canada.
Highlighted text If the 35th calendar day is a weekend day, the due date remains that weekend day. If the 35th calendar day is a holiday, the due date will be pushed to the following business day. Follow the Ontario holiday schedule for reporting requirements.
Formal reporting of the return is required as of September 5th 2017 for the reference month of July 2017. Institutions are also required to submit test data for 4 days per month beginning with the reference month January 2017 (due on March 7th 2017).
Bank of Canada
The purpose of this report is to provide the Bank of Canada with data on collateral pledging which is necessary for evaluating linkages between counterparties and activities, as well as determining the magnitude of transactions across various asset classes.
This return is to be completed at the business day frequency. Business days are defined to include all weekdays except federal and provincial statutory holidays. The
sample return template identifies a selection of rows and columns which are only required to be updated as of month end. Values are required to be reported in these cells for every business day; however, previous values can be carried forward until month end is reached.
All amounts are to be expressed in thousands of Canadian dollar equivalents. Currency conversions are to be made on a daily basis. The expectation is that the conversions computation will either achieve consistency with the LCR and M4 returns or be calculated using Eastern Time end-of-day rates.
All rows indicated by "of which: lodged unencumbered (%)" are to be expressed as a percentage value. For example, a value of 1.25 in the applicable cells should be interpreted as 1.25%.
The return is to be completed on an end-of-day basis and is not to include any unsettled or incomplete transactions.
The return is to be completed on a consolidated institution basis; however, some reporting accommodations may be requested from the Bank of Canada.
For any requested accommodation the reporting institution is expected to provide the Bank of Canada with information to demonstrate that the request will not materially alter the reporting of collateral and pledging activities.
For any accommodation extended the Bank of Canada reserves the right to revoke the accommodation or require additional supporting information at a later date.
The Bank will consider requests for reporting accommodations on an ongoing basis.
Available Unencumbered Assets
Financial Market Infrastructures (FMIs): A multilateral system among participating institutions, including the operator of the system, used for the purposes of clearing, settling, or recording payments, securities, derivatives, or other financial transactions.
Lodged Unencumbered: Collateral pledged to a central bank which is unencumbered and able to be immediately withdrawn or used to secure future transactions.
LVTS Lodged Unencumbered: LVTS collateral is pledged to the Bank of Canada as Tranche 1 or Tranche 2, or held unallocated as "lodged unencumbered" collateral. Lodged unencumbered collateral is the value of LVTS collateral pledged by a participant that is greater than what is apportioned. The Bank of Canada maintains a contingent security claim on collateral apportioned to the LVTS, but not on collateral held as lodged unencumbered. At a participant's discretion, lodged unencumbered collateral can be moved from its LVTS collateral holdings at any time, whereas collateral apportioned to Tranche 1 or Tranche 2 can only be transferred upon LVTS settlement, when the Bank of Canada relinquishes its contingent security claim on it.
Excess Collateral: Collateral pledged to a counterparty which is unencumbered and able to be immediately withdrawn or used to secure future transactions.
CDS Excess Collateral: The amount that is in excess of the total CDS requirements based on the default fund, the quarterly high water mark and daily mark-to-market requirements.
CDSX Excess Collateral: The amount that is in excess of the sum of the default or clearing funds and the daily mark-to-market requirements.
Default Fund Collateral Pledging: Collateral pledged to CCPs or FMIs to support 'survivor-pay' schemes for absorbing losses.
LVTS Default Fund Collateral Pledging: LVTS default fund collateral is excluded from the default fund reporting category on the H4 report. Instead all LVTS collateral pledging including the LVTS default fund collateral pledging amount 'MAX ASO' (maximum additional settlement obligations) is to be reported under the LVTS category.
Haircut: A haircut is the difference between the value of an underlying transaction and the value of the minimum amount of collateral required to secure the transaction. A haircut expressed as a percent is defined with the equation.
illustrated template contains a collection of reporting examples for common transactions.
The H4_Key rules_2017_EN document provides a summary of key reporting rules. The H4_All rules 2017_EN document contains the full suite of validation rules. Both documents can be found in RRS under Documents / Portal Documents / English / Return Validation Rules / DTI Validation.
The cross validation rules with the M4 and LCR are specified to function within a 2% threshold instead of requiring an exact reconciliation. The intention is to not have the practice of residual amounts arbitrarily being assigned into a category in order to pass the validation rules. Known reconciliation differences resulting from specific situations are to be reported in the adjustment rows and columns. Unknown reconciliation differences are expected to be within the 2% threshold.
Formatting of Data Submissions
Formatting of Data Points
In Part A institutions are to complete sections 1, 2 and 3; sections 4, 5, and 6 are then automatically calculated by the return.
Section 1 - Assets
In this section balance sheet assets are to be reported along with the distribution on assets classes or collateral classes associated with each balance sheet entry (e.g. the column 'securities – long (net)' breaks down securities long by asset class; the column 'reverse repos' breaks down reverse repos by collateral class).
