Regulation 63/2020 on the Leverage Ratio of Banks

R E P U B L I C O F ALB ANI A BANK OF ALBANIA SUPERVISORY COUNCIL DECISION No. 63, dated 4.11.2020 ON THE APPROVAL OF REGULATION “ON THE LEVERAGE RATIO OF BANKS” Pursuant to and in accordance with Article 3, paragraph 3, Article 12, letter “a” and Article 43, letter “c” of the Law No. 8269, dated 23.12.1997 “On the Bank of Albania”, as amended; with Article 57 and 59 of the Law No. 9662, dated 18.12.2006 “On banks in the Republic of Albania”, as amended; having regard to the proposal from the Supervision Department, the Supervisory Council of the Bank of Albania, DECIDED:

1. To adopt the regulation “On the leverage ratio of banks”, according to the text attached to this Decision.
2. The regulation “On the leverage ratio of banks” shall enter into force on 1 January
4. Until entry into force of the regulation “On the leverage ratio”, banks shall take the necessary measures and shall create the conditions for the implementation of the requirements of this regulation. Banks shall report every 6 months to the Bank of Albania in relation to the performance of the undertaken measures.
5. The Supervision Department and the Financial Statistics Department of the Bank of Albania are responsible for monitoring the implementation of this Decision.
6. The Governor’ Office and the Research Department are responsible for the publication of this Decision in the Official Journal of the Republic of Albania and in the Official Bulletin of the Bank of Albania, respectively. This Decision shall enter into force 15 days following its publication in the Official Journal. SECRETARY DEPUTY CHAIR Elvis ÇIBUKU Luljeta MINXHOZI

2 REGULATION “ON THE LEVERAGE RATIO OF BANKS” CHAPTER I GENERAL Article 1 Purpose

1. The purpose of this regulation is to determine: a) the criteria and rules for calculating the leverage ratio of banks; and b) the minimum level of leverage ratio. Article 2 Subjects Entities subject to this regulation are banks and foreign bank branches licensed by the Bank of Albania to exercise banking and/or financial activity in the Republic of Albania, which, henceforth, would be referred to as simply “banks”. Article 3 Legal basis This regulation is adopted in accordance with: a) Article 3, paragraph 3, Article 12, letter “a” and Article 43, letter “c” of the Law no. 8269, dated 23.12.1997 ”On the Bank of Albania,” as amended; as well as b) Article 57 and 59 of the Law no. 9662, dated 18.12.2006, ''On banks in the Republic of Albania,” as amended, which, henceforth, would be referred to as Law “On banks.” Article 4 Definitions
2. The terms used in this regulation have the same meaning with the terms defined in the Law “On banks” and in the regulation “On capital adequacy ratio” (which would be referred to simply as “capital adequacy regulation”), regulation ”On the regulatory capital of banks” (which will be referred to simply as “regulatory capital regulation”), and regulation “On credit risk management from large exposures of banks” (which would be referred to simply as ”large exposures regulation”).
3. In addition to paragraph 1 of this Article, for the purpose of implementing this regulation, the following terms shall mean:

3 a) “regular-way purchases or sales” - means a purchase or sale of a security (financial asset) under contracts whose terms require delivery of the security (asset) within the period established generally by rules or conventions in the marketplace concerned where the security (asset) is sold or purchased; b) “cash pooling arrangement” - means an arrangement involving treasury products whereby a bank combines the outstanding credit and/or debit balances of several individual participating customers’ accounts, into a single account balance to facilitate cash and/or liquidity management; c) “written credit derivative” - means any financial instrument (such as credit default swaps, total return swaps, options etc.), where the bank shall provide credit protection under certain conditions of the contract; d) “securities financing transactions” - mean repurchase transactions, reverse repurchase transactions, securities lending or borrowing transactions and margin lending transactions, where the transaction value depends on market evaluations and transactions are usually subject to margin transactions; e) “material term” - means any characteristic of the credit derivative that is relevant to its valuation, including the level of subordination, optionality, credit events, underlying reference entity or group of reference entities, and underlying reference obligations or group of reference obligations, with the exception of the notional amount and residual maturity of the credit derivative; f) “reference entity” – means the issuer of the debt that underlies a credit derivative. The reference entity may be a corporation, sovereign or any other legal entity that issues debt of any kind. If a credit event occurs and the reference entity is unable to satisfy the conditions of the loan, the buyer of the credit derivative receives payments from the seller of the derivative; g) “multi-level client structure” - means an indirect clearing arrangement under which clearing services are provided to a bank by an entity which is not a clearing member, but is itself a client of a clearing member or of a higher-level client; h) “higher-level client” - means an entity providing clearing services to a lower-level client; i) “lower-level client” - means an entity accessing the services of a central counterparty through a higher-level client.

4 CHAPTER II LEVERAGE Article 5 Leverage ratio

1. Banks shall calculate the leverage ratio in accordance with the methodology set out in article 6 of this regulation.
2. Banks shall ensure at any time a leverage ratio of at least 5.75%, on individual and consolidated basis.
3. Banks shall respect at any given time the leverage ratio provided for in paragraph 2 of this article. If the leverage ratio falls under the threshold provided for in paragraph 2 of this article, the bank shall report immediately to the Bank of Albania, determining the necessary measures and time to return this ratio within the designated threshold. Article 6 Calculation of the leverage ratio
4. The leverage ratio shall be calculated as the bank’s Tier 1 capital divided by the bank’s total exposure at the reporting date, and shall be expressed as a percentage. Leverage ratio (%) = Bank′ s Tier 1 Capital Bank′s total exposure
5. For the purpose of calculating the ratio set out in paragraph 1 of this article, banks shall calculate the Tier 1 capital in accordance with the methodology provided for in the regulatory capital regulation.
6. For the purpose of calculating the ratio set out in paragraph 1 of this article, banks shall calculate the total exposure value as the sum of the following items/elements: a) balance-sheet assets, which are calculated in accordance with article 7 of this regulation; b) the exposure of derivative contracts listed in Annex 4 of the capital adequacy regulation, calculated in accordance with article 8 of this regulation; c) credit derivative’s exposures, calculated in accordance with article 9 of this regulation; d) securities financing transactions exposures, calculated in accordance with article 10 of this regulation; e) off-balance sheet items, excluding contracts and transactions deriving from transactions provided for in letters “b”, “c” and “d” of this paragraph, which are calculated in accordance with article 11 of this regulation;

5 f) regular-way purchases or sales awaiting settlement, calculated in accordance with article 7 of this regulation. 4. Unless otherwise provided for in this regulation, banks shall calculate the total exposure in accordance with the following requirements: a) exposure measure is calculated based on its accounting value and is expressed on gross basis; b) physical collateral in the form of fixed assets or financial collateral, guarantees or other credit risk mitigation techniques shall not be used to reduce the total exposure value; c) assets shall not be netted with liabilities. 5. In order to ensure consistency, banks may deduct from the total exposure value provided for in this article, any assets item deducted from Tier 1 capital according to the regulatory capital regulation, except items related to liabilities. 6. The originating bank in a traditional securitisation, may exclude securitised exposures from the total exposure value provided for in this article, if the securitisation meets the operational requirements for the recognition of significant risk transfer according to the capital adequacy regulation. Banks meeting these conditions shall include any retained/ not transferred securitisation exposure in their total exposure value. 7. With regard to traditional securitisations that do not meet the operational requirements for the recognition of significant risk transfer or to synthetic securitisations, banks shall include the securitised exposures to the total exposure value. 8. Under special circumstances, the Bank of Albania may decide to exclude the reserves held by banks in the central bank from the calculation of the total exposure value provided for in this article, for a period not exceeding one year. In this case, banks shall respect the minimum adjusted leverage ratio set out by the Bank of Albania. 9. When excluding central bank reserves from the calculation of the total exposure value provided for in paragraph 8 of this article, banks shall calculate and report to the Bank of Albania, as well as publish the adjusted leverage ratio, together with the leverage ratio provided for in article 5 of this regulation. The Bank of Albania shall set out and shall communicate to the banks the method for calculating the adjusted leverage ratio. CHAPTER III CALCULATION OF THE EXPOSURE VALUE Article 7 Calculation of the exposure value of assets