Section 2 - Liabilities
In this section balance sheet liabilities are to be reported along with the distribution on assets classes or collateral classes associated with each balance sheet entry (e.g. the column 'securities – short (net)' breaks down securities short by asset class; the column 'repos' breaks down repos by collateral class).
Section 3 - Collateral Movements
This section breaks down collateral movements by collateral class.
Section 4 - Available Unencumbered Assets (calculated by return, by grouping)
This section identifies total Available Unencumbered Assets from the amounts reported in sections 1, 2, and 3.
The only cells that are to be reported in this section are the adjustment entries in a102-a105. These adjustment cells are intended for the reporting of small know amounts that are not specificity covered by other parts of the return.
Section 5 - Encumbered Assets
This section identifies Encumbered Assets using the amounts reported in sections 1-4. If there is a need to introduce an adjustment to the values computed these adjustments should be incorporated in section 4.
Section 6 - Haircuts (calculated by return, by grouping)
In this section the Regulatory Reporting System (RRS) will compute haircuts using the values reported in the previous sections. Reporting institutions are not required to submit any data points for this section.
Several locations are provided to make adjustments. The expectation is that these adjustments will be used to account for special situations that are not specifically covered in the rest of the return; and will not be used to absorb unknown reconciliation errors. It is acknowledged that there will be some amount of unknown reconciliation error and the expectation is that these will be covered by the 2% error tolerance built in to the cross return rules with the M4 and LCR. Additionally, it is expected that if an adjustment is used justifications will be made available upon request.
Reporting of excess collateral and lodged unencumbered collateral as Available Unencumbered Assets The reporting for excess collateral or lodged unencumbered collateral is only required in a few specific cases: cell(b48, c47), cell(b60, c47) cell(b65, c47) cell(b70, c47) and cell(b78, c47) [Note: lodged unencumbered collateral amounts in cell(b2, c47) and cell(b17, c47) are calculated by the Bank of Canada and are not a reporting requirement].
Excess collateral and lodged unencumbered collateral are both classified as Available Unencumbered Assets; however, if no adjustment is made both categories will appear as encumbered in the H4 return. Institutions have the option of using adjustment rows a104 and a105 (depending on LCR treatment) to reclassify these amounts from Encumbered Assets to Available Unencumbered Assets. To facilitate ease of reporting this is considered an optional adjustment (see reporting examples #2 and #4).
In this section pledging is to be allocated by counterparty on a credit risk basis.
Note: that the asset category definitions found in the Liquidity Coverage Ratio (LCR) Return (LA) are used here.
Deposits with FIs (and other cash not qualifying as HQLA)
This category includes all cash and deposits that do not qualify as HQLA.
Coins and banknotes
Coins and banknotes currently held by the institution that are immediately available to meet obligations.
Central bank reserves - that can be drawn in times of stress
Total amount held in central bank reserves and overnight and term deposits placed at a central bank which can be drawn down in times of stress. These include all completed deposit transactions with Bank of Canada, including Large-Value Transfer System (LVTS), Special Deposit Account (SDA) and Automated Clearing and Settlement System (ACSS) component balances.
Central bank reserves - that cannot be drawn in times of stress
Total amount held in central bank reserves including institutions' overnight and term deposits with a central bank, which cannot be drawn down in times of stress.
Issued by sovereigns
The market value of qualifying marketable debt securities issued by sovereigns, receiving a 0% risk weight under the standardised approach to credit riskFootnote 1.
This category follows the same definition as LCR line 11004
of which: are issued by Canada
The market value of qualifying marketable debt securities issued by Canada
Guaranteed by sovereigns
The market value of qualifying marketable debt securities guaranteed by sovereigns, receiving a 0% risk weight under the standardised approach to credit risk
of which: are guaranteed by Canada
The market value of qualifying marketable debt securities guaranteed by sovereigns of which are guaranteed by Canada
of which: are NHA-MBS
The market value of qualifying marketable debt securities issued or guaranteed by Canadian public sector entities of which are National Housing Act Mortgage-Backed Securities (NHA-MBS). This should also include NHA-MBS that are pooled and unsold which are captured as HQLA level 1 assets under the LCR treatment of liquid assets.
of which are own originated NHA-MBS
The market value of qualifying marketable debt securities issued or guaranteed by Canadian public sector entities of which are NHA-MBS originated by the institution.
of which: are CMBs
The market value of qualifying marketable debt securities issued or guaranteed by Canadian public sector entities of which are Canada Mortgage Bonds (CMBs).
of which: are Canadian (PSEs)
The market value of qualifying marketable debt securities issued or guaranteed by Canadian public sector entities.
of which: are issued by Canadian provinces
The market value of qualifying marketable debt securities issued by provincial entities
Other level 1 assets (non-0% risk-weighted sovereigns)
The value of all other qualifying level 1 assets not mentioned above.
Total level 1 assets
The total value of all qualifying level 1 assets Highlighted text (excluding Central Bank Reserves – that cannot be drawn in times of stress)
Market securities with a 20% risk-weight
Issued or guaranteed by sovereigns
The market value of qualifying marketable debt securities issued or guaranteed by sovereigns, receiving a 20% risk weight under the standardised approach to credit risk.