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1. Banks shall take into consideration all items, in the calculation of the exposure value of assets, including also on-balance sheet collateral of derivatives contracts and securities financing transactions, with the exception of on-balance sheet derivatives and securities financing transactions assets, which are treated according to the provisions laid down in articles 8 to 10 of this regulation.
2. Banks shall calculate the exposure value of on-balance sheet assets by taking into account their accounting value, after deducting reserves for loan loss provisions (including also statistical reserve funds), other value adjustments according to article 9 of the regulatory capital regulation and regulatory capital reductions related to these asset items.
3. Where a bank according to the accounting standards, recognises fiduciary assets on the balance sheet, these assets can be excluded from the leverage ratio exposure value, provided that the assets meet the International Financial Reporting Standards criteria for derecognition1 and, where applicable, IFRS2 criteria for deconsolidation.
4. Where a cash pooling arrangement entails a transfer at least on a daily basis of the credit and/or debit balances of the individual participating customer accounts into a single account balance, for purposes of the leverage ratio exposure value, banks shall take into consideration the balance of this single account and set to 0 (zero) the balance of individual participating customer accounts. Upon the transfer, banks shall not be liable for the balances of the individual customer accounts participating in the arrangement.
5. When the transfer of credit and/or debit balances of the individual participating customer accounts does not occur daily, banks shall deem that the transferring to a single account balance has occurred and this single account balance may serve as the basis of the total exposure value, with condition that all of the following requirements are met: a) the bank has the legally enforceable right to transfer, at any point in time, the balances of the individual participating customer accounts into a single account, and after the transfer the bank is not liable for the balances on an individual basis; b) the Bank of Albania deems that the frequency by which the balances of individual participating customer accounts are transferred to a single account are adequate for the purpose of calculating the total exposure value; c) there are no maturity mismatches among the balances of the individual participating customer accounts included in the cash pooling arrangement or all balances are either overnight or on demand. d) the bank charges or pays interest and/or fees based on the combined balance of the individual participating customer accounts included in the cash pooling arrangement.

1 IFRS 9. 2 IFRS 10.

7 6. In the event the requirements provided for in paragraph 5 of this article are not met, the bank shall reflect the individual balances of the participating customer accounts in a separate manner in the total exposure value. 7. Banks shall treat cash and securities/assets related to regular-way sales and purchases which remain on the balance sheet until the settlement date, as on-balance sheet assets. 8. Banks applying trade date accounting to regular-way purchases and sales which are awaiting settlement, according to the accounting standards, shall reverse out any offsetting between cash receivables for regular way sales waiting settlement and cash payables for regular way purchase awaiting settlement allowed under the applicable accounting standards. Upon having reversed out any offsetting, banks may offset between those cash receivables and cash payables where both the related regular-way sales and purchase are settled on a delivery-versus-payment (DVP) basis. 9. Banks applying settlement date accounting for regular-way purchases or sales which are awaiting settlement, according to the accounting standards, shall include in the total exposure value, the full nominal value of commitment to pay related to regular-way purchases. Banks shall offset this value with the full nominal value of cash receivables related to regular-way sales awaiting settlement only where both of the following conditions are met: a) regular-way purchases and sales are settled on a deliver-versus-payment (DVP) basis; b) the financial assets bought and sold that are associated with cash payables and receivables are fair valued through income and loss and are included in the bank’s trading book. Article 8 Calculation of the exposure value of derivatives

1. Banks shall calculate the exposure value of derivative contracts listed in Annex 4 of the capital adequacy regulation and of credit derivatives, including also derivative contracts and credit derivatives that are off-balance sheet, in accordance with the mark-to-market method set out in article 129 of the capital adequacy regulation.
2. In the event the derivative exposure is covered by a recognised/accepted bilateral netting agreement, banks shall implement the treatment laid down in paragraph 3 to 5 of this article.
3. For the purpose of calculating the total exposure value, banks may net transactions which are subject to bilateral agreements for novation and to other forms of bilateral netting agreements, provisioned in article 134, paragraph 2 of the capital adequacy

8 regulation, provided that the conditions laid down in subchapter II of Chapter VI of the capital adequacy regulation are met. 4. For the purpose of calculating the total exposure value, contracts containing walkaway clauses3 will not be eligible for netting pursuant to this article. 5. Banks shall calculate the exposure value of written credit derivatives in accordance with article 9 of this regulation. 6. As regards derivative transactions covered by a bilateral netting agreement provided for in paragraphs 3 and 4 of this article, banks shall implement the method of calculating the exposure value as set out in paragraph 1 of this article, for the entire netting (compensation) group. 7. Regarding derivative transactions which are not covered by a bilateral netting agreement laid down in paragraphs 3 and 4 of this article, banks shall determine the exposure value for each transaction separately. 8. For the purpose of calculating the total exposure value in accordance with the requirements of this article, banks shall not deduct the collateral/guarantee value received from the counterparty from the value of derivative exposure. 9. When the value of collateral/guarantee provided to the counterparty is deducted from the on-balance sheet assets, according to the accounting standards, banks shall add to the value of exposure, the value of collateral/guarantee provided. Article 9 Calculation of the exposure value of written credit derivatives

1. In addition to the calculation of the derivative value as laid down in article 8 of this regulation, banks shall also include to the calculation of the exposure value of written credit derivatives the effective notional amount referred to for this type of derivatives, after deducting any negative change in fair value amount that has been incorporated into the calculation of Tier 1 capital with respect to the written credit derivative.
2. Banks shall calculate the effective notional amount of written credit derivatives by adjusting/correcting the notional amount of these derivatives to reflect the true exposure of contracts that are leveraged or otherwise enhanced by the structure of the transaction.

3 “a walkaway clause” is a provision that permits a non-defaulting counterparty to make only limited payments, or no payment at all, to the estate of a defaulter, even if the defaulter is a net creditor in the netting (compensation) agreement.

9 3. Banks may partially or fully reduce the exposure value calculated in accordance with paragraphs 1 and 2 of this article, by the effective notional amount of purchased credit derivatives, on the same reference4 name, provided that all the following conditions are met: a) the purchased credit derivatives are subject to the same or more conservative material terms as those in the corresponding written credit derivative; b) the remaining maturity of the purchased credit derivative is equal to or greater than the remaining maturity of the written credit derivative; c) in the event that the effective notional amount of a written credit derivative is reduced by any negative change in the fair value amount incorporated in the Tier 1 capital, the effective notional amount of the purchased credit derivative is reduced by a positive change in the fair value incorporated in the Tier 1 capital; and d) the purchased credit derivative is not included in a transaction that has been cleared by the bank on behalf of a client (or that has been cleared by the bank in its role as a higher-level client in a multi-level client structure) and for which the effective notional amount referenced by the corresponding written credit derivative is excluded from the exposure value calculation according to this paragraph. 4. Without prejudice to letter “a” of paragraph 3 of this article, banks may use purchased credit derivatives on a pool of reference names to offset written credit derivatives on individual reference names within that pool, where the pool of reference entities and the level of subordination in both transactions are the same. 5. Banks shall not reduce the effective notional amount of written credit derivatives if they buy credit protection through a total return swap and record the net payments received as net income, but do not record in Tier 1 capital any offsetting deterioration in the value of the written credit derivative (through the reduction of the fair value or growth of reserve). 6. In the case of purchased credit derivatives on a pool of reference obligations, banks may reduce the effective notional amount of written credit derivatives on individual reference obligations by the effective notional amount of purchased credit derivatives in accordance with paragraph 3 of this article, only where the protection purchased is economically equivalent to buying protection separately on each of the individual obligations in the pool. Article 10 Calculation of the exposure value for securities financing transactions

1. Banks shall calculate the exposure value for securities financing transactions in accordance with the treatment laid down in this article.

4 Two reference names will be considered the same only if they refer to the same legal entity.

10 2. In the event that the bank acts as the issuer of securities financing transactions, the exposure value for these transactions shall be calculated as the sum of the elements provided for in paragraphs 3 and 4 of this article. 3. Banks shall include in the exposure value, the gross securities financing transactions assets, recognised according to accounting standards, after the following adjustments: a) exclude from the exposure value, the value of any securities received/accepted under the securities financing transactions (SFTs), where the security is recognised as an asset on the bank’s balance sheet; and b) cash payables and cash receivables in SFTs with the same counterparty are measured in net, if all the following criteria are met: i. transactions have the same explicit final settlement date (transactions with no explicit end date but which can be finalised at any time by either party to the transaction are not eligible for the purpose of this sub-paragraph); ii. the right to set off the amount owed to the counterparty by the bank, with the amount owed by the counterparty to the bank, is legally enforceable, both in the normal course of business and in the event of the counterparty's default, insolvency or bankruptcy; and iii. the counterparties intend to settle net, settle simultaneously, or the transactions are subject to a settlement mechanism that results in the equivalent of net settlement - that is, the cash flows of the transactions are equivalent to a single net amount on the settlement date. To achieve such equivalence, both transactions are settled through the same settlement system and the settlement arrangements are supported by cash and/or intraday credit facilities intended to ensure that settlement of both transactions will occur by the end of the business day and any issues arising from the collateral flow do not interfere with the completion of the net settlement of the cash receivables and payables. 4. For the purpose of calculating the exposure value of securities financing transactions, banks shall take into consideration the counterparty credit risk as well, calculated in accordance with paragraphs 5 and 6 of this article. 5. As regards transactions with a counterparty that is subject to a master netting (compensation) agreement that meets the conditions set out in article 73 of the capital adequacy regulation, banks shall calculate the exposure value for each agreement (calculation on an agreement-by-agreement basis), in accordance with the following formula: Ei* = max {0, [ΣEi – ΣCi]} where, Ei* = the exposure value of counterparty credit risk; i = the index that denotes the netting agreement;

11 Ei = the fair value of securities or cash lent to the counterparty for all the transactions that are subject to master netting agreement “i”; and Ci = the fair value of securities or cash received from the counterparty for all the transactions that are subject to master netting agreement “i”. 6. As regards transactions with a counterparty that is subject to a master netting (compensation) agreement that does not meet the conditions set out in article 73 of the capital adequacy regulation, banks shall calculate the exposure value for each transaction (calculation on a transaction-by-transaction basis), in accordance with the following formula: Ei* = max {0, [Ei – Ci]} where, Ei*= the exposure value of counterparty credit risk; i = the index that denotes the transaction; Ei = the fair value of securities or cash lent to the counterparty under transaction “i”; and; Ci = the fair value of securities or cash received from the counterparty under transaction “i”. 7. Banks may set to zero the exposure value of Ei* provided in paragraph 6 of this article, if: a) Ei is the cash lent to the counterparty; b) the transaction is treated as its own netting set; and c) the associated cash receivable is not eligible for the netting treatment laid down in paragraph 3 of this article. Article 11 Calculation of the exposure value of off-balance-sheet items

1. Banks shall calculate the exposure value of off-balance sheet items, excluding derivative contracts listed in Annex 4 of the capital adequacy regulation, credit derivatives and securities financing transactions referred to in articles 8 to 10 of this regulation, in accordance with paragraph 2 of this article.
2. For the purpose of calculating the leverage ratio, banks shall calculate the exposure value of off-balance sheet items listed in Annex 2 of the capital adequacy regulation, by applying to the value of potential exposure, the following percentages (conversion factors): a) 100% for high-risk categories; b) 50% for medium-risk categories; c) 20% for low-risk categories; d) 10% for risk-free categories.

12 CHAPTER IV SUPERVISORY REQUIREMENTS Article 12 Reporting requirements

1. Banks shall report quarterly the leverage ratio to the Supervisory Department of the Bank of Albania, on individual and consolidated basis, in accordance with the Unified Reporting System and the forms laid down in Annex 1 of this regulation. Article 13 Supervisory measures The Bank of Albania shall apply the supervisory and/or punitive measures in cases of non-compliance with the requirements of this regulation, in accordance with articles 74 to 80 and article 89 of the Law on banks. Article 14 Entry into force
2. This regulation shall enter into force on 1 January 2022.
3. Until the entry into force of this regulation, banks shall report quarterly the leverage ratio to the Supervisory Department of the Bank of Albania, on individual basis, in accordance with the forms of Annex 1, starting from March 2021. Article 15 Last provisions The attached Annexes are a component part of this regulation. DEPUTY CHAIR OF THE SUPERVISORY COUNCIL Luljeta MINXHOZI

13 ANNEX 1 - LEVERAGE RATIO Form number Form code Name of the form 1 F 1 Form 1 - Leverage ratio calculation Quarterly F1 2 F 2 Form 2 - Alternative treatment of the exposure value Quarterly F2 3 F 3 Form 3 - Alternative breakdown of total exposure's components Quarterly F3 Note: Periodicity Link LEVERAGE RATIO REPORTING FORMS

1. Banks, for forms F1 - F3, should not fill in the red fields.
2. Banks shall respect at any given time the leverage ratio provided for in Article 5 of this regulation and report to the Bank of Albania on an individual and consolidated basis, in accordance with the Forms F1-F3.
3. Banks, for forms F1 - F3, should not fill in the gray fields, as they contain formulas.

14 0010 Securities financing transactions : Exposure value 0020 Securities financing transactions: Add-on for counterparty credit risk 0030 Derivatives: replacement cost contribution under the Mark-to-Market method for counterparty credit risk 0040 Derivatives: Potential future exposure contribution under the Mark-to-Market method for counterparty credit risk 0050 Notional amount of written credit derivatives 0060 (-) Eligible purchased credit derivatives offset against written credit derivatives 0070 Off-balance sheet items with a 10% conversion factor (CCF) 0080 Off-balance sheet items with a 20% conversion factor (CCF) 0090 Off-balance sheet items with a 50% conversion factor (CCF) 0100 Off-balance sheet items with a 100% conversion factor (CCF) 0110 Regular-way purchases and sales awaiting settlement: Accounting value under trade date accounting 0120 Regular-way sales awaiting settlement: Reverse out of accounting offsetting, under trade date accounting 0130 (-) Regular-way sales awaiting settlement: offset in accordance with article 7, paragraph 8, under trade date accounting 0140 Regular-way purchases awaiting settlement: Full recognition of commitments to pay, under settlement date accounting 0150 (-) Regular-way purchases awaiting settlement: offsetting of commitments to pay, under settlement date accounting 0160 Other assets 0170 (-) General credit risk adjustments to on-balance sheet items 0180 Cash pooling arrangements that cannot be netted prudentially: value according to the accounting standards 0190 Cash pooling arrangements that cannot be netted prudentially: effect of grossing-up the netting applied in accordance with accounting standards 0200 Cash pooling arrangements that can be netted prudentially: value according to the accounting standards 0210 Cash pooling arrangements that can be netted prudentially: effect of grossing-up the netting applied in accordance with accounting standards 0220 (-) Cash pooling arrangements that can be netted prudentially: Recognition of netting in accordance with article 7, paragraph 4 0230 (-) Cash pooling arrangements that can be netted prudentially: Recognition of netting in accordance with article 7, paragraph 5 0240 Gross up for derivatives collateral provided 0250 (-) Fiduciary assets 0260 (-) Excluded securitised exposures representing significant risk transfer 0270 (-) Exposures to the central bank exempted 0280 (-) Asset amount deducted - Tier 1 capital 0290 Total exposure value for the purpose of calculating Leverage Ratio 0 Row Capital 0300 Tier 1 Capital Row Leverage Ratio 0310 Leverage Ratio Form F1 - LEVERAGE RATIO CALCULATION Row Exposure Values Exposure value on the reporting date

15 Form F2- ALTERNATIVE TREATMENT OF THE EXPOSURE VALUE 0010 0020 0030 0040 0050 0060 0010 Derivatives 0 0020 Credit derivatives (protection sold) 0 0030 Credit derivatives (protection sold), which are subject to a close out clause 0040 Credit derivatives (protection sold), which are not subject to a close out clause 0050 Credit derivatives (protection bought) 0060 Financial derivatives 0070 Security Financing Transactions 0080 Other assets 0090 Off-balance sheet items 0100 Cash collateral received in derivatives transactions 0110 Receivables for cash collateral posted in derivatives transactions 0120 Securities received in a Security Financing Transaction that are recognised as an asset 0130 Central bank reserves 0140 The central bank exposures value used for the calculation of the adjusted leverage ratio requirement referred to in article 6 of the regulation 0150 Leverage ratio exposure value used for the calculation of the adjusted leverage ratio requirement referred to in article 6 of the regulation Efective notional amount Efective notional amount (same reference name) Leverage ratio exposure amount Row Accounting balance sheet value Accounting value assuming no netting or other Credit Risk Mitigation (CRM) techniques Notional amount

16 0010 0020 0010 Off-balance sheet items 0020 of which:Trade finance 0030 Derivatives 0040 Securities Financing Transactions 0050 Exposure amounts resulting from the additional treatment for credit derivatives 0060 Other assets belonging to the trading book 0010 0020 0070 Covered bonds 0080 Exposures treated as sovereigns 0 0 0090 Central governments and central banks 0100 Regional governments and local authorities treated as sovereigns exposure 0110 Multilateral development banks and international organisations treated as sovereigns 0120 Public sector entities treated as sovereigns 0130 Exposures to regional governments, multilateral development banks, international organisations and public sector entities not treated as sovereigns 0 0 0140 Regional governments and local authorities not treated as sovereigns 0150 Multilateral development banks not treated as sovereigns 0160 Public sector entities not treated as sovereigns 0170 Supervised institutions 0180 Exposures secured by mortgages on immovable properties 0190 of which: exposure secured by mortgages of residential properties 0200 Retail exposures 0210 of which: Retail Small- and medium-sized enterprises exposures (SMEs) 0220 Corporate exposures 0 0 0230 Financial 0240 Non-financial 0 0 0250 Small- and medium-sized enterprises exposures (SME) 0260 Exposures other than small- and medium-sized enterprises exposures (SME) 0270 Past due exposures 0280 Other exposures 0290 of which: Securitisation exposures Risk-weighted exposures, under standardised approach Form F3 - ALTERNATIVE BREAKDOWN OF TOTAL EXPOSURE'S COMPONENTS Row Off-balance sheet items, derivatives, security financing transactions and trading book Leverage ratio exposure value Risk-weighted exposures Row Other non-trading book exposures Leverage ratio exposure value, under standardised approach