The market value of qualifying non-financial corporate bonds (including commercial paper) rated AA- or better.
Covered bonds (not self-issued, rated AAA+ to AA-)
The market value of qualifying covered bonds, not self-issued, rated AA- or better.
Other level 2A assets
The value of all other qualifying level 2A assets not mentioned above.
Total level 2A assets
Non-financial common equity shares
The market value of qualifying non-financial common equity shares
Non-financial corporate bonds (rated A+ to BBB-)
The market value of qualifying non-financial corporate debt securities (including commercial paper) rated A+ to BBB-.
RMBS (rated AAA+ to AA)
The market value of qualifying RMBS rated AA or better.
Other level 2B assets (Sovereign or central bank debt securities, rated BBB- to BBB+)
The value of all other qualifying level 2B assets not mentioned above (i.e. The market value of qualifying sovereign or central bank debt securities, rated BBB- to BBB+ that are not already included under 'other level 1 assets' as 'non-0% RW securities issued in domestic or foreign currencies').
Total level 2B assets
The total value of all qualifying level 2B assets
Total liquid assets
The total value of all qualifying level 1, level 2A, and level 2B assets listed above.
Other market securities
Financial sector common equity shares
The market value of financial common equity shares
Financial sector corporate bonds (all ratings)
The market value of financial corporate bonds (including commercial paper)
Own issued covered bonds (all ratings)
The market value of self-issued covered bonds (covered bonds issued by the reporting institution).
The market value of non-HQLA qualifying asset-backed securities (ABS).
The market value of non-HQLA qualifying term asset-backed securities (ABS)
The market value of non-HQLA qualifying asset-backed commercial paper (ABCP)
Include bankers' acceptances that are not reported in the above categories.
Other market securities
The market value of other non-HQLA qualifying securities not mentioned above.
Highlighted textOf which: are ETFs
Insured residential mortgages
The value of residential mortgage loans insured either under the National Housing Act or by other insurance companies/agencies. This includes both portfolio insured and individually insured mortgage loans. Note: this category should
not include NHA-MBS insured mortgages that are pooled and unsold which are captured as HQLA level 1 assets.
Uninsured residential mortgages
The value of all residential mortgage loans not classified as insured.
The value of all mortgage loans on property not classified as residential property, including such commercial structures as hotels, stores, office buildings, garages, theatres, warehouses, industrial plants, institutional properties, farms and vacant land.
The value of all non- mortgage loans, including loans to financial institutions, Canadian governments, foreign governments, lease receivables, individuals for non-business purposes, individuals and others for business purposes, own acceptances purchased, and loans made by security subsidiary.
The value of 'other assets eligible for pledging not listed above. These may include less-commonly pledged items such as non-marketable securities, commodities holdings, land, buildings, furniture and equipment (less accumulated depreciation), receivables and other assets which could reasonably be considered eligible for pledging. This section should exclude insurance-related assets, accrued interest, goodwill, deferred tax assets, intangibles and other assets unlikely to be considered eligible for pledging.
Total other assets
The total value of all 'other assets' listed above.
Total all assets classes
The total value of all assets qualifying as level 1, level 2A, level 2B assets and all 'other assets' listed above Highlighted text (Excluding Central Bank Reserves – that cannot be drawn in times of stress).
Netting Adjustment (c48)
The purpose of this column is for the reporting of netting impacts in order to facilitate reconciliation with the balance sheet. The column is for the reporting of netting adjustments only, other known adjustments are to be reported in c51, and unknown reconciliation differences are expected to be covered by the 2% error tolerance built in to the cross return rules with the M4 and LCR.
Amounts for non-reported collateral movements vis-a-vis brokerage clients (prime and retail)(c49)
This column is for the reporting of total collateral positions vis-à-vis brokerage clients when a reporting exclusion has been granted. If a reporting exclusion is granted the requirement for detailed daily reporting in c1-c47 is waived; however, the reporting of the total values is still required here on a monthly basis.
Amounts for non-reported subsidiaries (c50)
This column is for the reporting of total collateral positions with non-reported subsidiaries when a reporting exclusion has been granted. If a reporting exclusion is granted the requirement for detailed daily reporting in c1-c47 is waived; however, the reporting of the total values is still required here on a monthly basis.
Other Known Adjustments (e.g. accounting adjustments) (c51)
This column is for the reporting of small known adjustments for items that cannot readily be reported in the main return (e.g. small capitalized expenses). Adjustments for netting impacts are to be made in c48 and unknown reconciliation differences are expected to be covered by the 2% error tolerance built in to the cross return rules with the M4 and LCR.
Balance sheet amount (as appears on M4) (c52)
This column is to be a verbatim reporting of M4 values.
Consolidated Entity Total (month-end value equals M4 within threshold) (c53)
This column is for the reporting of totals of the consolidated entity and is the sum of c47 through c51.
Found at OSFI Capital Adequacy Requirements Guideline (CAR) - Chapter 3– Credit Risk – Standardized Approach.
Return to footnote 1