17 ANNEX 2 INSTRUCTIONS FOR FILLING OUT ANNEX 1 TEMPLATES RAPORTING ON THE LEVERAGE RATIO Content: PART I: GENERAL INSTRUCTIONS 18

1. STRUCTURE AND OTHER CONVENTIONS.......................................................................................18 I. 1.1 STRUCTURE .....................................................................................18 II. 1.2 NUMBERING CONVENTION......................................................................18 III. 1.3 SIGN CONVENTION ..............................................................................18 IV. 1.4 FORMULAS FOR LEVERAGE RATIO CALCULATION ..............................................18 PART II: INSTRUCTIONS RELATED TO FORMS 19 I. FORM F1 – LEVERAGE RATIO CALCULATION.................................................................................19 II. FORM F2 – ALTERNATIVE TREATMENT OF THE EXPOSURE VALUE................................................26 III. FORM F3 – ALTERNATIVE BREAKDOWN OF TOTAL EXPOSURE’S COMPONENTS ..........................31

18 PART I: GENERAL INSTRUCTIONS

1. Structure and other conventions 1.1 Structure
2. This Annex contains instructions for filling out the forms of Annex 1 of this regulation.
3. Banks will report according to the three following forms:  Form F1 - Leverage Ratio Calculation;  Form F2 - Alternative treatment of the exposure measure;  Form F3 - Alternative breakdown of total exposure’s components;
4. For each form are provided the regulatory references, as well as, further detailed information regarding more general aspects of the reporting. 1.2 Numbering convention
5. The Instructions will follow the labelling convention set in the following paragraphs, when referring to the columns, rows and cells of the forms.
6. The following general notation is followed in the instructions: {Form; Row; Column}.
7. In the case of instructions within the same form, notations will not refer to a form, but will be noted in this form: {Row; Column}. In the case of instructions of Form F1, notations will not refer to columns but only to rows and will be noted in this form: {Row}.
8. For the purpose of the reporting on leverage ratio, “of which” refers to an item that is a subset of a higher level exposure category. 1.3 Sign convention
9. As a general rule, all amounts shall be reported as positive figures, with the exception of: a. the items whose label is preceded by a negative sign (-), where no positive figure is expected to be reported for that item. b. Row {0300} and row {0310} in Form F1, which could take negative values in extreme cases, otherwise they take positive values. 1.4 Formulas for leverage ratio calculation
10. The leverage ratio takes into account the Tier 1 capital and the total exposure value, which is calculated according to the provisions laid down in this regulation and takes its values from Form F1, specifically: Tier 1 capital from row {0300} and total exposure value from row {0290}.
11. The leverage ratio(%) = Tier 1 Capital Total exposure

19 PART II: INSTRUCTIONS RELATED TO FORMS I. Form F1 – Leverage ratio calculation

1. This Form collects the data that are needed to calculate the leverage ratio as defined in this regulation.
2. Banks shall report quarterly the forms on components and the leverage ratio. In each quarter, the value “at reporting reference date” shall be the value at the last calendar day of the third month of the respective quarter.
3. Banks shall report the items in the “Exposure value” column with positive sign in accordance with the sign convention in section 1.3 of this Annex, excluding row {0280}, as if the items with a negative sign (for example exemptions/deductions) in accordance with the sign convention in section 1.3 of this Annex did not apply.
4. Any amount that increases the regulatory capital or the total exposure shall be reported as a positive figure. On the contrary, any amount that reduces the regulatory capital or the total exposure shall be reported as a negative figure. Where there is a negative sign (-) preceding the label of an item no positive figure is expected to be reported for that item.
5. Where an amount could qualify for deduction from multiple items, the amount shall be deducted from only one item/row of the form, to avoid double calculation. Regulation’s references and instructions for filling the forms Row Exposure values 0010 Securities financing transactions (SFTs): Exposure value Article 10, paragraph 3 This row shows the exposure value of the securities financing transactions which is calculated according to provisions laid down in article 10, paragraph 3 of the regulation. Banks shall not include in this row cash received or any security that is provided to a counterparty via the aforementioned transactions and is recognized on the balance sheet as an asset (i.e. the accounting criteria for derecognition are not met). In this case, banks shall include these items in the row {0160}. 0020 Securities financing transactions: Add-on for counterparty credit risk Article 10, paragraph 4 This row shows the add-on for counterparty credit risk of SFTs, including those that are off-balance sheet, determined in accordance with paragraph 5 or 6 of article 10 of the regulation, as applicable. 0030 Derivatives: replacement cost contribution under the Mark-to-Market method for counterparty credit risk Article 8, paragraph 1

20 This row shows the actual cost of contract replacement calculated according to the provisions set out in article 129 of the capital adequacy regulation. As laid down in article 8, paragraph 2 of the regulation, banks may net transactions that are subject of bilateral agreements for novation and other forms of bilateral netting agreements, in accordance with the provisions laid down in this article. Banks shall include all credit derivatives, not only those of the trading book. 0040 Derivatives: Potential future exposure contribution under the Mark-to-Market method for counterparty credit risk Article 8, paragraph 1 This row shows the potential future exposure contribution of credit calculated according to provisions laid down in article 129 of the capital adequacy regulation. 0050 Notional amount of written credit derivatives Article 9 This row shows the effective notional amount of written credit derivatives (as provided for in article 9 of the regulation). 0060 (-) Eligible purchased credit derivatives offset against written credit derivatives Article 9 This row shows the effective notional amount of purchased credit derivatives (i.e. where the bank is buying credit protection from a counterparty) on the same reference names as those credit derivatives written by the bank, where the remaining maturity of the purchased protection (derivative) is equal to or greater than the remaining maturity of the written protection (derivative). Hence, the value shall not be greater than the value entered in row {0050}, for each reference name. 0070 Off-balance sheet items with a 10% conversion factor Article 11 This row shows the exposure value, in accordance with article 11 of this regulation, of risk-free off-balance sheet items, referred to in Annex 2 of the capital adequacy regulation, that would be assigned a 0% credit conversion factor, where the exposure value shall be 10% of the nominal value In this row banks shall not include derivative contracts provided for in Annex 4 of the capital adequacy regulation, credit derivatives and securities financing transactions, in accordance with article 11 of the regulation. 0080 Off-balance sheet items with a 20% conversion factor Article 11 This row shows the exposure value in accordance with article 11 of the regulation, for low risk off-balance sheet items referred to in Annex 2 of the capital adequacy regulation, where the exposure value shall be 20% of the nominal value.

21 In this row, banks shall not include credit derivatives listed in Annex 4 of the capital adequacy regulation, credit derivatives and securities financing transactions referred to in article 11 of the regulation. 0090 Off-balance sheet items with a 50% conversion factor Article 11 This row shows the exposure value in accordance with article 11 of this regulation, of medium risk off-balance sheet items referred to in Annex 2 of the capital adequacy regulation, that are assigned a 50% conversion factor, where the exposure value of these items would be 50% of the nominal value. In this row, banks shall not consider derivative contracts listed in Annex 4 of the capital adequacy regulation, credit derivatives and securities financing transactions in accordance with article 11 of the regulation. 0100 Off-balance sheet items with a 100% conversion factor Article 11 This row shows the exposure value, in accordance with article 11 of this regulation, of high risk off-balance sheet items, referred to in Annex 2 of the capital adequacy regulation, that are assigned a 100% conversion ratio, where the exposure value of these items shall be 100% of the nominal value. In this row, banks shall not consider derivative contracts listed in Annex 4 of the capital adequacy regulation, credit derivatives and securities financing transactions in accordance with article 11 of the regulation. 0110 Regular-way purchases and sales awaiting settlement: Accounting value under trade date accounting Article 7, paragraph 7 This row shows the sum of:

• the amount of the cash related to regular-way purchases which remain on the balance sheet until the settlement date, as on-balance sheet assets;
• the cash receivables related to regular-way sales which remain on the balance sheet, until the settlement date, as on-balance sheet assets. This amount is calculated after the effect of offsetting between cash receivables for regular￾way sales awaiting settlement and cash payables for regular-way purchases awaiting settlement, as allowed under the applicable accounting standards. Banks that follow the trade date accounting shall report the abovementioned sum in this row, instead of row {0160} “Other assets”, while they shall report the securities related to regular-way purchases in row {0160}. 0120 Regular-way sales awaiting settlement: Reverse out of accounting offsetting under trade date accounting Article 7, paragraph 8

22 This row reflects the offset amount between cash receivables for regular-way sales awaiting settlement and cash payables for regular-way purchase awaiting settlement allowed under the applicable accounting standards. 0130 (-) Regular-way sales awaiting settlement: offset in accordance with article 7, paragraph 8 under trade date accounting Article 7, paragraph 8 This row shows the offset amount between cash receivables and cash payables where both the related regular-way sales and purchases are settled on a delivery-versus￾payment basis in accordance with article 7, paragraph 8 of the regulation. 0140 Regular-way purchases awaiting settlement: Full recognition of commitments to pay under settlement date accounting Article 7, paragraph 9 This row shows the full nominal value of commitments to pay related to regular-way purchases, for banks that, in accordance with the applicable accounting standards, apply settlement date accounting to regular-way purchases and sales. Securities related to regular-way sales shall be reported in row {0160} “Other assets”. 0150 (-) Regular-way purchases awaiting settlement: offset of commitments to pay under settlement date accounting Article 7, paragraph 9 This row shows the part of the amount reported in row 0140 offset by the full nominal value of cash receivables related to regular-way sales awaiting settlement in accordance with article 7, paragraph 9. 0160 Other assets Article 6, paragraph 3, letter “a” This row shows the amount of all assets other than derivative contracts listed in Annex 4 of the capital adequacy regulation, credit derivatives and securities financing transactions. Banks shall base valuation on the principles set out in article 6, paragraph 4 of the regulation. Banks shall include in this row cash receivables or any security that is provided to a counterparty via SFTs which remain on the balance sheet (i.e. the accounting criteria for derecognition are not met). Furthermore, banks shall recognise in this row items that are deducted from Common Tier 1 Capital and Additional Tier 1 Capital items (e.g. intangibles assets, deferred tax assets etc.). The amount reported in row {0170} shall not be taken into account as a reduction in the calculation of this row. Cash pooling arrangements shall be reported in rows {0180} to {0230} and not here.

23 0170 (-) General credit risk adjustments to on-balance sheet items Article 7 This row shows the amount of deductions corresponding to on-balance sheet items referred to in article 6, paragraph 3, letter “a”, banks deduct in accordance with paragraph 2 of article 7 of the regulation. The amount reported shall not be considered as a reduction in the calculation of other assets reported in row {0160}. 0180 Cash pooling arrangements that cannot be netted prudentially: value according to the accounting standards Article 7, paragraph 6 This row shows the accounting value of cash pooling arrangements, where the credit or debit balances of several individual accounts are combined for the purposes of cash or liquidity management, which cannot be netted in accordance with paragraphs 4 and 5 of article 7. 0190 Cash pooling arrangements that cannot be netted prudentially: effect of grossing￾up the netting applied in accordance with accounting standards Article 7, paragraph 6 This row shows the netted amount under the applicable accounting standards on the cash pooling arrangements that cannot be netted prudentially, reported in row {0180}. 0200 Cash pooling arrangements that can be netted prudentially: value according to the accounting standards Article 7, paragraphs 4 and 5 This row shows the accounting value of cash pooling arrangements, where the credit or debit balances of several individual accounts are combined for the purposes of cash or liquidity management, which can be netted in accordance with paragraphs 4 and 5 of article 7. 0210 Cash pooling arrangements that can be netted prudentially: effect of grossing-up the netting applied in accordance with accounting standards Article 7, paragraph 4 This row shows the netted amount under the applicable accounting standards on the cash pooling arrangements that can be netted prudentially, reported in row {0200}. Where the banks conduct overnight transfers of debit and credit balances to one single account, they shall not apply the gross-up in this row to balances of individual clients’ accounts which balances are set to 0 during the transferring process as provided in article 7, paragraph 4. 0220 (-) Cash pooling arrangements that can be netted prudentially: Recognition of netting in accordance with article 7, paragraph 4 Article 7, paragraph 4

24 This row shows the netted amount from the gross exposure related to cash pooling arrangements (sum of rows {0200} and {0210}), in accordance with article 7, paragraph 4. 0230 (-) Cash pooling arrangements that can be netted prudentially: Recognition of netting in accordance with article 7, paragraph 5 Article 7, paragraph 5 This row shows the netted amount from the gross exposure related to cash pooling arrangements (sum of rows {0200} and {0210}) in accordance with article 7, paragraph 5. 0240 Gross-up for derivatives collateral provided Article 8, paragraph 9 This row shows the value of any collateral provided for derivatives exposures, where the provision of that collateral reduces the amount of assets under the applicable accounting standards, as set out in article 8, paragraph 9. 0250 (-) Fiduciary assets Article 7, paragraph 3 This rows shows the value of fiduciary assets that are recognised on the bank's balance sheet by accounting standards, which meet the international financial reporting standards (specifically IFRS 9 for derecognition and, where applicable, IFRS 10 for deconsolidation), in accordance with article 7, paragraph 3 of the regulation, assuming there are no accounting netting or other credit risk mitigation effects (i.e. any effects of accounting netting or credit risk mitigation that have affected the accounting value shall be reversed). The amount reported shall also be included in item “Other assets” reported in row {0160}. 0260 (-) Excluded securitised exposures representing significant risk transfer Article 6, paragraph 6 This row shows the securitised exposures from traditional securitisations that meet the conditions for significant risk transfer provided for in the capital adequacy regulation. The amount reported shall also be included in the applicable rows above as if no exemption applied. 0270 (-) Exposures to the central bank exempted Article 6, paragraphs 8 and 9 The amount reported shall also be included in the applicable rows above as if no exemption applied.

25 0280 (-) Asset amount deducted - Tier 1 capital Article 6, paragraph 5 This row includes all the adjustments that target the value of an asset and which are required by:

• articles 7 to 10; or
• articles 11 to 19; or
• articles 25 to 29 of the regulatory capital regulation, as applicable. Banks shall take into account also the treatment set out in article 20 of the regulatory capital regulation. To avoid double counting, in this row banks shall not report adjustments already applied pursuant to article 7, paragraph 2 of the regulation, when calculating the exposure value in rows {0010} to {0270}, nor shall they report any adjustment that does not deduct the value of a specific asset. As these amounts are already deducted from the Tier 1 capital, they will reduce the total exposure value and shall be reported as a negative figure in this row. 0290 Total exposure value for the purpose of calculating Leverage Ratio In this row banks shall report the sum of all rows from {0010} to {0280}. Row Capital 0300 Tier 1 capital Article 6, paragraph 2 This row shows the amount of Tier 1 capital as calculated in accordance with the regulatory capital regulation. Row Leverage Ratio 0310 Leverage Ratio Article 6, paragraph 1 This is the leverage ratio as calculated under paragraph 1 of article 6 of the regulation.

26 II. Form F2 – Alternative treatment of the exposure value

1. This reporting form collects data on an alternative treatment of exposure value of derivatives, securities financing transactions and off-balance sheet items.
2. Banks shall determine the “Accounting balance sheet values” in Form F2 based on the applicable accounting standards. The term “Accounting value assuming no netting or other credit risk mitigation techniques (CRM)” refers to the accounting balance sheet value not taking into account any effects of netting or other credit risk mitigation techniques.
3. Banks shall report F2 items, as if the items with a negative sign in the F1 template (for example exemptions/deductions) in accordance with the sign convention provided in section 1.3 of this Annex, except row {0280}, not to be considered. {Row and column} Regulation’s references and instructions for filling the forms {0010;0010} Derivatives – Accounting balance sheet value This cell is the sum of {0020;0010}, {0050;0010} and {0060;0010}. {0010;0020} Derivatives – Accounting value assuming no netting or CRM This cell is the sum of {0020;0020}, {0050;0020} and {0060;0020}. {0010;0030} Derivatives – Notional amount This cell is the sum of {0020;0030}, {0050;0030} and {0060;0030}. {0020;0010} Credit derivatives (protection sold) – Accounting balance sheet value The accounting balance sheet value under the applicable accounting standards of credit derivatives where the bank is selling credit protection to a counterparty and the contract is recognised as an asset on the balance sheet. {0020;0020} Credit derivatives (protection sold) – Accounting value assuming no netting or other CRM The accounting balance sheet value under the applicable accounting standards of credit derivatives where the bank is selling credit protection to a counterparty and the contract is recognised as an asset on the balance sheet, assuming no prudential or accounting netting or other CRM effects (i.e. any effects of accounting netting or credit risk mitigation techniques that has affected the accounting value shall be reversed). {0020;0030} Credit derivatives (protection sold) – Notional amount This is the sum of {0030;0030} and {0040;0030}. {0020;0040} Credit derivatives (protection sold) – Effective notional amount

27 The bank provides the notional amount referenced by the credit derivatives (protection sold) as in {0020;0030} after deduction by any negative fair value changes that have been incorporated in Tier 1 capital with respect to the written credit derivative. {0030;0030} Credit derivatives (protection sold), which are subject to a close-out clause – Notional amount The bank provides the notional amount referenced by credit derivatives where the bank is selling credit protection to a counterparty subject to a close-out clause. A close-out clause shall be defined as a clause that provides the non-defaulting party the right to terminate and close-out in a timely manner all transactions under the agreement between the parties upon an event of default, including in event of insolvency or bankruptcy of the counterparty. Banks shall consider all credit derivatives, not just those assigned to the trading book. {0040;0030} Credit derivatives (protection sold), which are not subject to a close-out clause – Notional amount The bank provides the notional amount referenced by credit derivatives where the bank is selling credit protection to a counterparty not subject to a “close-out clause”. A close-out clause shall be defined as a clause that provides the non-defaulting party the right to terminate and close-out in a timely manner all transactions under the agreement between parties, upon an event of default, including in the event of insolvency or bankruptcy of the counterparty. Banks shall consider all credit derivatives, not just those assigned to the trading book {0050;0010} Credit derivatives (protection bought) – Accounting balance sheet value The accounting balance sheet value under the applicable accounting standards of credit derivatives where the bank is buying credit protection from a counterparty and the contract is recognised as an asset on the balance sheet. Banks shall consider all credit derivatives, not just those assigned to the trading book. {0050;0020} Credit derivatives (protection bought) – Accounting value assuming no netting or other credit risk mitigation The accounting balance sheet value under the applicable accounting standards of credit derivatives where the bank is buying credit protection from a counterparty and the contract is recognised as an asset on the balance sheet assuming no prudential or accounting netting or CRM effects (i.e. any effects of accounting netting or CRM that have affected the accounting value shall be reversed). Banks shall consider all credit derivatives, not just those assigned to the trading book. {0050;0030} Credit derivatives (protection bought) – Notional amount The bank provides the notional amount referenced by credit derivatives where the bank is buying credit protection from a counterparty. Banks shall consider all credit derivatives, not just those assigned to the trading book.

28 {0050;0040} Credit derivatives (protection bought) – Effective notional amount The bank provides the notional amount referenced by credit derivatives (protection bought) as in {0050;0030}, after reduction of any positive fair value changes that have been incorporated in Tier 1 capital with respect to the credit derivatives bought. {0050;0050} Credit derivatives (protection bought) – Effective notional amount (same reference name) The notional amount referenced by credit derivatives, where the bank is buying credit protection on the same reference name as those credit derivatives written by the reporting bank. For the purpose of reporting this cell value, reference names are considered the same if they refer to the same legal entity and level of seniority. Credit protection bought on a pool of reference entities is considered the same if this protection is equivalent to buying protection separately on each of the individual names in the pool. If a bank is buying credit protection on a pool of reference names, then this credit protection is considered the same, only if the bought credit protection covers the entirety of the subsets of the pool on which credit protection has been sold. In other words, offsetting may only be recognised when the pool of reference entities and the level of subordination in both transactions are identical. For each reference name, the notional amounts of credit protection bought which are considered in this cell shall not exceed the amounts reported in {0020;0040} and {0050;0040}. {0060;0010} Financial derivatives – Accounting balance sheet value The accounting balance sheet value under the applicable accounting standards, of contracts listed in Annex 4 of the capital adequacy regulation, where the contracts are recognised as assets on the balance sheet. {0060;0020} Financial derivatives – Accounting value assuming no netting or other CRM The accounting balance sheet value under the applicable accounting standards, of contracts listed in Annex 4 of the capital adequacy ratio, where the contracts are recognised as assets on the balance sheet assuming no prudential or accounting netting or other CRM effects (i.e. any effects of accounting netting or CRM that have affected the accounting value shall be reversed). {0060;0030} Financial derivatives - Notional amount The bank provides in this cell, the notional amount referenced by contracts listed in Annex 4 of the capital adequacy regulation. {0070;0010} Security Financing Transactions - Accounting balance sheet value The accounting balance sheet value of SFTs under the applicable accounting standards, where the contracts are recognised as assets on the balance sheet. Banks shall not include in this cell, cash received or any security that is provided to a counterparty via the aforementioned transactions and is retained on the balance

29 sheet (i.e. the accounting criteria for derecognition are not met). In this event banks shall instead include this in {0080;0010}. {0070;0020} Security Financing Transactions - Accounting value assuming no netting or other CRM The accounting balance sheet value under the applicable accounting standards, where the contracts are recognised as an asset on the balance sheet assuming no prudential or accounting netting or other CRM effects (i.e. any effects of accounting netting or CRM that have affected the accounting value shall be reversed). Banks shall not include in this cell, cash received or any security that is provided to a counterparty via the aforementioned transactions which remain on the balance sheet (i.e. the accounting criteria for derecognition are not met). Banks shall instead include this in {0080;0020}. {0080;0010} Other assets – Accounting balance sheet value The accounting balance sheet value under the applicable accounting standards, of all assets other than contracts listed in Annex 4 of the capital adequacy regulation, credit derivatives and SFTs. {0080;0020} Other assets – Accounting value assuming no netting or other CRM The accounting balance sheet value under the applicable accounting framework of all assets other than contracts listed in Annex 4 of the capital adequacy regulation, credit derivatives and SFTs assuming no accounting netting or other CRM effects (i.e. any effects of accounting netting or CRM that have affected the accounting value shall be reversed). {0090;0030} Off-balance sheet items The bank provides the nominal value of off-balance sheet items. Banks shall not consider in this cell contracts listed in Annex 4 of the capital adequacy regulation, credit derivatives and SFTs in accordance with article 11, paragraph 1 of the regulation. {0100;0020} Cash collateral received in derivatives transactions – Accounting value assuming no netting or other CRM The accounting balance sheet value under the applicable accounting standards of cash collateral received in derivatives transactions assuming no accounting netting or other CRM effects (i.e. any effects of accounting netting or CRM that have affected the accounting value shall be reversed). For the purpose of this cell, cash is defined as the total amount of cash including coins and banknotes. Total amount of deposits held with central banks is included to the extent that these deposits can be withdrawn in times of stress. Banks shall not report cash on deposit with other banks in this cell. {0110;0020} Receivables for cash collateral posted in derivatives transactions – Accounting value assuming no netting or other CRM The accounting balance sheet value, under the applicable accounting standards, of receivables for cash collateral posted against derivatives transactions assuming no

30 accounting netting or CRM effects (i.e. any effects of accounting netting or CRM that have affected the accounting value shall be reversed). Banks that are permitted under the applicable accounting standards to net the receivables for cash collateral posted against the related derivative liability (negative fair value) and that elect to do so, shall reverse out the netting and report the net cash receivable. {0120;0020} Securities received in a SFT that are recognised as an asset – Accounting value assuming no netting or other CRM The accounting balance sheet value, under the applicable accounting standards of securities, received in an SFT that are recognised as an asset under the applicable accounting standards, assuming no accounting netting or other CRM effects (i.e. any effects of accounting netting or CRM that have affected the accounting value shall be reversed). {0130;0010} Central bank reserves - Accounting balance sheet value Banks shall report, in accordance with the applicable accounting standards, the value of the central bank’s reserves. Institutions shall report these exposures irrespectively of whether they are exempted from the total exposure measure, as provisioned in article 6, paragraphs 8 and 9 of the regulation. {0140;0060} The central bank exposures value used for the calculation of the adjusted leverage ratio requirement referred to in article 6 of the regulation – Leverage ratio exposure amount The daily average total value of the banks’ reserves to its central bank, calculated over the reserve maintenance period up to the reporting date that are eligible to be excluded in accordance with paragraphs 8 and 9 of article 6 of the regulation. {0150;0060} Leverage ratio exposure value used for the calculation of the adjusted leverage ratio requirement referred to in article 6 of the regulation – Leverage ratio exposure amount The bank's total exposure value as defined in article 6, paragraph 3 of the regulation, including any reserves excluded in accordance with paragraphs 8 and 9 of article 6, on the reporting date.

31 III. Form F3 – Alternative breakdown of total exposure’s components

1. Banks shall report the total exposure values in the Form F3, after the application of exemptions and deductions in the Form F1, i.e. the items with a negative sign in accordance with the sign convention in section 1.3 of this Annex, except row {0280}.
2. Banks shall report the risk-weighted exposures after the application of credit risk mitigation (CRM) techniques and its substitution effects. Banks shall report the exposure value for the purpose of reporting the leverage ratio, in accordance with the original exposure, i.e. without taking into account any mitigation or substitution effect applicable to risk-weighted exposures. Row and column Regulation’s references and instructions for filling the forms {0010;0010} Off-balance sheet items – Leverage ratio exposure value The leverage ratio exposure value is calculated as the sum of rows {0070}, {0080}, {0090} and {0100} of the form F1. {0010;0020} Off-balance sheet items – Risk-weighted exposures The risk-weighted exposure amount of off-balance sheet items – excluding SFTs and derivatives – as in the Standardised Approach. For exposures under the Standardised Approach, banks shall determine the risk-weighted exposure amount in accordance with Chapter III of the capital adequacy regulation. {0020;0010} of which: Trade Finance – Leverage ratio exposure value The leverage ratio exposure value of off-balance sheet items related to trade finance. For the purpose of the reporting in form F3, off-balance sheet items related to trade finance shall relate to issued and confirmed import and export letters of credit which are short-term and self-liquidating, and similar transactions. {0020;0020} of which: Trade Finance – Risk-weighted exposures The risk-weighted exposure value of off-balance sheet items – excluding SFTs and derivatives – related to trade finance. For the purpose of the reporting in form F3, off-balance sheet items related to trade finance may relate to issued and confirmed import and export letters of credit which are short-term and self-liquidating, and similar transactions. {0030;0010} Derivatives – Leverage ratio exposure value The leverage ratio exposure value of derivatives. {0030;0020} Derivatives – Risk-weighted exposures The risk-weighted exposure amounts to credit and counterparty credit risk of derivatives, as calculated according to Chapter III of the capital adequacy regulation, including off-balance sheet items. {0040;0010} Securities Financing Transactions - Leverage ratio exposure value

32 The leverage ratio exposure value of securities financing transactions. {0040;0020} Securities Financing Transactions – Risk-weighted exposures The risk-weighted exposure amounts to credit and counterparty credit risk of securities financing transactions, as calculated under Chapter III of the capital adequacy regulation, including off-balance sheet items. {0050;0010} Exposure amounts resulting from the additional treatment for credit derivatives – Leverage ratio exposure value This cell shall equal the difference between row {0050} and row {0060} of the form F1. {0060;0010} Other assets belonging to the trading book – Leverage ratio exposure value The leverage ratio exposure value of items reported in {0160} of the form F1, excluding banking book items. {0060;0020} Other assets belonging to the trading book – Risk-weighted exposure Capital requirements for market risk calculated according to Chapter VII requirements of the capital adequacy regulation, multiplied by 12.5. {0070;0010} Covered bonds – Leverage ratio exposure value, under the standardised approach The leverage ratio exposure value of exposures in the form of covered bonds, as provisioned in article 26 of the capital adequacy regulation. Banks shall report this amount after deducting the past due exposures. {0070;0020} Covered bonds – Risk-weighted exposures, under the standardised approach The risk-weighted exposure amount of covered bonds as provisioned in Article 26 of the capital adequacy regulation. Banks shall report this amount after deducting the past due exposures. {0080,0010} Exposures treated as sovereigns – Leverage ratio exposure value, under the standardised approach This is the sum of cells from {0090, 0010} to {0120, 0010}. Banks shall report this amount after deducting the past due exposures. {0080;0020} Exposures treated as sovereigns – Risk-weighted exposures, under the standardised approach This is the sum of cells from {0090, 0020} to {0120, 0020}. Banks shall report this amount after deducting the past due exposures. {0090;0010} Central governments and central banks – Leverage ratio exposure value, under the standardised approach

33 The leverage ratio exposure value of exposures to central governments or central banks, as provisioned in article 12 of the capital adequacy regulation. Banks shall report this amount after deducting the past due exposures. {0090;0020} Central governments and central banks – Risk-weighted exposures, under the standardised approach The risk-weighted exposure amount of exposures to central governments or central banks, as provisioned in article 12 of the capital adequacy regulation. Banks shall report this amount after deducting the past due exposures. {0100;0010} Regional governments and local authorities treated as sovereigns – Leverage ratio exposure value, under the standardised approach The leverage ratio exposure value of exposures to regional governments and local authorities treated as sovereigns, as provisioned in paragraphs 2, 3 and 5 of article 13 of the capital adequacy regulation. Banks shall report this amount after deducting the past due exposures. {0100;0020} Regional governments and local authorities treated as sovereigns – Risk￾weighted exposures, under the standardised approach The risk-weighted exposure amount of exposures to regional governments and local authorities treated as sovereigns, as provisioned in paragraphs 2, 3 and 5 of article 13 of the capital adequacy regulation. Banks shall report this amount after deducting the past due exposures. {0110;0010} Multilateral development banks (MDBs) and international organisations treated as sovereigns – Leverage ratio exposure value, under the standardised approach The leverage ratio exposure value of exposures to multilateral development banks and international organisations, as provisioned in article 15, paragraph 3 and article 16 of the capital adequacy regulation. Banks shall report this amount after deducting the past due exposures. {0110;0020} Multilateral development banks and international organisations treated as sovereigns – Risk-weighted exposures, under the standardised approach The risk-weighted exposure amount of exposures to multilateral development banks and international organisations, as provisioned in article 15, paragraph 3 and article 16 of the capital adequacy regulation. Banks shall report this amount after deducting the past due exposures. {0120;0010} Public sector entities treated as sovereigns – Leverage ratio exposure value, under the standardised approach The leverage ratio exposure value of exposures to public sector entities, as provisioned in article 14, paragraph 5 of the capital adequacy regulation.

34 Banks shall report this amount after deducting the past due exposures. {0120;0020} Public sector entities treated as sovereigns – Risk-weighted exposures, under the standardised approach The risk-weighted exposure amount of exposures to public sector entities, as provisioned in article 14, paragraph 5 of the capital adequacy regulation. Banks shall report this amount after deducting the past due exposures. {0130;0010} Exposures to regional governments, multilateral development banks, international organisations and public sector entities not treated as sovereigns – Leverage ratio exposure value, under the standardised approach This is the sum of cells from {0140;0010} to {0160;0010}. Banks shall report this amount after deducting the past due exposures. {0130;0020} Exposures to regional governments, multilateral development banks, international organisations and public sector entities not treated as sovereigns – Risk-weighted exposures, under the standardised approach This is the sum of cells from {0140;0020} to {0160;0020}. Banks shall report this amount after deducting the past due exposures. {0140;0010} Regional governments and local authorities not treated as sovereigns – Leverage ratio exposure value, under the standardised approach The leverage ratio exposure value of exposures to regional governments and local authorities not treated as sovereigns, as provisioned in paragraphs 1 and 4 of article 13 of the capital adequacy regulation. Banks shall report this amount after deducting the past due exposures. {0140;0020} Regional governments and local authorities not treated as sovereigns – Risk￾weighted exposures, under the standardised approach The risk-weighted exposure amount of exposures to regional governments and local authorities not treated as sovereigns, as provisioned in paragraphs 1 and 4 of article 13 of the capital adequacy regulation. Banks shall report this amount after deducting the past due exposures. {0150;0010} Multilateral development banks not treated as sovereigns – Leverage ratio exposure value, under the standardised approach The leverage ratio exposure value of exposures to multilateral development banks, as provisioned in paragraphs 1 and 4 of article 15 of the capital adequacy regulation. Banks shall report this amount after deducting the past due exposures. {0150;0020} Multilateral development banks not treated as sovereigns – Risk-weighted exposures, under the standardised approach

35 The risk-weighted exposure amount of exposures to multilateral development banks, as provisioned in paragraphs 1 and 4 of article 15 of the capital adequacy regulation. Banks shall report this amount after deducting the past due exposures. {0160;0010} Public sector entities not treated as sovereigns – Leverage ratio exposure value, under the standardised approach The leverage ratio exposure value of exposures to public sector entities, as provisioned in paragraphs 1 to 4, and 6 to 7 of article 14 of the capital adequacy regulation. Banks shall report this amount after deducting the past due exposures. {0160;0020} Public sector entities not treated as sovereigns - Risk-weighted exposures, under the standardised approach The risk-weighted exposure amount of exposures to public sector entities, as provisioned in paragraphs 1 to 4, and 6 to 7 of article 14 of the capital adequacy regulation. Banks shall report this amount after deducting the past due exposures. {0170;0010} Supervised institutions – Leverage ratio exposure value, under the standardised approach The leverage ratio exposure value of exposures to supervised institutions, as provisioned in articles 17, 17/1 and 17/2 of the capital adequacy regulation. Banks shall report this amount after deducting the past due exposures. {0170;0020} Supervised institutions – Risk-weighted exposures, under the standardised approach The risk-weighted exposure amount of exposures to supervised institutions, as provisioned in articles 17, 17/1 and 17/2 of the capital adequacy regulation. Banks shall report this amount after deducting the past due exposures. {0180;0010} Exposures secured by mortgages on immovable properties – Leverage ratio exposure value, under the standardised approach The leverage ratio exposure value of exposures secured by mortgages on immovable property, as provisioned in article 21 of the capital adequacy regulation. Banks shall report this amount after deducting the past due exposures. {0180;0020} Exposures secured by mortgages on immovable properties – Risk-weighted exposures, under the standardised approach The risk-weighted exposure amount of exposures secured by mortgages on immovable property, as provisioned in article 21 of the capital adequacy regulation. Banks shall report this amount after deducting the past due exposures.

36 {0190;0010} of which: Secured by mortgages of residential properties – Leverage Ratio Exposure Value – Standardised approach The leverage ratio exposure value of exposures that are fully and completely secured by mortgages on residential property that fall under Article 22 of the capital adequacy regulation. Banks shall report this sum after deducting the past due exposures. {0190;0020} of which: Secured by mortgages of residential properties – Risk-weighted exposures, under the standardised approach The risk-weighted exposure amount of exposures that are fully and completely secured by mortgages on residential property, as provisioned in article 22 of the capital adequacy regulation. Banks shall report this amount after deducting the past due exposures. {0200;0010} Retail exposures – Leverage ratio exposure value, under the standardised approach The leverage ratio exposure value of retail exposures, as provisioned in article 10, paragraphs 2, 3 and 4 and article 20 of the capital adequacy regulation. Banks shall report this amount after deducting the past due exposures. {0200;0020} Retail exposures – Risk-weighted exposures, under the standardised approach The risk-weighted exposure amount of retail exposures, as provisioned in article 10 paragraphs 2, 3 and 4 and article 20 of the capital adequacy regulation. Banks shall report this amount after deducting the past due exposures. {0210;0010} of which: Retail Small- and medium-sized enterprises (SME) – Leverage ratio exposure value, under the standardised approach The leverage ratio exposure value of retail exposures to small- and medium-sized enterprises, as provisioned in articles 10 and article 20 of the capital adequacy regulation. For the purpose of this cell, the term “small and medium enterprise” has the same meaning as defined in the capital adequacy regulation. Banks shall report this amount after deducting the past due exposures. {0210;0020} of which: Retail Small- and medium-sized enterprises (SME) – Risk-weighted exposures, under the standardised approach The risk-weighted exposure amount of retail exposures to small- and medium-sized enterprises, as provisioned in articles 10 and 20 of the capital adequacy regulation. For the purpose of this cell, the term “small and medium enterprise”, has the same meaning as defined in the capital adequacy regulation. Banks shall report this amount after deducting the past due exposures.

37 {0220;0010} Corporate exposures – Leverage ratio exposure value, under the standardised approach This is the sum of cell {0230; 0010} and {0240;0010}. Banks shall report this amount after deducting the past due exposures. {0220;0020} Corporate exposures – Risk-weighted exposures, under the standardised approach This is the sum of cell {0230;0020} and {0240;0020}. Banks shall report this amount after deducting the past due exposures. {0230;0010} Financial corporate exposures – Leverage ratio exposure value, under the standardised approach The leverage ratio exposure value, of exposures to financial corporates, as provisioned in article 19 of the capital adequacy regulation. For the purpose of the reporting in the form F3, financial corporates shall mean regulated/supervised and unregulated/unsupervised undertakings, other than institutions referred to in cell {0170;0010}, the principal activity of which is to acquire holdings or to pursue one or more of the activities provided for in article 54 of the Law “On banks in the Republic of Albania”, or an insurance or re-insurance company, other than supervised institutions referred to in cell {0170;0010}. Banks shall report this amount after deducting the past due exposures. {0230;0020} Financial corporate exposures – Risk-weighted exposures, under the standardised approach The risk-weighted exposure amount, of exposures to financial corporates, as provisioned in article 19 of the capital adequacy regulation. For the purpose of reporting in the form F3, financial corporates shall mean regulated/supervised and unregulated/unsupervised undertakings, other than those referred to in cell {0170;0010}, the principal activity of which is to acquire holdings or to pursue one or more of the activities provided for in article 54 of the Law “On banks in the Republic of Albania”, or one insurance and re-insurance company, other than supervised institutions referred to in cell {0170;0010}. Banks shall report this amount after deducting the past due exposures. {0240;0010} Non-financial corporate exposures – Leverage ratio exposure value, under the standardised approach The leverage ratio exposure value, of exposures to non-financial corporates, as provisioned in article 19 of the capital adequacy regulation. This is the sum of {0250;0010} and {0260;0010}. Banks shall report this amount after deducting the past due exposures. {0240;0020} Non-financial corporate exposures – Risk-weighted exposures, under the standardised approach

38 The risk-weighted exposure amount of exposures to non-financial corporates, as provisioned in article 19 of the capital adequacy regulation. This is the sum of {0250;0020} and {0260;0020}. Banks shall report this amount after deducting the past due exposures. {0250;0010} Small- and medium-sized enterprises exposures – Leverage ratio exposure value, under the standardised approach The leverage ratio exposure value of exposures to corporates in the form of small￾and medium-sized enterprises, as provisioned in article 19 of the capital adequacy regulation. For the purpose of this cell, the term “small and medium enterprise” has the same meaning as the definition provided in the capital adequacy regulation. Banks shall report this amount after deducting the past due exposures. {0250;0020} Small- and medium-sized enterprises exposures – Risk-weighted exposures, under the standardised approach The risk-weighted exposure amount of exposures to corporates in the form of small￾and medium-sized enterprises, as provisioned in article 19 of the capital adequacy regulation. For the purpose of this cell, the term “small and medium enterprise” has the same meaning as the definition provided in the capital adequacy regulation. Banks shall report this amount after deducting the past due exposures. {0260;0010} Exposures other than small- and medium-sized enterprises exposures – Leverage ratio exposure value, under the standardised approach The leverage ratio exposure value of exposures to corporates, as provisioned in article 19 of the capital adequacy regulation and that are not reported in the cells above. Banks shall report this amount after deducting the past due exposures. {0260;0020} Exposures other than small- and medium-sized enterprises exposures – Risk￾weighted exposures, under the standardised approach The risk-weighted exposure amount of exposures to corporates, as provisioned in article 19 of the capital adequacy regulation and which are not reported in the cells above. Banks shall report this amount after deducting the past due exposures. {0270;0010} Past due exposures – Leverage ratio exposure value, under the standardised approach The leverage ratio exposure value of past due exposures as provisioned in Article 24 of the capital adequacy regulation.

39 {0270;0020} Past due exposures – Risk-weighted exposures, under the standardised approach The risk-weighted exposure amount of past due exposures, as provisioned in article 24 of the capital adequacy regulation. {0280;0010} Other exposures – Leverage ratio exposure value, under the standardised approach The leverage ratio exposure value, of exposures that are treated in accordance with article 17/1, paragraph 3; article 19 paragraph 3; and articles 25, 27, 28 and 29 of the capital adequacy regulation. Banks shall report assets that are deducted from the regulatory capital (e.g. intangible assets) but which cannot be categorised otherwise here, even if such a categorisation is not required for determining risk-based exposures in column {0020}. Banks shall report this amount after deducting the past due exposures. {0280;0020} Other exposures – Risk-weighted exposures, under the standardised approach The risk-weighted exposure value of exposures that are treated in accordance with article 17/1, paragraph 3; article 19, paragraph 3; and articles 25, 27, 28 and 29 of the capital adequacy regulation. Banks shall report this amount after deducting the past due exposures. {0290;0010} of which: Securitisation exposures – Leverage ratio exposure value, under the standardised approach The leverage ratio exposure value of exposures to securitisations, as provisioned in article 27 of the capital adequacy regulation. Banks shall report this amount after deducting the past due exposures. {0290;0020} of which: Securitisation exposures – Risk-weighted exposures, under the standardised approach The risk-weighted exposure amount of exposures to securitisations, as provisioned in article 27 of the capital adequacy regulation. Banks shall report this amount after deducting the past due exposures.